7
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): September 4, 1996
ASCENT ENTERTAINMENT GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-27192 52-1930707
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization File No.) Identification No.)
One Tabor Center
1200 Seventeenth Street, Suite 2800
Denver, Colorado 80202
(Address of principal executive office)
(303) 626-7000
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
Election of New Director
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On September 4, 1996, Allen E. Flower was elected to the Board of Directors
of Ascent Entertainment Group, Inc. ("Ascent" or the "Company"). Mr. Flower has
been Vice President, Chief Financial Officer and Acting Treasurer of COMSAT
Corporation ("COMSAT") since November 1995. He was Controller and Acting Chief
Financial Officer of COMSAT from April 1995 through November 1995, Controller
from June 1992 to April 1995 and Vice President, Finance and Administration of
Ascent's predecessor, COMSAT Video Enterprises, Inc. from May 1990 to June 1992.
Anticipated Changes to the Registrant's Liquidity and Capital Resources
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As previously disclosed, Ascent anticipates that its proposed acquisition of
the assets and certain liabilities of SpectraVision, Inc. ("SpectraVision") will
be consummated by the end of the third quarter of 1996, or shortly thereafter.
Ascent has formed a new company, On Command Corporation, which will acquire
SpectraVision and combine it with On Command Video Corporation ("OCV"), Ascent's
84% owned subsidiary (approximately 79% owned on a fully diluted basis). After
the transaction, Ascent will own approximately 57% of the outstanding shares of
Common Stock of On Command Corporation. Prior to closing, Ascent will own all of
the outstanding common stock of On Command Corporation (the "OCC Common Stock").
At closing, On Command Corporation will issue 21,750,000 shares of OCC Common
Stock (72.5% of the initial outstanding OCC Common Stock) to Ascent and the OCV
minority stockholders on a pro rata basis. On Command Corporation will issue up
to 8,250,000 shares of OCC Common Stock (the remaining 27.5% of the initial
outstanding OCC Common Stock to SpectraVision for distribution pursuant to its
plan of reorganization (the "Plan"). The shares issued to SpectraVision will be
decreased if SpectraVision's working capital is negative by more than $250,000
at closing, and a certain amount of OCC Common Stock will be reserved at closing
in connection with this possible adjustment (the "Reserve Stock"). After the
transaction (assuming that no OCV stockholders exercise their appraisal rights
in connection with the transaction and before giving effect to any Reserve Stock
and the exercise of the warrants described below), Ascent will own approximately
57% of the Common Stock.
In the transaction, On Command Corporation will also issue warrants
representing the right to purchase additional a total of 7,500,000 shares of OCC
Common Stock (20% of the outstanding Common Stock, after exercise of the
warrants). The warrants have a term of seven years and an exercise price based
upon $550,000,000 less On Command Corporation's outstanding debt at closing,
estimated currently at approximately $90 million. Series A Warrants to purchase
on a cashless basis an aggregate of 1,425,000 shares of Common Stock will be
issued to the former OCV stockholders, including Ascent; Series B Warrants to
purchase for cash an aggregate of 2,625,000 shares of Common Stock will be
issued to SpectraVision for distribution pursuant to the Plan; and a Series C
Warrant to purchase for cash an aggregate of 3,450,000 shares of Common Stock
will be issued to Gary Wilson Partners in consideration for certain investment
banking and advisory services provided in connection with the transactions.
Ascent will select five of the initial directors and all of the initial officers
of On Command Corporation, and the Creditors Committee will select two of the
initial directors of On Command Corporation, subject to the reasonable approval
of Ascent. In addition, consummation of the transaction is subject to several
conditions, including, without limitation: On Command Corporation's Registration
Statement on Form S-4, Commission File No. 333-10407, being filed and effective;
and the Plan being confirmed (which occurred on September 13, 1996). Ascent's
Form 8-K reporting the SpectraVision acquisition will be filed within 15 days
after the closing of the transactions.
Also as previously disclosed, pursuant to the Corporate Agreement dated
December 18, 1995 (the "Corporate Agreement") between Ascent and COMSAT, Ascent
agreed not to incur any indebtedness, other than that under Ascent's existing
$175 million revolving credit facility (the "Credit Facility") (and refinancings
thereof) and indebtedness incurred in the ordinary course of business which
together shall not exceed $175 million in the aggregate, without COMSAT's
consent. The Corporate Agreement also provides that, for so long as COMSAT owns
at least 50% of Ascent's outstanding Common Stock, Ascent will utilize
reasonable cash management procedures and use its reasonable best efforts to
minimize the Company's excess cash holdings.
In connection with the closing of the SpectraVision transaction, and in
consideration of Ascent's other capital requirements, COMSAT has consented to
permit Ascent to incur consolidated indebtedness (including indebtedness of On
Command Corporation) of up to $216 million under the Corporate Agreement;
provided, that: (i) no more than $50 million of such indebtedness may constitute
long term debt; and (ii) indebtedness in excess of $175 million may only be
incurred to satisfy funding requirements for 1996. Ascent plans to enter into a
new Credit Facility with aggregate available borrowings of up to $200 million,
on the terms described further below ("Ascent Credit Facility"). On Command
Corporation plans to enter into a separate $125 million credit facility on the
terms described further below (the "OCC Facility"). Also in connection with the
SpectraVision transaction, Ascent and On Command Corporation will enter into a
Corporate Agreement (the "OCC Corporate Agreement"), pursuant to which On
Command Corporation will agree, among other things, that for so long as Ascent
owns the largest percentage (and at least a minimum percentage to be
determined), On Command Corporation will not incur any indebtedness, without
Ascent's prior written consent, other than under the OCC Credit Facility (as
defined below) (and refinancings thereof) and indebtedness incurred in the
ordinary course of business which together shall not exceed $100 million in the
aggregate; provided that not more than $50 million of such indebtedness may
constitute long term debt. The OCC Corporate Agreement will also provide that,
for so long as Ascent owns the largest percentage (and at least a minimum
percentage to be determined) of the outstanding On Command Corporation Common
Stock, On Command Corporation will utilize reasonable cash management procedures
and use its reasonable best efforts to minimize its excess cash holdings. As a
consequence, the ability of Ascent and On Command Corporation to utilize the
Ascent Credit Facility and the OCC Facility, respectively, will be subject to
the limitations described above.
A primary purpose of the Corporate Agreement is, and a primary purpose of the
OCC Corporate Agreement will be, to require Ascent to coordinate its
consolidated capital requirements with COMSAT so that COMSAT can monitor
compliance with the regulations of the Federal Communications Commission ("FCC")
applicable to the capital structure and debt financing activities of COMSAT and
its consolidated subsidiaries. COMSAT is required to submit a financial plan to
the FCC for review annually. Under existing FCC guidelines, COMSAT is subject to
a maximum long-term debt to total capital ratio of 45%, a limit of $200 million
in short term debt and an interest coverage ratio of 2.3 to 1. COMSAT has
requested a temporary increase in the interest coverage ratio, which is measured
at year end, to a minimum of 1.9 to 1 for the 1996 plan year and an increase in
the short-term debt limit to $325 million as long as the financials of Ascent
are consolidated with those of COMSAT. COMSAT has informed Ascent that COMSAT
was in compliance with both the long-term debt to total capital ratio and the
short term debt limit at June 30, 1996, and expects to be in compliance with
those guidelines and the interest coverage ratio guideline at year end 1996 if
the short term debt limit and the interest coverage ratio are modified as
requested. If the FCC approves COMSAT's request, COMSAT has further informed
Ascent that it expects that the cash flows from operations and COMSAT's
consolidated short-term borrowing capacity, including indebtedness authorized
under the Ascent Credit Facility and the OCC Credit Facility, will be sufficient
to fund COMSAT's aggregate consolidated cash requirements for the balance of
1996.
Ascent management believes that the $216 million aggregate limit and related
restrictions (as described above) on Ascent's consolidated indebtedness will be
adequate to fund its consolidated operations through the end of 1996. A number
of factors could cause Ascent's funding requirements to differ materially from
those projected, including, but not limited to, the operating performance of
Ascent's subsidiaries, unanticipated costs associated with consummation of the
SpectraVision transaction or integration of SpectraVision's and OCV's
businesses, the level of ticket sales and other revenues by Ascent's
professional sports franchises, and market conditions. Prior to 1997, it will be
necessary for Ascent to seek approval from COMSAT to increase its debt limit,
and for On Command Corporation to seek approval from Ascent to increase its debt
limit. As part of Ascent's 1997 operating and capital planning process, Ascent
management will request that COMSAT increase Ascent's debt limit beginning in
January 1997. There can be no assurance, however, that COMSAT will approve an
increase in Ascent's debt limit. If Ascent were not to obtain approval to
increase its debt limit, Ascent would be required to reduce or reschedule
planned capital investments, reduce cash outlays, reduce debt, sell assets or
sell equity, and it is highly unlikely that Ascent would approve an increase in
On Command Corporation's debt limit. If On Command Corporation's debt limit were
not increased, On Command Corporation may be required to reduce or reschedule
planned capital investments, reduce cash outlays, reduce debt, sell assets or
sell equity.
Finally, COMSAT has informed Ascent that if COMSAT were to fail to satisfy
one or more the FCC guidelines as of an applicable measurement date, COMSAT
would be required to seek advance FCC approval of future financing activities on
a case by case basis. If such approval were not granted, Ascent could be
required to reduce or reschedule planned capital investments, reduce cash
outlays, reduce debt or sell assets or equity.
Ascent Credit Facility
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In September 1996, Ascent received a commitment from NationsBank of Texas,
N.A. ("NationsBank") for a $200 million, 364-day secured revolving credit
facility, which, subject to certain conditions, will be renewable for two
364-day periods. The Ascent Credit Facility provides that at no time will
amounts outstanding under the facility exceed the sum of (a) up to $100 million
(subject to the consent of the National Hockey League and the National
Basketball Association) secured by first priority pledges of, and liens on, the
equity interests in all of Ascent's subsidiaries (excluding On Command
Corporation, the Colorado Avalanche, LLC and the Denver Nuggets Limited
Partnership, but including the subsidiaries which own the Avalanche and
Nuggets), plus (b) 50% of the value of the On Command Corporation Common Stock
owned by Ascent, secured by a pledge of such stock. The Ascent Credit Facility
will contain the covenants and agreements contained in the Credit Facility, in
addition to, among other things, compliance by Ascent with certain financial
covenants, including a ratio of (x) the sum of undrawn availability under the
Ascent Credit Facility plus Ascent's consolidated EBITDA (excluding On Command
Corporation) to (y) Ascent's pro forma cash interest expense (calculated in
accordance with the Ascent Credit Facility) of at least 1.50 to 1.00 until
December 31, 1997, decreasing to at least 1.10 to 1.00 for the remainder of the
facility. In addition, the Ascent Credit Facility requires compliance by On
Command Corporation with certain financial covenants, including a minimum
consolidated EBITDA (calculated in accordance with the Ascent Credit Facility)
of at least $50 million, and a consolidated ratio of total debt to EBITDA
(calculated in accordance with the Ascent Credit Facility) of not more than 3.00
to 1.00 for any fiscal quarter from the closing of the SpectraVision transaction
through fiscal year 1997 and 2.50 to 1.00 for any fiscal quarter thereafter. The
Ascent Credit Facility will also limit Ascent's ability to incur indebtedness
and preclude Ascent from paying cash dividends on the Ascent Common Stock.
Revolving loans extended under the Ascent Credit Facility generally will
bear interest at either the London Interbank Offering Rate ("LIBOR") plus a
spread that may range from 2.00% to 2.50% depending on Ascent's consolidated
ratio of EBITDA (calculated in accordance with the Ascent Credit Facility) to
consolidated interest expense or the greater of the prime rate or the federal
funds rate plus 0.50% plus an applicable percentage. Borrowings under the Ascent
Credit Facility will be subject to certain customary conditions, including the
absence of any events of default and of any material adverse change in the
financial condition of Ascent, plus additional conditions related to league
consents. In consideration for the lenders' commitment under the Ascent Credit
Facility, Ascent will pay the lenders an annual commitment fee ranging from
0.25% to 0.5% of the undrawn amount of the Ascent Credit Facility, and certain
upfront facility fees.
On Command Corporation's Credit Facility
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In September 1996, On Command Corporation received a commitment from
NationsBank for an aggregate $125 million credit facility consisting of either
of the following types of facilities: (i) a 364-day revolving credit and
competitive advance facility in the amount of up to $125 million, which, subject
to certain conditions, will be renewable for four 364-day periods; and (ii) a
five year revolving credit and competitive advance facility in the amount of up
to $125 million; provided, that any amounts borrowed under the five year
facility will reduce the amounts available under the 364-day facility. The
Credit Facility will contain customary covenants and agreements, including,
among other things, compliance by On Command Corporation with certain financial
covenants, including a consolidated ratio of EBITDA to cash interest expense
(calculated in accordance with the OCC Credit Facility) of at least 4.00 to 1.00
for any four consecutive fiscal quarters and a consolidated ratio of total debt
to EBITDA (calculated in accordance with the OCC Credit Facility) of not more
than 2.50 to 1.00 for any fiscal quarter from the Closing through fiscal year
1997 and 2.00 to 1.00 for any fiscal quarter thereafter. The OCC Credit Facility
will also limit On Command Corporation's ability to incur indebtedness or pay
dividends, but will not preclude On Command Corporation from paying cash
dividends on its Common Stock.
Revolving loans extended under the OCC Credit Facility generally will bear
interest at either the LIBOR plus a spread that may range from 0.375% to 0.625%
depending on On Command Corporation's consolidated ratio of total debt to EBITDA
(calculated in accordance with the OCC Credit Facility) or the greater of the
prime rate or the federal funds rate plus 0.50%. In addition, at On Command
Corporation's option, it may request bids from the lenders under the OCC Credit
Facility for competitive advance loans with specified maturities, in which case
On Command Corporation may choose to accept bids in ascending order based on the
interest rates bid by such lenders. Borrowings under the OCC Credit Facility
will be subject to certain customary conditions, including the absence of any
events of default and of any material adverse change in the financial condition
of On Command Corporation. In consideration for the lenders' commitment under
the OCC Credit Facility, On Command Corporation will pay the lenders an annual
commitment fee ranging from 0.1875% to 0.25% of the undrawn amount of the OCC
Credit Facility, depending on On Command Corporation's consolidated ratio of
total debt to EBITDA (calculated in accordance with the OCC Credit Facility),
and certain other fees.
<PAGE>
SIGNATURES
Pursuant to the requirements on the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Ascent Entertainment Group, Inc.
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By: /s/ Arthur M. Aaron
Arthur M. Aaron
Vice President, Business and Legal Affairs
Date: October 17, 1996
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