8-KOther EventsExhibits & Filings

CHARTER COMMUNICATIONS, INC. /MO/ 8-K Report, Corporate Update (Dec 28, 2016)

Filed December 28, 2016For Securities:CHTR

Summary

This 8-K filing from Charter Communications, Inc. (CHTR) reports on a significant transaction with Advance/Newhouse Partnership (A/N) completed on December 28, 2016. The core of the event is the exchange of $537 million worth of Charter Holdings common units held by A/N for Charter's Class A common stock. This transaction is expected to provide Charter with an immediate step-up in the tax basis of Charter Holdings' assets, with the benefits shared equally with A/N per a prior Tax Receivables Agreement. Additionally, the agreement establishes a pro-rata repurchase arrangement where A/N will sell Charter Class A common stock or Charter Holdings common units to Charter or Charter Holdings, participating in Charter's share repurchase activities. This arrangement, along with the initial exchange, has implications for Charter's outstanding share count and A/N's remaining stake. Liberty Broadband Corporation's right of first refusal was waived for certain aspects of these transactions, as detailed in the filing.

Key Highlights

  • 1Charter Communications completed an exchange of $537 million of Charter Holdings common units from Advance/Newhouse Partnership (A/N) for Charter Class A common stock on December 28, 2016.
  • 2The exchange is expected to result in an immediate step-up in the tax basis of Charter Holdings' assets, with benefits shared with A/N.
  • 3A pro-rata repurchase arrangement was established, requiring A/N to sell Charter Class A common stock or Charter Holdings common units to Charter based on Charter's open market share repurchases.
  • 4An initial repurchase of 752,767 Charter Holdings Common Units from A/N was completed as part of this agreement.
  • 5Liberty Broadband Corporation waived its right of first refusal for these transactions.
  • 6As of December 28, 2016, Charter had approximately 268.8 million shares of Class A Stock outstanding after the exchange.
  • 7Charter has established a Rule 10b5-1 plan for share repurchases, but the timing and extent of future repurchases are subject to the plan's parameters and potential private transactions.

Frequently Asked Questions

The primary purpose was to facilitate an exchange of $537 million of Charter Holdings common units held by Advance/Newhouse Partnership (A/N) for Charter's Class A common stock. This exchange is expected to provide Charter with an immediate tax benefit through a step-up in the tax basis of Charter Holdings' assets, with the benefits being shared with A/N.

The pro rata repurchase arrangement requires A/N and its affiliates to sell to Charter or Charter Holdings a number of Charter Class A common shares or Charter Holdings common units that represents their pro rata participation in any shares Charter repurchases from other parties in the open market. This ensures A/N participates in Charter's buyback programs and helps Charter manage its outstanding share count and ownership structure.

A step-up in tax basis generally allows a company to increase the recorded value of its assets on its balance sheet to their current market value for tax purposes. This can lead to higher depreciation and amortization deductions in the future, reducing taxable income and thereby increasing cash flow. Charter expects to share these tax benefits with A/N under a prior agreement.

Yes, Liberty Broadband Corporation had a right of first refusal related to certain sales. However, Liberty Broadband waived this right with respect to the transactions described in the filing, including the initial repurchase of Charter Holdings Common Units from A/N.