8-KMaterial AgreementsFinancial EventsExhibits & Filings

CHARTER COMMUNICATIONS, INC. /MO/ 8-K Report, Material Agreement (Nov 4, 2005)

Filed November 4, 2005For Securities:CHTR

Summary

Charter Communications, Inc. (CHTR) filed an 8-K on November 4, 2005, to report a material definitive agreement resolving a significant dispute regarding the ownership and transfer of preferred membership units in its subsidiary, CC VIII, LLC. This dispute, which involved Charter's indirect subsidiary CC VIII, certain sellers affiliated with AT&T Broadband (now Comcast), and Paul G. Allen (a significant shareholder), stemmed from alleged "scrivener's errors" in the documentation of the 2000 acquisition of Bresnan Communications. The core issue revolved around whether certain preferred equity interests in CC VIII should have been automatically exchanged for Charter Holdco membership units upon exercise of a put right by the sellers to Mr. Allen. The settlement agreement, executed on October 31, 2005, resolves this long-standing disagreement. Under the settlement, Mr. Allen's affiliate, CII, retains 30% of its CC VIII interest. The remaining 70% is transferred to a newly formed subsidiary, CCHC, LLC. A portion of this transferred interest was exchanged for a subordinated exchangeable note issued by CCHC to CII, with specific accretion and maturity terms, and exchange rights into Charter Holdco Class A Common units. This resolution aims to clarify the ownership structure and mitigate potential legal entanglements for Charter.

Key Highlights

  • 1Charter Communications has settled a material dispute concerning the ownership of preferred membership units in its subsidiary CC VIII, LLC.
  • 2The dispute originated from alleged documentation errors in the 2000 acquisition of Bresnan Communications and involved parties including affiliates of Comcast and Paul G. Allen.
  • 3The settlement agreement, dated October 31, 2005, resolves the ownership controversy surrounding approximately 24.27 million Class A preferred membership units.
  • 4Paul G. Allen's affiliate, Charter Investment, Inc. (CII), will retain 30% of its CC VIII interest.
  • 5The remaining 70% of the CC VIII interest has been transferred to a new Charter subsidiary, CCHC, LLC.
  • 6CII received a subordinated exchangeable note from CCHC, valued at $48.2 million initially, with an annual accretion rate of 14% and a 15-year maturity, convertible into Charter Holdco Class A Common units.
  • 7The settlement aims to provide clarity on ownership structures and avoid further legal proceedings.

Frequently Asked Questions

The dispute centered on whether preferred membership units in Charter's subsidiary CC VIII, LLC, initially issued as part of the Bresnan Communications acquisition, should have been automatically exchanged for Charter Holdco membership units. This stemmed from alleged errors in the transaction documentation from February 2000.

The main parties involved were Charter Communications, Inc., its subsidiary CC VIII, LLC, certain sellers affiliated with AT&T Broadband (later Comcast), and Paul G. Allen (indirectly through Charter Investment, Inc. - CII).

The settlement primarily restructures ownership and financial arrangements within Charter's subsidiaries. CII retains 30% of the disputed interest, while the other 70% is transferred to CCHC, LLC. CII received a subordinated exchangeable note from CCHC, which carries specific accretion terms and exchange rights, impacting future potential dilution and debt-like obligations for CCHC.

The note represents a significant financial instrument where CII is owed a principal amount plus accrued interest, which can be exchanged for Charter Holdco Class A Common units. This note has a substantial initial accreted value of $48.2 million, grows at 14% annually, and matures in 15 years, with provisions for redemption by CCHC or mandatory redemption at maturity. It also has anti-dilution protections and can be exchanged for Charter common stock.