8-KMaterial Agreements

CHARTER COMMUNICATIONS, INC. /MO/ 8-K Report, Material Agreement (May 20, 2005)

Filed May 20, 2005For Securities:CHTR

Summary

Charter Communications, Inc. (CHTR) announced on May 20, 2005, an amendment to its January 24, 2005, Stipulation of Settlement concerning class action lawsuits. This amendment provides Charter with a crucial option to satisfy its obligation to issue settlement securities with cash, on a dollar-for-dollar basis, at its sole discretion. Previously, the settlement involved Charter's insurers paying $64 million in cash, and Charter issuing $40 million in Class A common stock and $40 million in warrants to purchase common stock. The new amendment allows Charter to replace some or all of these securities with an equivalent cash payment. As of the filing date, Charter had not yet determined whether to exercise this option. This flexibility could significantly impact Charter's balance sheet and shareholder equity depending on the final decision.

Key Highlights

  • 1Charter Communications amended its prior settlement agreement for class action lawsuits.
  • 2The company has gained the discretion to pay the settlement amount for securities in cash instead of issuing stock and warrants.
  • 3The original settlement involved $64 million in cash from insurers and $40 million in Class A common stock and $40 million in warrants from Charter.
  • 4Charter can now choose to substitute cash for all or part of the $80 million in settlement securities.
  • 5The decision on whether to issue securities or pay cash has not yet been made by Charter.
  • 6This amendment offers Charter financial flexibility in resolving the class action litigation.

Frequently Asked Questions

The primary change is that Charter Communications now has the option to pay the $80 million portion of the settlement that was to be made in the form of Class A common stock and warrants, entirely in cash, at its discretion. Previously, Charter was obligated to issue these securities.

The total settlement involves $64 million in cash to be paid by Charter's insurers, plus an additional $80 million. Under the amended agreement, this $80 million can be paid either by issuing Charter Class A common stock and warrants (valued at $40 million each) or by paying an equivalent amount in cash.

No, as of May 20, 2005, Charter Communications had not yet made a determination on whether to issue the settlement securities or to substitute cash for some or all of that obligation.

If Charter decides to pay the $80 million in cash, it would avoid diluting existing shareholders by issuing new stock and warrants. Conversely, if they choose to issue securities, it could dilute the value of existing shares depending on market conditions and the valuation formula used for the stock and warrants.