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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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AMENDMENT NO. 1
to
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-B, L.P.
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(Name of Subject Company)
Enstar Income/Growth Program Six-B, 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-B, 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 3,459 Units, representing approximately 9.4% of the
Units outstanding, at a purchase price of $110.00 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 and certain affiliates of the General Partner (the
"Purchasers") entered into an Asset Purchase Agreement, dated as of November 6,
1998, and an Amendment to Asset Purchase Agreement, dated as of March 30, 1999
(collectively, the "Purchase Agreement"), pursuant to which the Partnership
agreed to sell to the Purchasers substantially all of the Partnership's assets
for $10,473,200 in cash plus the amount, if any, of any capital expenditures
incurred by the Partnership between November 5, 1998 and the closing of the sale
in connection with line extensions and/or rebuilds of its cable systems (the
"Sale"). The Sale is conditioned upon, among other things, the approval of the
holders of at least a majority of the Units. The Partnership intends to
dissolve, terminate and be liquidated after the consummation of the Sale. On
April 30, 1999, the Partnership and certain of its affiliates filed Amendment
No. 3 to a Transaction Statement on Schedule 13E-3 and the Partnership mailed to
unitholders a Consent Solicitation Statement relating to the Sale and subsequent
liquidation of the Partnership.
Each of the Purchasers is an affiliate of the General Partner and
each of them is under the common control of Falcon Holding Group, L.P. As a
result of these affiliations, a conflict arises between the Purchasers' desire
to purchase the Partnership's assets at the lowest possible price and the
Partnership's desire to maximize the sale price of its assets. Furthermore, the
Purchase Agreement was not negotiated at arms' length. The General Partner,
which is an
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affiliate of the Purchasers, negotiated the terms and provisions of the Purchase
Agreement on behalf of the Partnership with the Purchasers on terms the General
Partner believes are customary for the sale of similar assets.
In addition, the Partnership has 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 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 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 FCLP. Prior to December 1, 1998, the Partnership
purchased substantially all of its programming services from Falcon Cablevision,
a California limited partnership which is an affiliate of the General Partner
("Cablevision"). Cablevision charged the Partnership for programming services,
and FCLP currently charges the Partnership for programming services, 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.
Because the Partnership did not generate sufficient cash flow from
operations in previous years, a portion of its programming fees payable to
Cablevision, and a portion of the management fees and reimbursed expenses
payable to Enstar Cable, were deferred. 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.
The Partnership used borrowings under the revolving loan facility to pay to
Cablevision all of its $408,000 balance for deferred programming fees, and to
pay to the General Partner all but $244,600 of the Partnership's balance owed
for deferred management fees and reimbursed expenses. The remaining $244,600
portion of these deferred amounts was contributed as an equity contribution by
the General Partner to Enstar Finance and remains an outstanding obligation of
the Partnership. If the Sale and liquidation are not approved by unitholders, it
is uncertain if or when the Partnership will pay these remaining deferred fees
and expenses to Enstar Finance. If the Sale and liquidation are approved by
unitholders, the General Partner
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intends to cause the Partnership to pay the outstanding receivable balance to
Enstar Finance with the proceeds of the Sale. The Partnership is also required
to repay its note payable balance (which was $1.4 million as of the date of this
Statement) and related interest expense to Enstar Finance with proceeds from the
Sale. In addition, the General Partners are eligible to receive 1.0% of the net
sale price of the Partnership's assets in accordance with the terms of the
partnership agreement. In order to pay such amounts, the proceeds from the Sale
will be reduced by the aggregate amount of these items. Such reduction will
consequently result in a reduction in the total liquidating distributions per
Unit. Accordingly, the General Partner's interest in it and its affiliates being
paid in full at the earliest possible date may conflict with the unitholders'
interest in maximizing the value of their investment.
(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 1,943 Units, or approximately 5.3% 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 indicated their belief that the
Offer is inadequate and recommended that unitholders reject the Offer. 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 IS SIGNIFICANTLY LESS THAN THE TOTAL AMOUNT OF
LIQUIDATING DISTRIBUTIONS THE PARTNERSHIP ESTIMATES UNITHOLDERS WILL RECEIVE
AFTER THE SALE. As discussed in Item 3 above, the Partnership has entered into
the Purchase Agreement with affiliates of the General Partner pursuant to which
such affiliates have agreed to purchase substantially all of the Partnership's
assets for $10,473,200 in cash plus the amount, if any, of any capital
expenditures incurred by the Partnership between November 5, 1998 and the
closing of the Sale in connection with line extensions and/or rebuilds of its
cable systems. After consummation of the Sale, the Partnership intends to
dissolve, terminate and be liquidated. The Partnership presently estimates that,
after the repayment of the Partnership's existing obligations, liquidating
distributions to unitholders would total approximately $227 per Unit. The Offer
Price is $110 per Unit. There are risks that the proposed Sale may not be
consummated. For example, the Sale is conditioned upon, among other things, the
approval of the holders of at least a majority of the Units. The Partnership and
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the General Partner believe that compared to the estimated liquidating
distributions unitholders may be entitled to receive if the Sale is consummated,
the Offer Price represents too great a discount in relation to the risk that the
Sale is not consummated or that actual liquidating distributions are lower than
what is presently estimated. Unitholders who transfer their Units pursuant to
the Offer will not be entitled to receive liquidating distributions relating to
such Units after the consummation of the Sale.
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 $40.29 per Unit.
The Offer Price represents a valuation of approximately 1.7 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 1.7 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
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. The Partnership and the General
Partner also 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. In addition, the
Partnership and the General Partner 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.
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 $156.64 per Unit for the months of November and December 1998
(based on two trades involving an aggregate of 80 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.
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.
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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.
As disclosed under Items 3 and 4 above, the Partnership is currently
in the process of selling substantially all of its assets to affiliates of the
General Partner. The Partnership intends to dissolve, terminate and be
liquidated following consummation of the Sale. The Purchase Agreement for the
Sale was entered into (and the Partnership's plans for dissolution, termination
and liquidation were formulated) prior to Madison's Offer and were not entered
into (or formulated) in response to the Offer.
(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)
of the first paragraph of section (a) above. As indicated under Items 3, 4 and
7(a), however, the Partnership, prior to the Offer, had entered into the
Purchase Agreement for the Sale of substantially all of its assets to affiliates
of the General Partner and had formulated the intention to dissolve, terminate
and be liquidated after the consummation of the Sale.
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 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 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 1,036 Units, or
approximately 2.83% of the outstanding Units, already have been processed during
the 1999 tax year of the Partnership. Accordingly, only 795 Units, or
approximately 2.17% of the outstanding Units, remain available for transfer
during the 1999 tax year.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
(a)(1)* Letter, dated May 5, 1999, from the Partnership and the
General Partner to the unitholders of the Partnership.
(c)(1) Amended and Restated Agreement of Limited Partnership of
Enstar Income/Growth Program Six-B, L.P., dated as of
January 5, 1989 (incorporated by reference to the exhibits
to the Partnership's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989, file No. 0-18495).
(c)(2) Management Agreement between Enstar Income /Growth Program
Six-B, L.P. and Enstar Cable Corporation (incorporated by
reference to the exhibits to the
</TABLE>
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* Previously filed
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<TABLE>
<S> <C>
Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989, file No. 0-18495).
(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, 1989, file No.
0-18495).
(c)(4) Asset Purchase Agreement, dated as of November 6, 1998, by
and among Enstar Income/Growth Program Six-B, L.P., Falcon
Cablevision, a California limited partnership, and Falcon
Telecable, a California limited partnership (incorporated
by reference to Annex A of the Partnership's Consent
Solicitation Statement on Schedule 14A, filed on April 30,
1999).
(c)(5) Amendment to Asset Purchase Agreement, dated as of March
30, 1999, by and among Enstar Income/Growth Program Six-B,
L.P., Falcon Cablevision, a California limited partnership,
and Falcon Telecable, a California limited partnership
(incorporated by reference to Annex B of the Partnership's
Consent Solicitation Statement on Schedule 14A, filed on
April 30, 1999).
(c)(6) 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. 0-18495).
</TABLE>
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-B, 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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