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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: May 27, 1999
(Date of Earliest Event Reported)
HECTOR COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 0-18587 41-1666660
(State or other jurisdiction (Commission File (Federal Employer
of Incorporation) Number) Identification No.)
211 South Main Street
Hector, MN 55342
(Address of principal executive offices)
Registrant's telephone number, including area code: (320) 848-6611
Total Pages (2)
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HECTOR COMMUNICATIONS CORPORATION
FORM 8-K
Items 1 - 4 Not Applicable.
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Item 5. Other Events.
On May 24, 1999, the stockholders of the St. Paul Bank for Cooperatives ("SPBC")
approved a merger agreement between SPBC and CoBank, ACB ("CoBank"). Pending
final approval of the merger by the Farm Credit Administration, the merger will
take place effective July 1, 1999. At that time, shareholders of SPBC will
become shareholders of CoBank and SPBC will cease to exist.
As part of the merger process, SPBC and CoBank have been reviewing each other's
loan portfolios. Subsequent to the approval of the merger, the parties concluded
that accruals for losses on SPBC's loan portfolio needed to be substantially
increased. On May 27, 1999, the Company was notified that the parties estimate
that the additional loss accruals will reduce the value of SPBC stock by between
11% and 19% of its December 31, 1998 valuation.
Hector Communications Corporation ("HCC") and its 68% owned subsidiary Alliance
Telecommunications Corporation ("Alliance"), as a result of various loan
agreements, are shareholders in SPBC. At December 31, 1998, their investments in
SPBC stock totaled $3,258,000. HCC management estimates potential losses due to
impairment of the value of SPBC stock could be as much as $619,000. After
adjusting for the minority interest, this would amount to $.11 per diluted share
based on shares of HCC outstanding at March 31, 1999. HCC expects to report an
adjustment of the value of its SPBC stock in its June, 1999 earnings report.
The Company's investment in SPBC is a nonearning asset in that it pays no
dividend and is not associated with any patronage dividends the Company may
receive on interest payments made to the bank. HCC's management does not believe
the valuation adjustment to its SPBC stock will have any material effect on the
Company's future operations.
Items 6 - 8 Not Applicable.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HECTOR COMMUNICATIONS CORPORATION
By /s/Charles A. Braun
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Charles A. Braun
Chief Financial Officer
June 4, 1999
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