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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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AMENDMENT NO. 1
TO
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D) (4) OF THE SECURITIES EXCHANGE ACT OF 1934
Enstar Income/Growth Program Six-A, L.P.
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(Name of Subject Company)
Enstar Income/Growth Program Six-A, L.P.
Enstar Communications Corporation
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(Name of Person(s) Filing Statement)
Units of Limited Partnership Interest
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(Title of Class of Securities)
Not Applicable
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((CUSIP) Number of Class of Securities)
Stanley S. Itskowitch, Esq.
Enstar Communications Corporation
10900 Wilshire Blvd., 15th Floor
Los Angeles, California 90024
(310) 824-9990
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(Name, Address and Telephone Number of Person Authorized to Receive
Notice and Communications on Behalf of the Person(s) Filing Statement)
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The subject company is Enstar Income/Growth Program Six-A, L.P.,
a Georgia limited partnership (the "Partnership"). The corporate general
partner of the Partnership is Enstar Communications Corporation, a Georgia
corporation (the "General Partner"), and the individual general partner of the
Partnership is Robert T. Graff, Jr. (together with the General Partner, the
"General Partners"). The principal executive offices of the Partnership and the
General Partner are located at 10900 Wilshire Boulevard, 15th Floor, Los Angles,
California 90024. The title and class of equity securities to which this
Statement relates is the units of limited partnership interest of the
Partnership (the "Units").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the offer (the "Offer") by Madison
Liquidity Investors 104, LLC, a Delaware limited liability company ("Madison"),
to purchase for cash up to 6,880 Units, representing approximately 8.6% of the
Units outstanding, at a purchase price of $50.00 per Unit (less the $25 transfer
fee and the amount of any distributions paid with respect to the Units on or
after April 21, 1999) (the "Offer Price"), as disclosed in the Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1"), dated April 21, 1999, and
filed by Madison with the Securities and Exchange Commission on April 22, 1999.
According to the Schedule 14D-1, Madison's principal business address is P.O.
Box 7461, Incline Village, Nevada 89452.
ITEM 3. IDENTITY AND BACKGROUND.
(a) This Statement is being filed by the Partnership and the General
Partner. The name and business address of the Partnership and the General
Partner are set forth under Item 1 above.
(b)(1) The Partnership is party to a management agreement (the
"Management Agreement") with Enstar Cable Corporation, a wholly owned subsidiary
of the General Partner ("Enstar Cable"). Pursuant to the Management Agreement,
Enstar Cable manages the Partnership's systems and provides all operational
support for the activities of the Partnership. For these services, Enstar Cable
receives a management fee equal to 5% of the Partnership's gross revenues
(excluding revenues from the sale of cable television systems or franchises)
calculated and paid monthly. In addition, the Partnership reimburses Enstar
Cable for certain operating expenses incurred by Enstar Cable in the day-to-day
operation of the Partnership's cable systems. The Management Agreement also
requires the Partnership to indemnify Enstar Cable (including its officers,
employees, agents and shareholders) against loss or expense, absent negligence
or deliberate breach by Enstar Cable of the Management Agreement. Enstar Cable
has engaged Falcon Communications, L.P., an affiliate of the General Partner
("FCLP"), to provide certain management services for the Partnership and pays a
portion of the management fees it receives to FCLP in consideration of such
services and reimburses FCLP for expenses incurred by FCLP on its behalf. In
addition, the Partnership receives certain system operating management services
from an affiliate of Enstar Cable in lieu of directly employing personnel to
perform such services. The Partnership reimburses the affiliate for its
allocable share of the affiliate's operating costs. The General Partner also
performs certain supervisory and
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administrative services for the Partnership for which it is reimbursed. In
addition, the Partnership purchases substantially all of its programming
services from FCLP. FCLP charges the Partnership for these costs based on an
estimate of what the General Partner could negotiate for such programming
services for the 15 partnerships managed by the General Partner as a group.
The interest of the General Partner and the affiliates that provide the
services described above in maximizing their profits from the provision of
such services conflicts with the Partnership's interest in receiving such
services for the best possible price.
In addition, on September 30, 1997, the Partnership entered into
a new revolving loan facility with Enstar Finance Company, LLC ("Enstar
Finance"), an eighty-percent owned subsidiary of the General Partner, and has
incurred indebtedness under that facility. The interest of Enstar Finance in
receiving prompt payments of principal and interest may conflict with the
Partnership's interest in maintaining liquidity.
(b)(2) To the best knowledge of the Partnership and the General Partner,
there are no material contracts, agreements, arrangements or understandings or
any actual or potential conflicts of interest between the Partnership or the
General Partner or the directors and executive officers of the General Partner
or affiliates thereof, on the one hand, and Madison or its executive officers,
directors or affiliates, on the other hand.
Based on the Schedule 14D-1, as of the date of the Offer, Madison
and its affiliates owned or had contracted to purchase a total of 4,684 Units,
or approximately 5.86% of the outstanding Units, which were acquired during 1997
through 1999 through registered and unregistered tender offers and negotiated
secondary market purchases.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) This Statement relates to the recommendation by the Partnership
and the General Partner with respect to the Offer. In a letter to unitholders,
dated May 5, 1999, the Partnership and the General Partner recommended that
unitholders reject the Offer. In reaching that conclusion, the Partnership and
the General Partner noted, however, that some unitholders may view the Offer as
attractive, even if at a low value, because it offers the prospect of liquidity,
and also noted that there can be no assurance as to when unitholders will be
presented with another opportunity to liquidate their investment in the Units.
Such letter is filed as Exhibit (a)(1) hereto and is incorporated herein by
reference.
(b) The reasons for the position taken by the Partnership and the
General Partner are as follows:
THE OFFER PRICE REPRESENTS A LOW CASH FLOW MULTIPLE. The
Partnership's cash flow (operating income before depreciation and
amortization) for the twelve months ended December 31, 1998 was approximately
$21.50 per Unit. The Offer Price represents a valuation of approximately 1.4
times cash flow (after adjustment for the excess of current assets over total
liabilities as of December 31, 1998). The Partnership and the General
Partner believe that a valuation of 1.4 times cash flow is considerably lower
than the inherent value of the Partnership's assets based on cash flow
multiples paid for similar assets. For example, the Partnership and the
General Partner believe that in August 1998 Blackstone Cable purchased cable
systems in Georgia from Galaxy Cablevision for a purchase price that
represents a valuation of approximately 6.6 times annualized cash flow. The
Partnership and General Partner also believe that in December 1998 Pine Tree
Cablevision purchased cable systems in South Carolina from Carolina Country
Cable for a purchase price that represents a valuation of approximately 7.5
times annualized cash flow. In addition, the Partnership and the General
Partner believe that in December 1998 Central Valley Cable purchased cable
systems in California from Somerset Cable Associates II for a purchase price
that represents a valuation of approximately 6.2 times annualized cash flow.
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THE OFFER PRICE IS LOWER THAN THE GENERAL PARTNER'S ESTIMATE OF A
REASONABLE VALUATION RANGE PER UNIT. As of the date hereof, the General Partner
believes that a reasonable range of valuation per limited partnership Unit is
between $110 and $130 based on the factors noted below. The General Partner
believes that the Madison Offer is inadequate because it does not even approach
the $110 low end of the range provided. The General Partner did not retain a
third party to conduct an evaluation of the Partnership's assets or otherwise
obtain any appraisals. Rather, the per Unit valuations provided were derived by
attributing a range of multiples to the Partnership's cash flow (operating
income before depreciation and amortization) for the twelve months ended
December 31, 1998, adjusted for the excess of current assets over total
liabilities. The General Partner has selected market multiples based on, among
other things, its understanding of the multiples placed on other transactions
involving comparable cable television properties and the securities of companies
in that industry. The General Partner's belief as to the valuation range
provided is necessarily based on economic, industry and financial market
conditions as they exist as of the date hereof, all of which are subject to
change, and there can be no assurance that the Partnership's cable properties
could actually be sold at a price within this range. Additionally, the
valuations provided do not give effect to any brokerage or other transaction
fees that might be incurred by the Partnership in any actual sale of the
Partnership's systems.
THE OFFER PRICE IS LOWER THAN THE MOST RECENT SALES IN THE
SECONDARY MARKET. No established market for the Units was ever expected to
develop, and the secondary market transactions for the Units have been limited
and sporadic. The Partnership believes that sellers in the secondary market who
desire to dispose of their units but who have limited means to effectuate such
sales are often willing to accept substantial discounts from what might
otherwise be regarded as the fair value of the interest being sold to facilitate
the sales. The Partnership and the General Partner believe that secondary
market prices generally do not reflect the current market value of the
Partnership's assets, nor are they indicative of total return, since prior cash
distributions and tax benefits received by the original investor are not
reflected in the prices. Nevertheless, the secondary market prices, to the
extent that the reported data are reliable, are indicative of the prices at
which the Units trade in the illiquid secondary market. As reported in THE
PARTNERSHIP SPECTRUM, the weighted average price was $78.85 per Unit for the
months of January and February 1999 (based on three trades involving an
aggregate of 260 Units). There can be no assurance regarding future secondary
market prices.
A SIGNIFICANT PORTION OF THE UNITS TENDERED PURSUANT TO THE OFFER
MAY NOT BE TRANSFERRED IN 1999. As more fully described under Item 8 below, the
Partnership adheres to an Internal Revenue Service safe harbor which limits most
sales of limited partnership interests to five percent of the outstanding Units
in any given tax year of the Partnership. The General Partner believes that the
policy of allowing no more than five percent of the outstanding Units to be
transferred in any given tax year of the Partnership serves the best interests
of the Partnership and the unitholders and the Partnership does not intend to
waive this policy for transfers of Units pursuant to the Offer. Consequently,
this policy may have the effect of limiting the number of Units that can be
transferred pursuant to the Offer in 1999.
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ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Neither the Partnership nor the General Partner, nor any person
acting on their behalf, intends to employ, retain or compensate any other person
to make solicitations or recommendations to the holders of Units in connection
with the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO
SECURITIES.
(a) To the best knowledge of the Partnership and the General Partner,
no transaction in the Units has been effected during the past 60 days by the
Partnership or the General Partner, or by any executive officer, director,
affiliate or subsidiary thereof.
(b) To the best knowledge of the Partnership and the General Partner,
the General Partner and the executive officers, directors, affiliates and
subsidiaries of the Partnership and the General Partner do not own any Units.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT
COMPANY.
(a) The Partnership is not engaged in any negotiations in response to
the Offer that relates to or would result in: (1) an extraordinary transaction,
such as a merger or reorganization, involving the Partnership or any subsidiary
of the Partnership; (2) a purchase, sale or transfer of a material amount of
assets by the Partnership or any subsidiary of the Partnership; (3) a tender
offer for or other acquisition of securities by or of the Partnership; or (4)
any material change in the present capitalization or distribution policy of the
Partnership.
(b) There are no transactions, board or partnership resolutions,
agreements in principle or signed contracts in response to the Offer, which
relate to or would result in one or more of the events set forth in clauses (1)
through (4) in section (a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Unitholders are advised that Units may be transferred (including
transfers pursuant to the Offer) only upon the following conditions: (1) the
transfer is of the transferor's entire interest in the Partnership, unless the
General Partners otherwise consent; (2) the transfer is not made to any person
who is incompetent or has not attained his twenty-first birthday or to any other
person not lawfully empowered to own such interest; (3) documents have been
executed and delivered by the transferring unitholder and the transferee in a
form satisfactory to the General Partners to evidence and effectuate the
transfer, and they have indemnified the Partnership and the General Partners
against any loss or liability arising out of the transfer; and (4) the transfer,
in the sole determination of the General Partners, would not violate the Revised
Uniform Limited Partnership Act of the State of Georgia or any applicable state
or Federal securities laws, would not be detrimental to the continued status of
the Partnership as a limited partnership taxable as a "partnership" under the
Internal Revenue Code of 1986, as amended, and would not cause a deemed
termination of the Partnership under the Code.
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The Partnership currently is treated as a partnership for Federal
income tax purposes. One of the obligations of the General Partner is to
endeavor to preserve the status of the Partnership as a partnership under
Federal income tax laws. Failure to maintain this status could have a material
adverse effect on the Partnership and the unitholders. Among the related legal
requirements imposed upon the Partnership is that its partnership interests not
be traded in an established securities market, a secondary market or the
substantial equivalent of a secondary market. As it believes is customary, the
Partnership complies with this requirement by adhering to an Internal Revenue
Service safe harbor which limits most sales of limited partnership interests to
five percent of the outstanding Units in any given tax year of the Partnership.
Transfers to which the above trading limit does not apply include (1) carryover
basis transactions, (2) transfers at death, (3) transfers between siblings,
spouses, ancestors or lineal descendants and (4) distributions from a qualified
retirement plan.
The General Partner believes that the policy of allowing no more
than five percent of the outstanding Units to be transferred in any given tax
year of the Partnership serves the best interests of the Partnership and the
unitholders, and the Partnership does not intend to waive this policy for
transfers of Units pursuant to the Offer. Consequently, this policy may have
the effect of limiting the number of Units that can be transferred pursuant to
the Offer in 1999. As of the date of this Statement, transfers of 2,695 Units,
or approximately 3.38% of the outstanding Units, already have been processed
during the 1999 tax year of the Partnership. Accordingly, only 1,296 Units, or
approximately 1.62% of the outstanding Units, remain available for transfer
during the 1999 tax year.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
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Exhibit
Number Description
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(a)(1)* Letter, dated May 5, 1999, from the Partnership and the General
Partner to the unitholders of the Partnership.
(c)(1) Third Amended and Restated Agreement of Limited Partnership of
Enstar Income/Growth Program Six-A, L.P., dated as of December
23, 1988 (incorporated by reference to the exhibits to the
Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1988, file No. 0-17687).
(c)(2) Management Agreement between Enstar Income /Growth Program Six-A,
L.P. and Enstar Cable Corporation (incorporated by reference to
the exhibits to the Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 1988, file No. 0-17687).
(c)(3) Service Agreement, dated as of October 1, 1988, between Enstar
Communications Corporation, Enstar Cable Corporation and Falcon
Holding Group, Inc. (incorporated by reference to the exhibits to
the Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1988, file No. 0-17687).
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* Previously filed.
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(c)(4) Loan Agreement, dated as of September 30, 1997, between Enstar
Income/Growth Program Six-B, L.P. and Enstar Finance Company, LLC
(incorporated by reference to the exhibits to the Partnership's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997, File No. 0-17687).
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After reasonable inquiry and to the best of our knowledge and
belief, we certify that the information set forth in this Statement is true,
complete and correct.
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
By: Enstar Communications Corporation,
Corporate General Partner
By: MICHAEL K. MENEREY
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Michael K. Menerey
Executive Vice President, Chief Financial Officer
and Secretary
ENSTAR COMMUNICATIONS CORPORATION
By: MICHAEL K. MENEREY
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Michael K. Menerey
Executive Vice President, Chief Financial Officer
and Secretary
Dated: May 14, 1999
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