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SEC Filings

S-4/A
AVALON CABLE OF MICHIGAN INC/ filed this Form S-4/A on 05/28/1999
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            AVALON CABLE OF MICHIGAN HOLDINGS, INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(In thousands)

                              March 31, 1999

1. Description of Business

   Avalon Cable of Michigan Holdings, Inc. ("The Company") was formed in June
1998, pursuant to the laws of the state of Delaware. Avalon Cable of Michigan
Inc. ("Avalon Michigan") was formed in June 1998, pursuant to the laws of the
state of Delaware as a wholly owned subsidiary of the Company. On June 3, 1998,
Avalon Michigan entered into an Agreement and Plan of Merger (the "Agreement")
among the Company, Cable Michigan, Inc. and Avalon Michigan, pursuant to which
Cable Michigan, Inc. will merge into Avalon Michigan and Avalon Michigan will
become a wholly owned subsidiary of the Company (the "Merger").

   In accordance with the terms of the Agreement, each share of common stock,
par value $1.00 per share ("common stock"), of Cable Michigan, Inc. (Cable
Michigan") outstanding prior to the effective time of the Merger (other than
treasury stock, shares owned by the Company or its subsidiaries, or shares as
to which dissenters' rights have been exercised) shall be converted into the
right to receive $40.50 in cash (the "Merger Consideration"), subject to
certain possible closing adjustments.

   In conjunction with the acquisition of Cable Michigan, Avalon Michigan
acquired Cable Michigan's 62% ownership interest in Mercom, Inc. ("Mercom").

   On November 6, 1998, Avalon Michigan completed its merger into and with
Cable Michigan. The total consideration paid in conjunction with the merger,
including fees and expenses was $431,629, including repayment of all existing
Cable Michigan indebtedness and accrued interest of $135,205. The Agreement
also permitted Avalon Michigan to agree to acquire the remaining shares of
Mercom that it did not own.

   The Company contributed $137,375 in cash to Avalon Michigan, which was used
to consummate the Merger. On November 5, 1998, the Company received $105,000 in
cash in exchange for promissory notes to lenders (the "Bridge Agreement"). On
November 6, 1998, the Company contributed the proceeds received from the Bridge
Agreement and an additional $35,000 in cash to Avalon Michigan in exchange for
100 shares of common stock.

   On March 26, 1999, after the acquisition of Mercom, Avalon Michigan
completed a series of transactions to facilitate certain aspects of its
financing. As a result of these transactions:

  .  The Company contributed the Senior Discount Notes and associated debt
     finance costs to Avalon Michigan.

  .  Avalon Michigan contributed its assets and liabilities excluding
     deferred tax liabilities, net to Avalon Cable LLC in exchange for an
     approximate 88% voting interest in Avalon Cable LLC. Avalon Cable LLC
     contributed these assets and liabilities, excluding the Senior Discount
     Notes and associated debt finance costs, to its wholly-owned subsidiary,
     Avalon Cable of Michigan LLC.

  .  Avalon Cable of Michigan LLC has become the operator of the Michigan
     cluster replacing Avalon Michigan;

  .  Avalon Cable of Michigan LLC is an obligor on the Senior Subordinated
     Notes replacing Avalon Michigan; and

  .  Avalon Michigan is a guarantor of the obligations of Avalon Cable of
     Michigan LLC under the Senior Subordinated Notes. Avalon Michigan does
     not have significant assets, other than its 88% investment in Avalon
     Cable LLC at March 31, 1999.

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