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): November 17, 2009
Charter Communications,
Inc.
(Exact name of registrant as
specified in its charter)
(Debtor - In - Possession as of March 27, 2009)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
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000-27927
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43-1857213
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(Commission File
Number)
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(I.R.S. Employer
Identification Number)
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12405 Powerscourt
Drive
St. Louis, Missouri
63131
(Address of principal executive
offices including zip code)
(314)
965-0555
(Registrant's telephone number,
including area code)
Not
Applicable
(Former name or former address, if
changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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ITEM
1.03. BANKRUPTCY OR RECEIVERSHIP.
As
previously reported, on March 27, 2009 (the “Petition Date”),
Charter Communications, Inc. (the “Company” or “CCI”), and certain of
its subsidiaries (collectively, the “Debtors”) filed
voluntary petitions in the United States Bankruptcy Court for the Southern
District of New York (the “Bankruptcy Court”)
seeking relief under the provisions of chapter 11 of Title 11 of the United
States Code (the “Bankruptcy
Code”). The chapter 11 cases were consolidated for the purpose of
joint administration under the caption In re Charter Communications, Inc., et
al., Case No. 09-11435 (JMP) (the “Chapter 11 Cases”).
On
November 17, 2009 (the “Confirmation Date”),
the Bankruptcy Court entered an order (the “Confirmation Order”)
confirming the Debtors’ Joint Plan of Reorganization, as amended, pursuant to
chapter 11 of the Bankruptcy Code, which was originally filed with the
Bankruptcy Court on the Petition Date and supplemented by the Supplement to
Debtors’ Joint Plan of Reorganization pursuant to chapter 11 of the Bankruptcy
Code filed with the Bankruptcy Court on the Petition Date (as so amended and
supplemented, the “Plan”). Copies of the
Plan and the Disclosure Statement are filed as Exhibits 2.1 and 2.2 hereto,
respectively, and are incorporated herein by reference. On the Confirmation
Date, the Company issued a press release announcing the entry of the
Confirmation Order by the Bankruptcy Court, a copy of which is attached hereto
as Exhibit 99.1 and incorporated herein by reference. The Debtors
plan to emerge from chapter 11 after satisfying the remaining conditions to
effectiveness contemplated under the Plan (the date that all conditions to the
effectiveness of the Plan have been satisfied or waived, the “Effective
Date”).
The
following is a summary of the material matters contemplated to occur either
pursuant to or in connection with the confirmation and implementation of the
Plan. This summary only highlights certain of the substantive provisions of the
Plan and is not intended to be a complete description of, or a substitute for a
full and complete reading of, the Plan. This summary is qualified in its
entirety by reference to the full text of the Plan. Capitalized terms used but
not defined in this Form 8-K have the meanings set forth in the
Plan.
The Plan
contemplates that upon the Effective Date (i) the notes and credit facilities of
CCO and CCOH will remain outstanding, (ii) holders of CCH II Notes will exchange
their CCH II Notes for New CCH II Notes (the “Notes Exchange”) and/or cash;
(iii) holders of CCH I Notes will receive approximately 21.1 million shares New
Class A Stock, (iv) holders of CIH Notes will receive warrants to purchase
approximately 6.4 million shares of New Class A Stock, (v) holders of CCH Notes
will receive warrants to purchase approximately 1.3 million shares of New Class
A Stock, (vi) holders of CCI Notes will receive cash and shares of preferred
stock having an aggregate liquidation preference of $138 million to be issued by
the reorganized Company, (vii) holders of existing common stock of CCI will not
receive any amounts on account of their common stock, which will be cancelled,
(viii) trade creditors will continue to be paid in full, and (ix) the Company
will consummate the CII Settlement.
Certain
Agreements Under the Plan
Lock-Up Agreement
Pursuant
to the Lock-Up Agreement to be entered into by the Company, Paul G. Allen (“ Mr.
Allen”) and any permitted affiliate of Mr. Allen that will hold shares of New
Class B Stock, from and after the Effective Date to but not including the
earliest to occur of (i) September 15, 2014, (ii) the repayment, replacement,
refinancing or substantial modification, including any waiver, to the change of
control provisions of the CCO Credit Facility and (iii) a Change of Control (as
defined in the Lock-Up Agreement), Mr. Allen and/or any such permitted affiliate
shall not transfer or sell shares of New Class B Stock received by such person
under the Plan or convert shares of New Class B Stock received by such person
under the Plan into New Class A Stock except to certain affiliates of Mr. Allen
(and such affiliates will also be permitted to transfer such New Class B Stock
to Mr. Allen and other of such affiliates).
2
Reorganized Holdco Exchange
Agreement
In connection with the Plan, the
reorganized Company, reorganized Charter Communications Holding Company, LLC
(“Holdco”),
reorganized Charter Investment, Inc. (“CII”) and Mr. Allen will enter into an
exchange agreement (the “Reorganized Holdco Exchange
Agreement”), pursuant to which Mr. Allen and certain persons and entities
affiliated with Mr. Allen (together, the “Allen Entities”) will
have the right, at any time and from time to time on or before the fifth
anniversary of the date of the Reorganized Holdco Exchange Agreement, to require
the reorganized Company to (i) exchange all or any portion of their membership
units in reorganized Holdco for $1,000 in cash and shares of New Class A Stock
in a taxable transaction, (ii) exchange 100% of the equity in such Allen Entity
for $1,000 in cash and shares of New Class A Stock in a taxable transaction, or
(iii) permit such Allen Entity to merge with and into the reorganized Company,
or a wholly-owned subsidiary of the reorganized Company, or undertake tax-free
transactions similar to the taxable transactions in clauses (i) and (ii),
provided that the exchange rights described in clauses (ii) and (iii) above will
not be available to any Allen Entity unless and until Allen Entities have
utilized 90% of CII’s available ordinary suspended losses under Section 1366(d)
of the Internal Revenue Code of 1986, as amended, against ordinary
income. The number of shares of New Class A Stock that an Allen
Entity receives is subject to certain adjustments, including for certain
distributions received from reorganized Holdco prior to the date the option to
exchange is exercised and for certain distributions made by the reorganized
Company to holders of its New Common Stock. In addition, in the event
that a transaction that would constitute a Change of Control (as defined in the
Lock-Up Agreement) is approved by a majority of the members of the Board of
Directors of the reorganized Company not affiliated with the person(s) proposing
such transactions, the reorganized Company will have the right to require (no
sooner than at least 120 days following the Effective Date) the Allen Entities
to effect an exchange transaction of the type elected by the Allen Entities from
subclauses (i), (ii) or (iii) above, which election is subject to certain
limitations.
Reorganized Holdco LLC
Agreement
As part
of the Plan, the reorganized Company, reorganized CII and reorganized Holdco
will enter into an Amended and Restated Limited Liability Company Agreement of
reorganized Holdco, pursuant to which the reorganized Company will be the
manager of reorganized Holdco and will have the authority, subject to certain
limitations, to manage the business of reorganized Holdco, including to appoint
directors to reorganized Holdco’s board of directors. As part of the
CII Settlement, CII will retain 1,120,649 reorganized Holdco units exchangeable
at CII’s option for an equivalent number of shares of New Class A Stock pursuant
to the Reorganized Holdco Exchange Agreement.
Treatment
of Executory Contracts
The Plan
provides that all of the Debtors' Executory Contracts, except certain exceptions
specified in the Plan, shall be deemed assumed as of the Effective
Date. The Plan also provides that, for each of the Debtors’ Executory
Contracts to be assumed, the Debtors shall designate a proposed Cure, and any
disagreements as to the proposed Cure must be filed on or before the Cure Bar
Date. The Cure Bar Date shall not apply to any franchise or Executory
Contract with a state or local franchise authority.
Employment
Agreements
Under the
Plan, the Employment Agreements of the Company’s Chief Executive Officer (the
“CEO”) and
Chief Operating Officer (the “COO”) will be deemed
assumed by the reorganized Company as of the Effective Date. The CEO and COO
will receive cash and bonus compensation and benefits on substantially the same
terms as (but not less economically favorable than) those contained in their
respective employment agreements in effect on the date hereof. The
CEO will receive (i) long-term incentive compensation having substantially the
same value as the long-term incentive compensation contained in his employment
agreement in effect on the date hereof, and (ii) a waiver with respect to the
retention bonus clawback provision contained in his employment agreement in
effect on the date hereof.
The
Employment Agreements of the named executive officers and various other officers
of the Company as of the Petition Date and amended effective as of the Effective
Date will be deemed assumed by the reorganized Company as of the Effective
Date.
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Management
Incentive Plan
The Plan
also provides for a management incentive plan (the “Management Incentive
Plan”), which will include, among other things, an allocation of
equity-based awards representing no less than 3% of the fully diluted New Class
A Stock and New Class B Stock (the “New Common Stock”)
outstanding on the Effective Date, after giving effect to the rights offering
and the issuance of warrants provided for by the Plan.
Composition
of New Board of Directors After the Effective Date
Under the
Plan upon the Debtors’ emergence from bankruptcy, the reorganized Company’s
initial Board of Directors will be fixed at 11 members. Each
projected holder of 10% or more of the voting power of the reorganized Company
on the Effective Date based on such holder’s pro rata share of New Class A Stock
will have the right to appoint one member of the initial Board of Directors upon
emergence for each 10% of the voting power attributable to such holder’s New
Class A Stock. Mr. Allen will have the right to appoint four of the 11
members of the initial Board of Directors, and Neil Smit, the President and CEO
of the reorganized Company, will also serve on the initial Board of Directors.
In addition, the Company’s current CEO and COO will continue in their same
positions.
Registration
Rights
Certain
holders of New Class A Stock will receive certain customary registration rights
with respect to their shares. The reorganized Company will use its
commercially reasonable efforts to file a shelf registration statement, and to
cause such registration statement to become effective by June 30, 2010, subject
to certain exceptions, covering shares of New Class A Stock, issued or issuable
on conversion, exercise or exchange of securities, held by participants in the
rights offering, holders of warrants and CII Settlement Claim
Parties. In addition, certain holders of New CCH II Notes will have
their securities registered by the reorganized Company or in some circumstances
exchanged for registered securities following the Effective
Date. These registration rights will be subject to certain customary
limitations, including that securities held by holders of less than 1% of the
New Class A Stock shall not be entitled to registration rights.
Limitations
on Subsequent Transactions
The Plan
also provides that for a period of at least six months following the Effective
Date, the reorganized Company, reorganized Holdco, reorganized CCO and each of
their respective direct and indirect subsidiaries will not negotiate, enter into
agreements, understandings or arrangements or consummate transactions in the
aggregate in excess of $500 million in total value to the extent that such
transactions would occur at a price in excess of 110% of either (i) the value
implied by the Reorganized Debtors’ valuation analysis set forth on an exhibit
on the Disclosure Statement (the “Implied Plan Value”)
or (ii) the appraised values, if any such appraised values are
obtained. Any transactions occurring at a price of 110% or lower than
both the Implied Plan Value and such appraised values (if any) will not be
subject to restriction and will not be taken into account in determining whether
the $500 million limitation has been exceeded.
Amended
and Restated Certificate of Incorporation
Subject
to the Lock-Up Agreement, each share of New Class B Stock will be convertible
into one share of New Class A Stock at the option of the Holder. In addition, on
or after January 1, 2011 and until September 15, 2014, each share of New Class B
Stock will be convertible into one share of New Class A Stock at any time at the
election of a majority of disinterested board members of the
Company. The Amended and Restated Certificate of Incorporation will
also provide that the Board of Directors may impose restrictions on the trading
of the reorganized Company’s stock if (i) the reorganized Company has
experienced an “owner shift” as determined for purposes of Section 382 of the
IRC of at least 25 percentage points and (ii) the equity value of the
reorganized Company has decreased by at least 35% since the Effective
Date. These restrictions, which are intended to preserve the
reorganized Company’s ability to use its NOLs, may prohibit any person from
acquiring stock of the reorganized Company if such person is a “5% shareholder”
or would become a “5% shareholder” as a result of such
acquisition. The restrictions will not operate to prevent any
stockholder from disposing of shares and are subject to certain other exceptions
relating to shares of New Common Stock issued or issuable under the
Plan. The ability of the Board of Directors of the reorganized
Company to impose these restrictions will terminate on the fifth anniversary of
the date of the reorganized Company’s emergence from bankruptcy.
4
Sources
of Funds
The Plan
is to be funded with cash from operations, the Notes Exchange and proceeds of
approximately $1.6 billion from the issuance of Class A Common
Stock.
Securities
to be Issued under the Plan
On the
Effective Date, the outstanding shares of the old common stock will be
cancelled. The authorized capital stock of the reorganized Company
will consist of 900,000,000 shares of New Class A Stock, 25,000,000
shares of New Class B Stock, and 250,000,000 shares of preferred
stock. Pursuant to the Plan:
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(a)
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approximately
21.1 million shares of New Class A Stock will be issued pro rata to
holders of CCH I Notes Claims;
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(b)
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approximately
86.6 million shares of New Class A Stock will be issued to creditors who
exercised rights received in a rights
offering;
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(c)
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approximately
2.1 million shares of New Class A Stock will be issued to the Excess
Backstop Parties for exercising the Overallotment
Option;
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(d)
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approximately
2.2 million shares of New Class B Stock will be issued to Mr. Allen (or
his designee that is an Authorized Class B Holder), which shares represent
35% of the voting power of the capital stock of the
Company;
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(e)
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shares
of preferred stock having an aggregate liquidation preference of $138
million will be issued to holders of CCI
Notes;
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(f)
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warrants
to purchase approximately 4.7 million shares of New Class A Stock will be
issued to Mr. Allen (or his designees) as part of the CII Settlement. Such
warrants will have an exercise price based on a total equity value of the
reorganized Company equal to the Implied Plan Value less the Warrant Value
plus the gross cash proceeds of the Rights Offering and will expire seven
years after the date of issuance;
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(g)
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warrants
to purchase approximately 6.4 million shares of New Class A Stock will be
issued holders of CIH Notes. Such warrants will have an exercise price
based on a total equity value of the reorganized Company of $5.3 billion
and will expire five years after the date of issuance;
and
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(h)
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Warrants
to purchase approximately 1.3 million shares of New Class A Stock will be
issued to holders of CCH Notes. Such warrants will have an exercise price
based on a total equity value of the reorganized Company of $5.8 billion
and will expire five years after the date of
issuance.
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As of the Effective Date, there will be
a total of approximately 112 million shares of New Common Stock issued and
outstanding. In addition, pursuant to the terms of the Plan,
approximately 12.4 million shares of New Class A Stock will be reserved for
issuance upon exercise of the Warrants, and an additional approximately 3.8
million shares of New Class A Stock will be reserved for issuance under the
Management Incentive Plan of the reorganized Company.
Releases
On the Effective Date, pursuant to the
Plan the holders of claims and interests in the Chapter 11 Cases will be deemed
to provide a full discharge and release to the Debtors, Mr. Allen, CII, members
of the Crossover Committee and various other parties, and their respective
officers, directors, affiliates and representatives against all claims, whether
known or unknown, arising from or related in any way to the Debtors, including
claims in any way related to the Chapter 11 Cases or the Plan. In
addition, each Debtor will be deemed to provide a full discharge
and
5
release
to each other Debtor, Mr. Allen, CII, members of the Crossover Committee and
various other parties, and their respective officers, directors, affiliates and
representatives against all claims, whether known or unknown.
Certain
Information Regarding Assets and Liabilities of the Company
Information regarding the assets and
liabilities of the Company as the most recent practicable date is hereby
incorporated by reference to the Company’s quarterly reports on Form 10-Q for
the fiscal quarter ended September 30, 2009 filed with the Securities and
Exchange Commission on November 9, 2009.
Cautionary
Statement Regarding Forward-Looking Statements
This Current Report includes
forward-looking statements within the meaning of Section 27A of the Securities
Act, and Section 21E of the Securities Exchange Act of 1934, as amended,
regarding, among other things, our plans, strategies and prospects, both
business and financial. Although we believe that our plans, intentions and
expectations reflected in or suggested by these forward-looking statements are
reasonable, we cannot assure you that we will achieve or realize these plans,
intentions or expectations. Forward-looking statements are inherently subject to
risks, uncertainties and assumptions including, without limitation, the factors
described under “Risk Factors” from time to time in our filings with the
Securities and Exchange Commission (“SEC”). Many of the
forward-looking statements contained in this Current Report may be identified by
the use of forward-looking words such as “believe,” “expect,” “anticipate,”
“should,” “plans,” “will,” “may,” “intend,” “estimated,” “aim,” “on track,”
“target,” “opportunity” and “potential,” among others. Important factors that
could cause actual results to differ materially from the forward-looking
statements we make in this Current Report are set forth in other reports or
documents that we file from time to time with the SEC, including our quarterly
reports on Form 10-Q filed in 2009 and our most recent annual report on Form
10-K and include, but are not limited to:
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·
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the
completion of the Company’s restructuring including the outcome and impact
on our business of the proceedings under chapter 11 of the Bankruptcy
Code;
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·
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the
ability of the Company to satisfy closing conditions under the
agreements-in-principle with certain of our bondholders, the Plan and
related documents;
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·
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the
availability and access, in general, of funds to meet our debt obligations
and to fund our operations and necessary capital expenditures, either
through cash on hand, cash flows from operating activities, further
borrowings or other sources and, in particular, our ability to fund debt
obligations (by dividend, investment or otherwise) to the applicable
obligor of such debt;
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·
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our
ability to comply with all covenants in our indentures and credit
facilities, any violation of which, if not cured in a timely manner, could
trigger a default of our other obligations under cross-default
provisions;
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·
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our
ability to repay debt prior to or when it becomes due and/or successfully
access the capital or credit markets to refinance that debt through new
issuances, exchange offers or otherwise, especially given recent
volatility and disruption in the capital and credit
markets;
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·
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the
impact of competition from other distributors, including but not limited
to incumbent telephone companies, direct broadcast satellite operators,
wireless broadband providers, and digital subscriber line (“DSL”)
providers;
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difficulties
in growing and operating our telephone services, while adequately
meeting customer expectations for the reliability of voice
services;
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·
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our
ability to adequately meet demand for installations and customer
service;
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·
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our
ability to sustain and grow revenues and cash flows from operating
activities by offering video, high-speed Internet, telephone and other
services, and to maintain and grow our customer base, particularly in the
face of increasingly aggressive competition and the weak economic
conditions in the United States;
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·
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our
ability to obtain programming at reasonable prices or to adequately raise
prices to offset the effects of higher programming
costs;
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·
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general
business conditions, economic uncertainty or downturn, including the
recent volatility and disruption in the capital and credit markets and the
significant downturn in the housing sector and overall economy;
and
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·
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the
effects of governmental regulation on our
business.
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All forward-looking statements
attributable to us or any person acting on our behalf are expressly qualified in
their entirety by this cautionary statement. We are under no duty or obligation
to update any of the forward-looking statements after the date of this Current
Report.
ITEM 9.01. FINANCIAL STATEMENTS
AND EXHIBITS.
(d)
Exhibits
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Exhibit
No.
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Description
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2.1
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Debtors'
Joint Plan of Reorganization filed pursuant to Chapter 11 of the United
States Bankruptcy Code filed on July 15, 2009 with the United States
Bankruptcy Court for the Southern District of New York in Case No.
09-11435 (Jointly Administered) (incorporated by reference to Exhibit 10.2
to the quarterly report on Form 10-Q of Charter Communications, Inc. filed
on August 6, 2009 (File No. 000-27927)).
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2.2
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Debtors'
Disclosure Statement filed pursuant to Chapter 11 of the United States
Bankruptcy Code filed on May 1, 2009 with the United States Bankruptcy
Court for the Southern District of New York in Case No. 09-11435 (Jointly
Administered) (incorporated by reference to Exhibit 10.1 to the quarterly
report on Form 10-Q of Charter Communications, Inc. filed on August 6,
2009 (File No. 000-27927)).
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99.1
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Press
release dated November 17, 2009. *
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* filed
herewith
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, Charter
Communications, Inc. has duly caused this Current Report to be signed on its
behalf by the undersigned hereunto duly authorized.
CHARTER COMMUNICATIONS,
INC.
Registrant
Dated:
November 23, 2009
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By:/s/ Kevin D.
Howard
Name:
Kevin D. Howard
Title: Vice President,
Controller and Chief Accounting
Officer
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EXHIBIT INDEX
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Exhibit
No.
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Description
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2.1
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Debtors'
Joint Plan of Reorganization filed pursuant to Chapter 11 of the United
States Bankruptcy Code filed on July 15, 2009 with the United States
Bankruptcy Court for the Southern District of New York in Case No.
09-11435 (Jointly Administered) (incorporated by reference to Exhibit 10.2
to the quarterly report on Form 10-Q of Charter Communications, Inc. filed
on August 6, 2009 (File No. 000-27927)).
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2.2
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Debtors'
Disclosure Statement filed pursuant to Chapter 11 of the United States
Bankruptcy Code filed on May 1, 2009 with the United States Bankruptcy
Court for the Southern District of New York in Case No. 09-11435 (Jointly
Administered) (incorporated by reference to Exhibit 10.1 to the quarterly
report on Form 10-Q of Charter Communications, Inc. filed on August 6,
2009 (File No. 000-27927)).
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99.1
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Press
release dated November 17, 2009. *
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* filed
herewith