ITEM 2 ACQUISITION OF ASSETS.
On November 12, 1999, Charter Communications Holding Company, LLC
(Charter Holdco), managed by and 40.6% owned by Charter Communications, Inc.
(the "Company"), completed the acquisition of partnership interests in Falcon
Communications, L.P. (FCLP) from Falcon Holding Group, L.P. and TCI Falcon
Holdings, LLC, interests in a number of entities held by Falcon Cable Trust and
Falcon Holding Group, Inc., specified interests in Enstar Communications
Corporation and Enstar Finance Company, LLC held by Falcon Holding Group, L.P.
and specified interests in Adlink held by DHN Inc. (collectively referred to as
the "Falcon Acquisition" herein). Charter Investment, Inc., an affiliate of the
Company, entered into the Falcon Acquisition purchase agreement in May 1999 and
assigned its rights under the purchase agreement to Charter Holdco.
The purchase price for the Falcon Acquisition was $3.5 billion, subject
to adjustment, and was comprised of $1.3 billion in cash, $550 million in equity
of Charter Holdco and $1.7 billion in assumed debt. A portion of the proceeds
from the Company's initial public offering of Class A common stock were used to
fund the Falcon Acquisition.
Immediately upon the closing of the Falcon Acquisition, Falcon Holding
Group, L.P. contributed to Charter Holdco a portion of its partnership interests
in FCLP in exchange for $550 million of membership interests in Charter Holdco.
These membership interests were exchanged on a one for one basis for Class A
common stock of the Company. Falcon Holding Group, L.P. has the right to require
Paul G. Allen, majority owner of the Company, or his designee to purchase these
shares for a price equal to $550 million plus interest of 4.5% per annum. These
rights terminate upon the second anniversary of the closing of the Falcon
Acquisition, November 12, 2001.
Immediately after the consummation of the transactions described above,
FCLP merged with and into CC VII Holdings, LLC (CC VII). CC VII, the surviving
entity of the merger, succeeded the rights and obligations of FCLP, including
obligations with respect to FCLP's outstanding debentures (see Item 5 below). CC
VII is a limited liability company and its manager is the Company. The sole
member of CC VII is Charter Holdco.
The Falcon cable systems are located in California and the Pacific
Northwest, Missouri, North Carolina, Alabama and Georgia and serve approximately
1,005,000 customers. For the nine months ended September 30, 1999, the Falcon
cable systems had revenues of approximately $320.2 million. For the year ended
December 31, 1999, the Falcon cable systems had revenues of approximately $307.6
A copy of the Company's press release announcing the consummation of
the Falcon acquisition is being filed as Exhibit 99.1 with this report.
ITEM 5 OTHER EVENTS.
The acquisition of Falcon by Charter Holdco constituted a change in
control under the indentures to Falcon's publicly held 8.375% Senior Debentures
due 2010 and publicly held 9.285% Senior Discount Debentures due 2010. The
indentures governing these debentures provide that upon the occurrence of a
change of control, each holder of the debentures has the right to require Falcon
to repurchase each holder's debentures at a cash offer price equal to 101% of
the aggregate principal amount thereon or 101% of the accreted value for the
senior discount debentures, plus accrued and unpaid interest. Accordingly, CC
VII and Falcon Funding Corp., co-obligor of the debentures, intend to make an
offer to repurchase the debentures on or before December 12, 1999.