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 (Date of earliest event reported):
June 13, 1996
Falcon Holding Group, L.P.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
33-60776 95-4408577
(Commission File Number) (IRS Employer Identification No.)
10900 Wilshire Boulevard, 15th Floor, Los Angeles, CA 90024
(Address of principal executive offices) (Zip Code)
(310) 824-9990
(Registrant's Telephone Number)<PAGE>
ITEM 5. OTHER EVENTS.
On June 13, 1996, the Board of Representatives of Falcon
Holding Group, L.P. ("FHGLP"), which is the managing general
partner of Falcon Cable Investors Group, L.P. ("FCIG"), which
is itself the general partner of Falcon Cable Systems Com-
pany, L.P. ("FCSC"), unanimously approved the acquisition of
the assets of FCSC for approximately $247.40 million in cash
(the "Acquisition"). The Acquisition will be made pursuant
to a purchase right (the "Purchase Right") contained in the
Agreement of Limited Partnership of FCSC (the "FCSC Part-
nership Agreement"), which provides that FCIG may cause the
sale of all or substantially all of FCSC's cable systems to
FCIG or an affiliate for cash so long as the purchase price
is equal to or greater than the appraised value of the cable
systems being sold.
The FCSC Partnership Agreement provides that the "ap-
praised value" is determined by the average of three ap-
praisal evaluations of the cable systems to be sold and pro-
vides that one appraiser is selected by FCIG; one appraiser
is selected by a majority vote of the independent members of
FCSC's advisory committee; and one appraiser is selected by
the two appraisers already so chosen. In accordance with
this process, the appraisers were selected earlier this year.
The three appraisers are, respectively, Malarkey-Taylor As-
sociates, Inc., Kane-Reece Associates, Inc., and Waller Capi-
tal Corporation (the "Appraisers").
On March 11, 1996, each of the Appraisers delivered sum-
maries of the results of their appraisals which were filed as
Exhibits 1, 2 and 3, respectively, to FCSC's Current Report
on Form 8-K/A dated March 11, 1996 (File No. 01-9322), and
are incorporated herein by reference. The full report of
each Appraiser (together with the previously filed summaries,
the "Appraisals") was subsequently delivered, and each was
filed as an exhibit to FCSC's Current Report on Form 8-K
dated June 13, 1996 (the "June 13 FCSC Report"), and are in-
corporated herein by reference. Based upon the Appraisals,
as of December 31, 1995, the "appraised value" (as defined in
the FCSC Partnership Agreement) of all of the cable systems
owned by FCSC (the "Total Systems") is $247.40 million. The
Appraised Value is calculated as the average of $283.23 mil-
lion, $245.29 million, and $213.67 million, the appraised
values as of December 31, 1995 of all of the cable systems
owned by FCSC, as set forth in the Appraisals delivered by
each of Malarkey-Taylor Associates, Inc., Kane-Reece Associ-
ates, Inc., and Waller Capital Corporation, respectively.
Pursuant to the approval by the Board of Representatives
of FHGLP of the exercise of the Purchase Right, on June 13,
1996 FCIG caused FCSC to enter into an Asset Purchase Agree-
ment (the "Purchase Agreement") with a newly-formed affiliate
of FCIG and FHGLP, Falcon Cable Systems Company II, L.P.<PAGE>
("New Falcon"), which Purchase Agreement is filed as an ex-
hibit to the June 13 FCSC Report and is hereby incorporated
herein by reference. The description of the Purchase Agree-
ment in this Form 8-K is qualified in its entirety by the
foregoing reference thereto. New Falcon is owned 99% by FH-
GLP (98% as a limited partner and 1% as a general partner)
and 1% by Falcon Investor Group, Ltd., as a general partner.
The Purchase Agreement provides that, subject to the
terms and conditions set forth in the Purchase Agreement,
FCSC will sell to New Falcon, and New Falcon will purchase,
all of FCSC's right, title and interest in the Total Systems.
Pursuant to the Purchase Agreement, New Falcon will pay FCSC
an amount equal to the Appraised Value of approximately
$247.40 million in cash.
Unless waived by the parties, the Purchase will not be
consummated unless (i) any applicable waiting period (and any
extension thereof) under the Hart-Scott-Rodino Antitrust Im-
provements Act of 1976, as amended (the "HSR Act"), shall
have expired or been terminated without the commencement or
threat of any litigation to restrain the consummation of the
Acquisition; (ii) no order, stay, judgment or decree shall
have been issued by any court and be in effect restraining or
prohibiting the consummation of the Acquisition in any mate-
rial respect; (iii) all consents required to be obtained
in connection with the Acquisition shall have been obtained
and remain in full force and effect; and (iv) the parties'
representations and warranties are true and correct on the
date of the Purchase Agreement and the date the Purchase is
consummated.
Pursuant to the Purchase Agreement, FCSC and New Falcon
have begun the process of obtaining regulatory approvals,
including those required pursuant to certain cable television
system franchises, federal communications law, and the HSR
Act.
In addition, the obligations of New Falcon to consummate
the Acquisition are subject to the receipt by New Falcon of
financing in an amount necessary to satisfy New Falcon's ob-
ligations under the Purchase Agreement. New Falcon currently
intends to obtain such financing through (i) the receipt of a
capital contribution from partners in New Falcon, and (ii)
borrowings under a new bank credit facility (the "Facility")
to be entered into by FHGLP and pursuant to which FHGLP, New
Falcon and other FHGLP affiliates (together, the "Falcon
Group") will borrow. FHGLP has received a commitment letter
with respect to the Facility which is filed herewith as Ex-
hibit 5 and is hereby incorporated herein by reference.
On June 13, 1996, the Board of Representatives of FHGLP
approved the entering into the Facility by the members of the
Falcon Group. However, the Falcon Group and the lenders un-
der the Facility have not yet entered into the Facility, and
under the Facility, borrowing by members of the Falcon Group
will be subject to certain specified conditions. Therefore,
-2-<PAGE>
while it is expected that the Facility will be entered into,
and as a result of the Facility, FHGLP and New Falcon are ex-
pected to be able to obtain sufficient financing to consum-
mate the Acquisition of the Total Systems, there can be no
assurance that the Facility will be entered into or that FH-
GLP and New Falcon will be able to obtain sufficient financ-
ing to consummate the Acquisition.
The Facility will be a new $750 million Bank Credit
Agreement. An initial drawdown of approximately $628 mil-
lion, combined with cash on hand, is anticipated to take
place at the closing of the Facility to: (i) consummate the
approximately $247.40 million Acquisition of the Total Sys-
tems; (ii) retire the approximately $382 million of principal
and accrued interest outstanding under FHGLP's current Bank
Credit Agreement; and (iii) pay fees related to the Acquisi-
tion and the new Bank Credit Agreement estimated to be ap-
proximately $7 million.
The Facility will provide for maximum available borrow-
ings as follows: $750 million at December 31, 1996; $749
million at December 31, 1997; $748 million at December 31,
1998; $681 million at December 31, 1999; $586 million at De-
cember 31, 2000; $510 million at December 31, 2001; and $414
million at December 31, 2002. The Facility will require that
interest be tied to the ratio of consolidated total debt to
consolidated annualized cash flow (in each case, as defined
therein), and will further require that the Partnership must
maintain hedging arrangements with respect to at least 50% of
the outstanding borrowings thereunder. As of March 31, 1996,
borrowings under the current Bank Credit Agreement bore
interest at an average rate of 7.55% (including the effect of
interest rate hedging transactions). FHGLP has entered into
fixed interest rate hedging agreements with an aggregate no-
tional amount at March 31, 1996 of $430 million, which is net
of variable interest rate agreements with a notional amount
of $35 million. Agreements in effect at March 31, 1996 to-
taled $280 million, with the remaining $150 million scheduled
to become effective as certain of the existing contracts ma-
ture during 1996 and 1997. The agreements serve as a hedge
against interest rate fluctuations associated with the
FHGLP's variable rate debt. These agreements expire through
May 27, 2000. Additionally, FCSC has entered into interest
rate hedging agreements aggregating a net notional amount at
March 31, 1996 of $235 million, $165 million of which are in
effect at March 31, 1996. The remaining $70 million of con-
tracts are scheduled to become effective as certain of the
existing contracts mature during 1996 and 1997. These agree-
ments expire through July 19, 1999. These contracts will be
assigned to New Falcon in the Acquisition. The Facility also
will contain various restrictions relating to, among other
things, mergers and acquisitions, a change in control and the
incurrence of additional indebtedness and also will require
compliance with certain financial covenants, the principal
-3-<PAGE>
covenant being restrictions on the Falcon Group's debt to
cash flow ratio. Under both FHGLP's current Bank Credit
Agreement and the Facility, the Falcon Group's total debt to
cash flow ratio may not exceed 7.50. Under the current Bank
Credit Agreement, the Falcon Group's senior debt to cash flow
ratio may not exceed 5.15, and under the Facility, the Falcon
Group's senior debt to cash flow ratio may not exceed 5.50.
At March 31, 1996 the total debt to cash flow ratio of the
Falcon Group was 6.71 and the senior debt to cash flow ratio
was 4.22. The ratios computed on a pro forma basis for the
Acquisition of the Total Systems are expected to be ap-
proximately 6.90 and 5.10, respectively.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA
FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
Exhibit No. Description
1 System Appraisal of Falcon Cable Systems Com-
pany, as of December 31, 1995, by Malarkey-
Taylor Associates, Inc., dated April 29, 1996
(filed as Exhibit 1 to the June 13 FCSC Report
and incorporated by reference).
2 System Appraisal of Falcon Cable Systems Com-
pany, as of December 31, 1995, by Kane-Reece
Associates, Inc., dated April 29, 1996 (filed
as Exhibit 2 to the June 13 FCSC Report and
incorporated by reference).
3 System Appraisal of Falcon Cable Systems Com-
pany, as of December 31, 1995, by Waller Capi-
tal Corporation (filed as Exhibit 3 to the
June 13 FCSC Report and incorporated by refer-
ence).
4 Asset Purchase Agreement by and between the
Partnership and New Falcon, dated as of June
13, 1996 (filed as Exhibit 4 to the June 13
FCSC Report and incorporated by reference).
5 Credit Facilities Commitment Letter dated June
5, 1996 from The First National Bank of Bos-
ton, NationsBank of Texas, N.A., and Toronto-
Dominion (Texas) Inc. to FHGLP.
-4-<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Ex-
change Act of 1934, the registrant has duly caused this re-
port to be signed on its behalf by the undersigned hereunto
duly authorized.
Date: June 13, 1996
FALCON HOLDING GROUP, L.P.
By: Falcon Holding Group, Inc.
General Partner
By: /s/ Michael K. Menerey
Michael K. Menerey, Secretary
and Chief Financial Officer
-5-<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
1 System Appraisal of Falcon
Cable Systems Company, as
of December 31, 1995, by
Malarkey-Taylor Associ-
ates, Inc., dated April
29, 1996 (filed as Exhibit
1 to the June 13 FCSC Re-
port and incorporated by
reference).
2 System Appraisal of Falcon
Cable Systems Company, as
of December 31, 1995, by
Kane-Reece Associates,
Inc., dated April 29, 1996
(filed as Exhibit 2 to the
June 13 FCSC Report and
incorporated by refer-
ence).
3 System Appraisal of Falcon
Cable Systems Company, as
of December 31, 1995, by
Waller Capital Corporation
(filed as Exhibit 3 to the
June 13 FCSC Report and
incorporated by refer-
ence).
4 Asset Purchase Agreement
by and between the Part-
nership and New Falcon,
dated as of June 13, 1996
(filed as Exhibit 4 to the
June 13 FCSC Report and
incorporated by refer-
ence).
5 Credit Facilities Commit-
ment Letter dated June 5,
1996 from The First Na-
tional Bank of Boston,
NationsBank of Texas,
N.A., and Toronto-Dominion
(Texas) Inc. to FHGLP.
Exhibit 5
June 5, 1996
Falcon Holding Group, L.P.
10900 Wilshire Boulevard - 15th Floor
Los Angeles, California 90024
Attention: Jon Lunsford
Re: Credit Facilities Commitment Letter
Ladies and Gentlemen:
You have informed us that Falcon Holding Group, L.P. (the
"Company") and its subsidiaries indicated as Restricted Subsid-
iaries below would like to have Tranche A and Tranche B senior
bank credit facilities of up to $750,000,000 (the "Credit Fa-
cilities") in the aggregate available in order to refinance
indebtedness under existing credit facilities and to finance
capital expenditures, working capital and for other general
business purposes. The borrowers under the Credit Facilities
would be Falcon Cablevision, Falcon Cable Media, Falcon Tele-
cable, Falcon Community Cable (including one of its subsid-
iaries), Falcon First, Inc., Falcon Cable Systems Limited Part-
nership or its successor entity and Falcon Telecom, L.P. (the
"Restricted Subsidiaries").
Based on our discussions and on the financial statements,
projections and other information furnished by the Company to
us, this letter evidences the commitment of each of The First
National Bank of Boston ("Bank of Boston"), NationsBank of
Texas, N.A. and its affiliates ("NationsBank") and Toronto-
Dominion (Texas) Inc. ("Toronto-Dominion" and, together with
Bank of Boston and NationsBank, the "Agents"), on a several
(and not joint or joint and several) basis, and on the terms
and conditions set forth or referred to herein, (a) to use rea-
sonable efforts to form a group of lenders that will extend
such Credit Facilities on the terms provided herein and for
which Bank of Boston will act as managing agent and documenta-
tion agent, NationsBank will act as syndication agent and
Toronto-Dominion will act as administrative agent and (b) to
each provide up to $150,000,000 of the proposed Credit Facili-
ties as part of the group of lenders, subject to obtaining com-
mitments from the other lenders to provide the balance of the
Credit Facilities.
Attached to this letter is an outline of the principal
terms (the "Outline") of the proposed Credit Facilities. Terms
that are not clear in the Outline are subject to the future<PAGE>
mutual agreement of the parties. In particular, the Outline
does not purport to include all of the conditions, covenants,
representations, warranties, defaults, definitions and other
terms that would be contained in the definitive documents for
the transaction, all of which must be satisfactory in form and
substance to the Agents and their counsel, to the other lenders
and their counsel and to the Company and its counsel prior to
proceeding with the proposed Credit Facilities.
The proposed Credit Facilities are conditioned upon the
factors set forth in the Outline, as well as the absence of (i)
any material adverse change in the business, assets, financial
condition, income or prospects of the Company and the Re-
stricted Subsidiaries since the date of the last audited finan-
cial statements furnished to the Agents, (ii) any material
change in the ability of the Company and the Restricted Subsid-
iaries to operate in accordance with the financial projections
furnished to the Agents or to comply with the proposed finan-
cial covenants, (iii) any material misstatements in or omis-
sions from the materials that have previously been furnished by
the Company to the Agents for the Agents, review and (iv) any
material change in governmental regulation or policy affecting
the Agents, the other lenders, the Company, the Restricted Sub-
sidiaries or the proposed Credit Facilities. If, in the course
of documenting the transaction and the Agents' continued analy-
sis of financial and other information relating to the Company
and the Restricted Subsidiaries, the Agents discover that any
of the foregoing conditions will in their judgment not be met,
the Agents reserve the right to terminate any obligation they
may have with respect to the proposed Credit Facilities.
Whether or not the transactions contemplated hereby are
consummated, (A) the Company agrees to pay all fees and dis-
bursements of the Agents' special counsel relating to the prep-
aration of this letter and the proposed Credit Facilities docu-
mentation and to the transactions contemplated hereby and
thereby, and (B) the Company agrees to indemnify the respective
Agents, their directors, officers and employees and each other
entity, if any, who controls any of the Agents and to hold the
Agents and such other entities harmless from and against all
losses, claims, damages, liabilities and expenses (including
expenses of litigation, discovery or preparation therefor)
which the Agents or such other entities may incur or which may
be asserted against the Agents or such other entities in con-
nection with or arising out of the matters referred to herein,
except for legal fees resulting from claims where the proposed
indemnities was determined by a court of competent jurisdiction
not to have acted in good faith.
This letter sets forth our proposal with respect to the
proposed Credit Facilities and shall be considered withdrawn if
the Agents have not received the enclosed copy of this letter
signed by the Company prior to June 14, 1996. If for any rea-
son the Agents, the Company, the Restricted Subsidiaries and<PAGE>
the proposed group of lenders have been unable to agree to de-
finitive terms and conditions and enter into a definitive
agreement prior to August 31, 1996, this proposal shall be con-
sidered terminated (except as specifically set forth in the
preceding paragraph).<PAGE>
If the foregoing is in accordance with your understanding
of out agreement, please sign this letter in the space indi-
cated below and return it to Bank of Boston.
Very truly yours,
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ David B. Herter
Title: Director
NATIONSBANK OF TEXAS, N.A.
By: /s/ Douglas S. Stuart
Title: SVP
TORONTO-DOMINION (TEXAS) INC.
By: /s/ Peter J. Foley
Title: Managing Director
The foregoing is agreed to:
FALCON HOLDING GROUP, L.P.
By FALCON HOLDING GROUP, INC.,
General Partner
By /s/ Peter J. Foley
Title: V.P. Finance
