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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 14 D-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 7,901 Units, representing approximately 9.9% 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 after
February 5, 1999) (the "Offer Price"), as disclosed in the Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1"), dated February 5, 1999, and
filed by Madison with the Securities and Exchange Commission on February 8,
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 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 80% 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
affiliates of Enstar Cable in lieu of directly employing personnel to perform
such services. The Partnership reimburses the affiliates for its allocable
share of their operating costs. The
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General Partner also performs certain supervisory and administrative services
for the Partnership for which it is reimbursed. In addition, the Partnership
purchases substantially all of its programming services from Falcon Cablevision,
a California limited partnership which is an affiliate of the General Partner
("Cablevision"). Cablevision 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
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 a total of 3,900 Units, or approximately 4.88% of the
outstanding Units, which were acquired during 1997 and 1998 through unregistered
tender offers and 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 February 22, 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
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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.
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 $59.30 per Unit for the
months of November and December 1998 (based on two trades involving an aggregate
of 100 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
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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.
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
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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.
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.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
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Exhibit
Number Description
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(a)(1) Letter, dated February 22, 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
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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).
(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: /s/ MICHAEL K. MENEREY
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Michael K. Menerey
Executive Vice President, Chief Financial Officer
and Secretary
ENSTAR COMMUNICATIONS CORPORATION
By: /s/ MICHAEL K. MENEREY
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Michael K. Menerey
Executive Vice President, Chief Financial Officer
and Secretary
Dated: February 22, 1999
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EXHIBIT (a)(1)
February 22, 1999
Dear Limited Partner:
Enstar Income Growth Program Six-A, L.P. (the "Partnership") and its
corporate general partner, Enstar Communications Corporation (the "General
Partner"), have become aware that an unsolicited offer (the "Offer") to purchase
outstanding units in the Partnership, at a price of $50 per unit, was commenced
by Madison Liquidity Investors 104, LLC ("Madison") pursuant to an offer to
purchase dated February 5, 1999. THIS OFFER WAS MADE WITHOUT THE CONSENT OR THE
INVOLVEMENT OF THE PARTNERSHIP OR THE GENERAL PARTNER. The Partnership and the
General Partner have filed with the Securities and Exchange Commission a
Recommendation Statement on Schedule 14D-9, relating to the Offer. A copy of
that Recommendation Statement on Schedule 14D-9 is enclosed with this letter and
we urge you to review it carefully.
As more fully described in the Recommendation Statement on Schedule 14D-9,
we recommend that you reject Madison's Offer. We note, however, that some
unitholders may view the Offer as attractive, even if at a low value, because it
offers the prospect of liquidity. We also note that there can be no assurance
as to when unitholders will be presented with another opportunity to liquidate
their investment in the units. In evaluating the Offer, the Partnership and the
General Partner believe that its limited partners should also consider the
following information:
- - 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 price offered by Madison 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.
- - As of the date of this letter, 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 is significantly less than
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 of this
letter, 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
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brokerage or other transaction fees that might be incurred by the
Partnership in any actual sale of the Partnership's systems.
- - 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 Partnership's units trade in the illiquid secondary
market. As reported in THE PARTNERSHIP SPECTRUM, the weighted average
price was $59.30 per unit for the months of November and December 1998
(based on two trades involving an aggregate of 100 units). There can be
no assurance regarding furure secondary market prices.
Furthermore, one of the obligations of the Corporate 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 its partners. Among the related legal
requirements imposed upon the Partnership is that its partnership interests not
be traded on 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 year. AFTER FIVE PERCENT OF
THE OUTSTANDING UNITS HAVE BEEN TRANSFERRED IN 1999, NO FURTHER SALES OF UNITS,
INCLUDING ANY ATTEMPTED SALES RELATED TO THE MADISON OFFER, WILL BE RECOGNIZED
BY THE PARTNERSHIP FOR THE BALANCE OF 1999.
For the reasons discussed above and more fully described in the
Recommendation Statement on Schedule 14D-9, the Partnership and the General
Partner recommend that you NOT transfer, agree to transfer, or tender any units
in response to the Madison Offer. To the extent that you have previously
tendered units pursuant to Madison's Offer, we note that you have a right to
withdraw your tender by following the procedures set forth under "Section 5.
Withdrawal Rights" in Madison's offer to purchase document.
If you have any questions regarding these matters or your investment,
please call our Investor Services Department at (800) 433-4287.
Sincerely,
Enstar Income/Growth Program Six-A, L.P.
Enstar Communications Corporation
cc: Account Representative
