AVALON CABLE LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998
The Credit Facility contains restrictive covenants which among other things
require the Co-Borrowers to maintain certain ratios including consolidated
leverage ratios and the interest coverage ratio, fixed charge ratio and debt
service coverage ratio.
The obligations of the Co-Borrowers under the Credit Facility are secured by
substantially all of the assets of the Co-Borrowers. In addition, the
obligations of the Co-Borrowers under the Credit Facility are guaranteed by
affiliated companies; Avalon Cable of Michigan Holdings, Inc., Avalon Cable
Finance Holdings, Inc., Avalon New England Holdings, Inc., Avalon Cable
Holdings, LLC and the Company.
In December 1998, Avalon New England became a co-issuer of a $150,000
principal balance, Senior Subordinated Notes ("Subordinated Notes") offering
and the Company became a co-issuer of $196,000, accreted value, Senior Discount
Notes ("Senior Discounts Notes") offering. In conjunction with these
financings, Avalon New England received $18,130 from Avalon Michigan as a
partial payment against the Company's note receivable--affiliate from Avalon
Michigan. Avalon Michigan paid $75 in interest during the period from October
21, 1998 (inception) through December 31, 1998. The cash proceeds received by
Avalon New England of $18,206 was paid to Avalon as a dividend.
The Subordinated Notes mature on December 1, 2008, and interest accrues at a
rate of 9.375% per annum. Interest is payable semi-annually in arrears on June
1 and December 1 of each year, commencing on June 1, 1999. The Senior Discount
Notes also mature on December 12, 2008, and interest accrues at a rate of
11.875% per annum on the principal amount at maturity on the Senior Discount
Notes. Interest is payable semi-annually in arrears on December 31, 1999.
The Company issued a note payable for $500 which is due on May 29, 2003, and
bears interest at a rate of 7% per annum (which approximates Avalon New
England's incremental borrowing rate) payable annually. Additionally, the
Company has a $100 non-compete agreement. The agreement calls for five annual
payments of $20, commencing on May 29, 1999.
10. Commitments and Contingencies
The Company rents poles from utility companies for use in its operations.
While rental agreements are generally short-term, the Company anticipates such
rentals will continue in the future. The Company also leases office facilities
and various items of equipment under month-to-month operating leases. Rent
expense was $23 for the period from October 21 (inception) through December 31,
1998. Future minimum payments on equipment and office facilities under non-
cancelable operating lease commitments approximates $112, $108, $105, $100 and
$100 for the five years ended December 31, 2004.
The Company is subject to regulation by the Federal Communications
Commission ("FCC") and other franchising authorities.
From time to time the Company is also involved with claims that arise in the
normal course of business. In the opinion of management, the ultimate liability
with respect to these claims will not have a material adverse effect on the
operations, cash flows or financial position of the Company.