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): September 30, 2002
United Pan-Europe Communications N.V.
(Exact name of registrant as specified in its charter)
The Netherlands
(State or Other Jurisdiction of Incorporation)
000-25365
(Commission File Number)
98-0191997
(I.R.S. Employer Identification Number)
Boeing Avenue 53
1119 PE, Schiphol Rijk
The Netherlands
(Address and zip code of principal executive offices)
(31) 20-778-9840
(Registrant's telephone number, including area code)
Item 5. Other Events
On September 30, 2002, United Pan-Europe Communications N.V. (the
"Company") issued a press release announcing that, in connection with the
proposed restructuring of its capitalization (the "Restructuring"), it has
entered into a Restructuring Agreement, dated September 30, 2002 (the
"Restructuring Agreement") with its parent company, UnitedGlobalCom, Inc.
("UGC"), certain subsidiaries of UGC, New UPC, Inc., a company formed for
purposes of effectuating the Company's restructuring ("New UPC"), and certain
holders (the "Participating Noteholders") of the Company's $200.0 million and
(euro)100.0 million 10 7/8% Senior Notes due 2007, $800.0 million and
(euro)300.0 million 10 7/8% Senior Notes due 2009, $735.0 million 12 1/2% Senior
Discount Notes due 2009, $252.0 million and (euro)101.0 million 11 1/4% Senior
Notes due 2009, $478.0 million and (euro)191.0 million 13 3/8% Senior Discount
Notes due 2009, $600.0 million and (euro)200.0 million 11 1/4% Senior Notes due
2010, $300.00 million 11 1/2% Senior Notes due 2010 and $1.0 billion 13 3/4%
Senior Discount Notes due 2010 (the "UPC Notes"). The Company also announced
that its wholly-owned subsidiary, UPC Distribution Holding B.V. ("UPC
Distribution"), has entered into a waiver and amendment (the "Waiver and
Amendment") to the senior secured credit facility dated October 26, 2000 (the
"UPC Distribution Facility") among UPC Distribution, as Borrower, TD Bank Europe
Limited and Toronto Dominion (Texas), Inc., as Facility Agents, and a group of
banks and financial institutions. The full text of the press release is attached
as Exhibit 99.1 hereto.
Restructuring Agreement
The following is a summary of the significant terms of the Restructuring
Agreement. The summary set forth below does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the detailed
provisions of the Restructuring Agreement. The full text of the Restructuring
Agreement is attached as Exhibit 99.2 hereto.
Agreed Restructuring Process
Under the Restructuring Agreement, the Company, New UPC, UGC (and certain
other members of the UGC Group (as defined hereinafter)) and the Participating
Noteholders have agreed that (i) the 6% Guaranteed Discount Notes due 2007 (the
"Belmarken Notes") of the Company and Belmarken Holding B.V. ("Belmarken"), (ii)
the UPC Notes, (iii) the Series 1 Convertible Preference Shares A of the Company
(the "UPC Preference Shares"), (iv) the Priority Shares of the Company (the "UPC
Priority Shares"), (v) the ordinary shares A of the Company (the "UPC Ordinary
Shares A") and (vi) the claims of other unsecured creditors of the Company will
be converted into shares of Common Stock of New UPC ("New UPC Common Stock") on
the terms set forth in the Restructuring Agreement. New UPC is a newly-formed
company, incorporated in the State of Delaware, that will act as the holding
company for the Company upon completion of the Restructuring.
The Restructuring is expected to consist of several different elements.
Under the Restructuring Agreement, the Company has agreed to
(i) file a voluntary case under Chapter 11 of the United States Bankruptcy
Code (the "U.S. Bankruptcy Code") and a plan of reorganization (the
"Plan") and
disclosure statement with the United States Bankruptcy Court (the
"U.S. Bankruptcy Court") and
(ii) file a voluntary provisional moratorium petition and a plan of
compulsory composition (Akkoord) (the "Akkoord") under the Dutch
Bankruptcy Code (Faillissementswet) (the "Dutch Bankruptcy Code") in
the Amsterdam Court (the "Dutch Court").
In addition, solely for the purpose of carrying out the Plan in a manner
consistent with Dutch law, to the extent necessary to qualify the Plan under
applicable Dutch securities laws, simultaneously with the proposal of the
Akkoord, New UPC has agreed, for purposes of Dutch law and, to the extent
permitted under applicable securities laws, solely with respect to individuals
and entities who are not U.S. persons (as such term is defined in Rule 902(k)
under the Securities Act of 1933), to offer a specified number of shares of New
UPC Common Stock with the noteholders and creditors of the Company in
consideration for transferring their claims against the Company to New UPC.
Distribution of Shares of New UPC Common Stock under the Plan and the
Akkoord
The Plan and the Akkoord will set forth the number of shares of New UPC
Common Stock to be distributed to
(i) UGC and its subsidiaries (the "UGC Group") in conversion of the
Belmarken Notes and the UPC Notes held by the members of the UGC
Group,
(ii) the holders of the UPC Notes other than the UGC Group,
(iii) the holders of the UPC Preference Shares, the UPC Ordinary Shares A
and the UPC Priority Shares and
(iv) the other unsecured creditors of the Company.
Under the Plan, each holder of UPC Notes and of any other claim against the
Company to the extent such claim is in the same class as the UPC Notes will be
offered two options: the first option will entitle such creditor to receive a
number of shares of New UPC Common Stock (to be determined as part of the
Restructuring) per $1,000 of allowed claim from New UPC in consideration for
transferring its claim against the Company to New UPC ("Option 1") and the
second option will entitle such creditor to receive a number of shares of New
UPC Common Stock per $1,000 of allowed claim from the Company equal to 75% of
the number of shares of New UPC Common Stock per $1,000 of allowed claim from
New UPC offered pursuant to Option 1 in final discharge of their rights against
the Company ("Option 2"). Under the Akkoord, the creditors of the Company will
receive a specified number of shares of New UPC Common Stock per $1,000 of
allowed claim which will be identical to the number of shares of New UPC Common
Stock that a holder of UPC Notes will receive in final discharge of its UPC
Notes pursuant to Option 2. Solely for the purpose of carrying out Option 1 in a
manner consistent with Dutch law, to the extent necessary to qualify Option 1
under applicable Dutch securities laws, simultaneously with the proposal of the
Akkoord, New UPC will, for purposes of Dutch law and, to the extent permitted
under applicable securities laws, solely with respect to
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individuals and entities who are not U.S. persons (as such term is defined in
Rule 902(k) under the Securities Act of 1933), offer a specified number of
shares of New UPC Common Stock with the noteholders and other creditors of the
Company in consideration for transferring their claims against the Company to
New UPC which will be identical to the number of shares of New UPC Common Stock
per $1,000 of allowed claim that creditors of the Company will receive in
consideration for their claims against the Company pursuant to Option 1.
In addition, the Company intends to ensure that the implementation of the
Plan, including, without limitation, the distribution of shares of New UPC
Common Stock to the creditors and equity holders of the Company, will be made in
accordance with all applicable laws, including the applicable securities laws of
the United States, The Netherlands and Luxembourg.
Upon consummation of the Plan and the Akkoord, it is anticipated under the
Restructuring Agreement that the following percentages of the total number of
shares of New UPC Common Stock will be distributed to the UGC Group, the holders
of the UPC Notes (other than the UGC Group) (assuming that Option 1 applies to
all UPC Notes) and the holders of the UPC Preference Shares, the UPC Ordinary
Shares A and the UPC Priority Shares and other claims treated as equity claims
(subject to potential dilution by issuance of additional shares of New UPC
Common Stock as described in "Treatment of Other Creditors of the Company,"
"Shares of New UPC Common Stock Issuable under Management Incentive Plans" and
"Capital Subscription in New UPC on the Effective Date" below):
Percentage of Total Number of Shares
Security Holder of the Company of New UPC Common Stock Distributed
Belmarken Notes and UPC Notes owned by UGC Group
on the date of the Restructuring Agreement 65.5%
UPC Notes (other than UPC Notes owned by the UGC
Group on the date of the Restructuring Agreement) 32.5%
Holders of UPC Preference Shares, UPC Ordinary Shares A
and UPC Priority Shares 2.0%
Under the Restructuring Agreement, UGC (on its own behalf and on behalf of the
UGC Group) and the Participating Noteholders have agreed to vote in favor of the
Plan as part of the Chapter 11 bankruptcy case and the Akkoord and other
Restructuring proposals set forth in the Restructuring Agreement and to take
other actions necessary to effectuate the terms of the Restructuring Agreement.
As of the date of the Restructuring Agreement, the Participating Noteholders
represented approximately 25% of all outstanding UPC Notes (approximately 38% of
all outstanding UPC Notes held by holders other than the UGC Group).
Collectively, as of the date of the Restructuring Agreement, the UGC Group and
the Participating Noteholders hold approximately 60% of the outstanding UPC
Notes. In addition, the UGC Group owns all of the outstanding Belmarken Notes,
approximately 20% of all outstanding UPC Preference Shares, all
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of the outstanding UPC Priority Shares and approximately 53% of all outstanding
UPC Ordinary Shares A.
Treatment of Other Creditors of the Company
Critical Vendors. Under the terms of the Restructuring Agreement, the
Company, the UGC Group, New UPC and the Participating Noteholders have
acknowledged that certain creditors of the Company are critical to the operation
of the business of the Company as a going concern ("Critical Vendors").
Accordingly, the parties to the Restructuring Agreement have agreed that the
Company will use its commercially reasonable efforts to pay such Critical
Vendors in full prior to the filing date of its Chapter 11 bankruptcy case, and
to the extent that any Critical Vendors are not paid in full prior to the filing
date, to support a motion in the U.S. Bankruptcy Court to permit the payment in
full on or as soon as is possible after the filing date, subject to the consent
of the Dutch administrator under the Akkoord. Furthermore, each of the parties
to the Restructuring Agreement have agreed to take other action to ensure that
the obligations of the Company to its Critical Vendors which remain unpaid on
the date the Plan and the Akkoord become effective (the "Effective Date") are
unimpaired, assumed and restated under the Plan and, subject to the consent of
the Dutch administrator under the Akkoord, paid in full in cash on or as soon as
practicable after the Effective Date. The Company will use its reasonable best
efforts to obtain the permission of the Dutch administrator under the Akkoord to
treat its Critical Vendors as "ransom-suppliers" and shall, subject to the
approval of the U.S. Bankruptcy Court, pay the claims of such Critical Vendors
in full in cash on or as soon as practicable after the filing date of its
Chapter 11 bankruptcy case. If the Company and/or the Dutch administrator under
the Akkoord determine after the filing date that there are additional
"ransom-suppliers," the Company will use its reasonable best efforts to obtain
any necessary approvals of the U.S. Bankruptcy Court to treat such additional
"ransom-suppliers" as additional Critical Vendors for all purposes. In
accordance with the Dutch Bankruptcy Code, Critical Vendors who are also
"ransom-suppliers," having been paid shall not be treated as creditors of the
Company and shall not be entitled to vote on the Akkoord and shall not receive
any additional compensation as a result of the Plan or the Akkoord except having
their claims paid in full in cash on or as soon as practicable after the filing
date. The Restructuring Agreement provides that the parties will use their
commercially reasonable efforts to treat the Critical Vendors who are not
permitted to be treated as such in the Chapter 11 case and Dutch moratorium as
general unsecured creditors of the Company, separately from the UPC Notes, the
Belmarken Notes and all other classes of creditors under the Plan and the
Akkoord and in a manner that is consistent with the treatment afforded to those
creditors which are permitted to be treated as Critical Vendors (to the extent
permitted by applicable law).
General Unsecured Creditors. Under the Restructuring Agreement, all general
unsecured creditors of the Company, other than holders of the UPC Notes, the
Belmarken Notes and, to the extent applicable, Litigation Claims (as described
below) ("General Unsecured Creditors") and Critical Vendors, other than Critical
Vendors permitted to be treated separately from other General Unsecured
Creditors, that will be affected by the Dutch moratorium will be offered the
same proportionate consideration pursuant to Option 1, Option 2, the Akkoord
option and the Dutch offer option described under "Distribution of Shares of New
UPC Common Stock under the Plan and the Akkoord" above as if they held UPC Notes
in the amount of their debt in full redemption of their claims once final
adjudication by the U.S. Bankruptcy
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Court or the Dutch Court, as the case may be, has been obtained. Any shares of
New UPC Common Stock issued in consideration for the claims of General Unsecured
Creditors will be in addition to the total number of shares of New UPC Common
Stock issued to the holders of the UPC Notes, the Belmarken Notes, the UPC
Preference Shares, the UPC Priority Shares and the UPC Ordinary Shares A as
described under "Distribution of Shares of New UPC Common Stock under the Plan
and the Akkoord" above.
Holders of Litigation Claims. The Restructuring Agreement contemplates that the
Plan will provide for the subordination under section 510(b) of the U.S.
Bankruptcy Code of certain litigation claims against the Company (the
"Litigation Claims") and, if the U.S. Bankruptcy Court determines that these
Litigation Claims are subject to subordination under section 510(b) of the U.S.
Bankruptcy Code or otherwise, then the holders of these Litigation Claims will
receive a portion of the shares of New UPC Common Stock to be issued in
consideration for the UPC Ordinary Shares A and UPC Priority Shares, pari passu
on a pro rata basis with the holders of the UPC Ordinary Shares A and the UPC
Priority Shares based on an allowed interest in an amount to be determined by
the U.S. Bankruptcy Court. If the U.S. Bankruptcy Court determines that the
Litigation Claims are not to be subordinated under section 510(b) or otherwise,
then the holders of the Litigation Claims are expected to receive same
proportionate consideration on account of the Litigation Claims as if they held
UPC Notes in the amount of their Litigation Claims in lieu of a cash payment.
Any shares of New UPC Common Stock issued to the holders of Litigation Claims
will be in addition to the total number of shares of New UPC Common Stock issued
to the holders of the UPC Notes, the Belmarken Notes, the UPC Preference Shares,
the UPC Priority Shares and the UPC Ordinary Shares A as described under
"Distribution of Shares of New UPC Common Stock under the Plan and the Akkoord"
above.
Administrative and Other Priority Claims. Under the Restructuring
Agreement, the Plan will provide that, on or as soon as practicable after the
Effective Date, each holder of an allowed administrative or other priority claim
under the U.S. Bankruptcy Code will be (i) paid in cash by the Company for the
full amount of its allowed claim, (ii) left unimpaired and restated or (iii) be
accorded such treatment as the Company and the holder of that claim agree in
writing. The Company has agreed to use its best efforts to ensure that
administrative claims in the Chapter 11 case are treated by the Company and the
Dutch administrator similarly in the moratorium proceedings in The Netherlands.
Outstanding Rights, Options and Warrants for Shares of the Company. Under
the Restructuring Agreement, the Plan will provide that all rights, options and
warrants to acquire UPC Ordinary Shares A, including rights, options and
warrants held by the Company's employees under the Company's existing equity
incentive plans, outstanding immediately prior to the Effective Date may remain
outstanding, unless those rights, options and warrants can be cancelled in
connection with the Restructuring or, in the case of rights, options and
warrants held by Company employees, such rights, options and warrants are
delivered to New UPC, in the discretion of New UPC's board of directors, in
exchange for rights, options and warrants permitted to be issued by New UPC as
described under "Shares of New UPC Common Stock Issuable under Management
Incentive Plans" below.
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New UPC Board of Directors and Rights of the Participating Noteholders
Under the Restructuring Agreement, New UPC's By-Laws and a stockholders
agreement to be entered into among New UPC, UGC and the Participating
Noteholders (the "Stockholders Agreement") will provide that, for a three year
period beginning on the Effective Date,
(i) a majority-in-interest of the Participating Noteholders will have the
right to designate two individuals, each of whom must be acceptable to
UGC, to serve as directors of New UPC (the "Noteholders' Directors"),
(ii) the Board of Directors of New UPC will be comprised of ten members and
the number of directors cannot be changed without the consent of the
Noteholders' Directors,
(iii) the Noteholders' Directors cannot be removed except for cause or upon
written request of a majority-in-interest of the Participating
Noteholders and
(iv) upon removal, resignation or death of a Noteholders' Director, the
Participating Noteholders will have the right to replace that
Noteholders' Director.
New UPC's By-Laws will provide the Noteholders' Directors, acting together,
with the power to reject certain related party transactions between New UPC and
its affiliates (other than subsidiaries of New UPC) subject to certain
exceptions or if approved by a majority of the disinterested shareholders of New
UPC.
The Stockholders Agreement will provide the Participating Noteholders with
"tag-along" rights for sale of their shares of New UPC Common Stock in the event
that members of the UGC Group propose to sell 5% or more of the outstanding
shares of New UPC Common Stock.
Under the Restructuring Agreement, the Company, the UGC Group, New UPC and
the Participating Noteholders have agreed that, after the Restructuring is
completed, changes will be made to the corporate governance of the Company to
ensure that (i) decisions taken by the board of directors of New UPC are
implemented by the Company and (ii) rights of the Participating Noteholders in
the management of New UPC and the approval requirements of the Participating
Noteholders over related party transactions, each as described above, are also
applicable to actions taken by the Company.
Shares of New UPC Common Stock Issuable under Management Incentive Plans
Under the Restructuring Agreement, the Plan will provide that, at the
discretion of New UPC's board of directors, options with respect to no more than
five (5) percent of New UPC's common equity outstanding immediately after the
Effective Date, on a fully-diluted basis, can be issued during the three year
period beginning on the Effective Date to certain members of the management and
other employees of New UPC and its subsidiaries subject to certain limitations
on pricing.
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Pre-emptive Rights of Holders of New UPC Common Stock
Under the Plan, the holders of shares of New UPC Common Stock will have
pre-emptive rights for the first (euro)1,538.46 million of equity or
equity-linked securities issued by New UPC after the day that the Plan and the
Akkoord become effective and final for cash or in exchange for assets (or other
consideration) acquired from a related party.
Capital Subscription in New UPC on Effective Date
The Restructuring Agreement provides that the Plan will include a
requirement that, on the Effective Date, New UPC will offer to each holder of
UPC Notes and the Belmarken Notes the right to purchase a pro rata share of up
to (euro)100 million of shares of New UPC Common Stock at the per share price
implied by the Plan. This right will be exercisable only on the Effective Date.
The (euro)100 million amount will be reduced by the net proceeds of any assets
sold by the Company prior to the Effective Date (other than assets sold in the
ordinary course of the Company's business in a manner consistent with its past
practices) and by the net proceeds from any non-dilutive capital raised by the
Company (other than capital received from UGC) (the "Maximum Subscription
Amount"). The UGC Group has agreed to subscribe for its pro rata share of the
Maximum Subscription Amount of shares of New UPC Common Stock to be issued on
the Effective Date. In addition, the UGC Group has agreed to subscribe for the
pro rata share of the Maximum Subscription Amount offered to the holders of the
UPC Notes (other than the UGC Group) to the extent that such holders do not
subscribe for their pro rata share of the Maximum Subscription Amount on the
Effective Date.
Consents and Approvals Necessary for the Consummation of the Restructuring
The Company must receive various consents, approvals and rulings of various
governmental authorities and other third parties, including, without limitation,
the following:
(i) confirmation of the Plan by the U.S. Bankruptcy Court in accordance
with the provisions of the U.S. Bankruptcy Code and approval of the
Plan by the requisite amount and number of creditors of the Company
and, to the extent legally required, the requisite amount of
shareholders of the Company, including, without limitation, by at
least 66 2/3% in amount, and more than 50% in number, of the holders
(other than the UGC Group) of the UPC Notes who actually vote on the
Plan;
(ii) approval of the Akkoord by 66 2/3% of the admitted (by the supervising
Dutch judge) and recognized (by the Dutch administrator) ordinary
creditors of the Company representing 75% in value of the admitted and
recognized claims against the Company;
(iii) ratification of the Akkoord by the Amsterdam Court;
(iv) receipt of a final tax ruling from the Dutch tax inspector, the effect
of which is that there will be no adverse effect upon the value of the
Company as a result of
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the Dutch tax consequences of consummating the Restructuring on the
terms set forth in the Restructuring Agreement;
(v) the elimination of the UPC Preference Shares;
(vi) approval of (A) an amendment of Articles of Association of the Company
to change the authorized share capital of the Company to 450 million
Ordinary Shares A with a par value of (euro)0.02 per share, 50 billion
ordinary shares C with a par value of (euro)0.02 per share, 300
priority shares with a par value of (euro)0.01 per share and 12,400
preference shares A with a par value of (euro)0.01 per share, and (B)
the terms of the Restructuring by the voting shareholders of the
Company at an extraordinary general meeting of the Company's
shareholders; and
(vii) approval of the Prospectus (as defined in the Restructuring
Agreement) in respect of the Restructuring by the securities
regulators of The Netherlands and Luxembourg.
The Company has begun, or will promptly begin, to take steps to procure
these consents, approvals and rulings in a timely fashion.
The Company currently expects to complete the Restructuring in the first
quarter of 2003. The Company cannot provide any assurances that (i) the
Restructuring will not be delayed or terminated, (ii) the terms of the
Restructuring will not be modified from the terms of the Restructuring Agreement
set forth in Exhibit 99.2 or (iii) the Restructuring will be successfully
completed on the terms set forth in the Restructuring Agreement or otherwise. If
the Company's Restructuring is not successfully completed on the terms set forth
in the Restructuring Agreement, the Company would likely have to renegotiate the
terms of the Restructuring Agreement, sell or otherwise dispose of assets and
businesses to raise funds necessary to satisfy its obligations or seek
alternative means to restructure or extinguish its outstanding indebtedness.
The description of the terms of the Restructuring Agreement contained in
this Form 8-K shall not constitute an offer to exchange or sell, or the
solicitation of an offer to exchange or buy, any securities of UPC or New UPC,
or a solicitation of any votes in favor of the Plan or the Akkoord; nor shall
there be any exchange or sale of securities of UPC or New UPC, or solicitation
of votes in favor of the Plan or the Akkoord; in any jurisdiction in which such
offer, exchange, sale or solicitation would be unlawful.
Waiver and Amendment
The following is a summary of the significant terms of the Waiver and
Amendment. The summary set forth below does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the detailed
provisions of the Waiver and Amendment. The full text of the Waiver and
Amendment is attached as Exhibit 99.3 hereto.
The Waiver and Amendment largely reflects a desire on behalf of the banking
group to ensure that, post-restructuring, the UPC Group remains a viable
enterprise. The Waiver and Amendment extends, until March 31, 2003, the waivers
of the defaults arising under the UPC Distribution Facility as a result of the
Company's decision not to make interest payments under
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the outstanding UPC Notes. In addition, the Waiver and Amendment amends the UPC
Distribution Facility to
(i) increase the interest margin applicable to outstanding amounts owed
under the UPC Distribution Facility by 1.5% across all tranches;
(ii) require the Company to pay a fee of 0.25% on the total commitment
amount to the banks five business days after the Effective Date;
(iii)reduce the total commitment amount under the facility to(euro)3.5
billion, effective October 7, 2002;
(iv) increase headroom under the Company's Senior Debt (as defined in the
UPC Distribution Facility) to Annualised EBITDA (as defined in the UPC
Distribution Facility) covenant by increasing and extending the
maximum ratios to the following:
Test Date Ratio
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March 31, 2003 8.25 : 1
June 30, 2003 8.00 : 1
September 30, 2003 7.75 : 1
December 31, 2003 7.00 : 1
March 31, 2004 6.50 : 1
June 30, 2004 6.00 : 1
September 30, 2004 5.25 : 1
December 31, 2004 4.75 : 1
March 31, 2005 4.25 : 1
June 30, 2005 3.75 : 1
September 30, 2005 3.50 : 1
December 31, 2005 3.25 : 1
March 31, 2006 2.75 : 1
June 30, 2006 2.50 : 1
September 30, 2006 2.25 : 1
Thereafter 2.00 : 1
(v) increase headroom under the Company's minimum EBIDTA (as defined in
the UPC Distribution Facility) to Total Cash Interest (as defined in
the UPC Distribution Facility) covenant by lowering and extending the
minimum ratios to the following:
Test Date Ratio
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March 31, 2003 1.35 : 1
June 30, 2003 1.35 : 1
September 30, 2003 1.50 : 1
December 31, 2003 1.75 : 1
March 31, 2004 1.75 : 1
June 30, 2004 2.00 : 1
September 30, 2004 2.25 : 1
December 31, 2004 2.50 : 1
March 31, 2005 2.75 : 1
June 30, 2005 3.00 : 1
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September 30, 2005 3.25 : 1
Thereafter 3.50 : 1
(vi) increase headroom under the Company's minimum EBIDTA to Senior Debt
Service covenant by lowering and extending the minimum ratios to the
following:
Test Dates Ratio
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December 31, 2003 to December 31, 2004 1.00 : 1
March 31, 2005 to December 31, 2006 1.10 : 1
March 31, 2007 and thereafter 1.50 : 1
(vii) include an additional amount permitted to be drawn under the facility
of(euro)100 million during the restructuring process;
(viii) require the Company to make a capital contribution or subordinated
shareholder loans of (euro)125 million to UPC Distribution within two
business days after the completion of the Restructuring;
(ix) include all corporate costs (together with the corresponding asset, as
appropriate) for both the Company and UPC Distribution into the UPC
Distribution Facility during 2003;
(x) through an amendment to the definition of "Permitted Acquisition," (a)
reduce the Permitted Acquisitions basket from (euro)500 million to
(euro)100 million and (b) prohibit UPC Distribution from acquiring the
share capital or assets of any entity owned by New UPC, the Company or
any of their respective subsidiaries with money drawn under the UPC
Distribution Facility;
(xi) add a requirement that the Company use 10% of any net cash proceeds
received by UPC Distribution or any company of which UPC Distribution
is a subsidiary, including New UPC and the Company (a "Relevant
Company"), from the issuance of any equity securities (or securities
convertible or exchangeable into equity securities) to prepay a
corresponding amount of the outstanding loans under the UPC
Distribution Facility, except
(a) if UPC Distribution's ratio of Senior Debt to Annualised EBITDA
is less than or equal to 3.5:1 for the two most recent Ratio
Periods (as defined in the UPC Distribution Facility),
(b) to the extent that those net proceeds have been previously
treated as net proceeds for purposes of that new section of the
UPC Distribution Facility,
(c) in respect of the(euro)100 million subscription by UGC for shares
of New UPC Common Stock on the Effective Date pursuant to the
terms of the Restructuring Agreement,
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(d) in respect of net proceeds received from a new issue of shares by
UPC Holding B.V. (the immediate holding company of UPC
Distribution and wholly-owned subsidiary of Belmarken) subscribed
for by Belmarken, and
(e) in respect of net proceeds relating to any issuance of shares
where all of the shares issued are subscribed for by New UPC or
any of its affiliates (including UGC and Liberty Media
Corporation and their respective subsidiaries);
(xii) restrict each Relevant Company from incurring any debt owed to any
person other than New UPC and its affiliates (including UGC, Liberty
Media Corporation and their respective subsidiaries) on or before
December 31, 2004, and, after December 31, 2004, such debt may be
incurred provided that, unless UPC Distribution's ratio of Senior Debt
to Annualised EBITDA is equal to or less than 3.5:1 for the two most
recent Ratio Periods, UPC Distribution shall prepay the amount of the
facilities equal to 50% of such third party debt incurred; and
(xiii) restrict each Relevant Company from creating any security interest
over all or part of its present or future undertakings, assets, rights
or revenues.
In the Waiver and Amendment, the Majority Lenders (as defined in the UPC
Distribution Facility) have confirmed that any waiver granted in respect of any
Restructuring default will become permanent after completion of the
Restructuring. In addition, UPC Distribution has agreed to provide certain
information to the Lenders regarding the Restructuring, including monthly
updates of the progress of the Restructuring, details of material changes to, or
termination of, the Restructuring Agreement, the occurrence of Termination
Events (as defined in the Waiver and Amendment) and completion of, and
post-completion matters related to, the Restructuring.
Item 7. Exhibits
Exhibit Number Description
-------------- -----------
99.1 Press Release dated September 30, 2002.
99.2 Restructuring Agreement, dated September 30, 2002,
among United Pan-Europe Communications N.V., New
UPC, Inc., UnitedGlobalCom, Inc., UGC Holdings,
Inc., United Europe, Inc., United UPC Bonds, LLC,
and certain holders of notes of United Pan-Europe
Communications N.V.
99.3 Waiver and Amendment Letter, dated September 30,
2002, between TD Bank Europe Limited (acting with
the approval of the Majority Lenders) and UPC
Distribution Holding B.V. (acting on its own
behalf and on behalf of its subsidiaries party to
the UPC Distribution Facility).
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Item 9. FD Disclosure
During the course of the discussions and negotiations among the Company,
UGC and other members of the UGC Group, the Participating Noteholders and their
respective affiliates, representatives and financial and legal advisors
regarding the various proposed structures for the Restructuring and the terms of
the Restructuring Agreement, the Company provided certain information to the
Participating Noteholders and their advisors under confidentiality agreements.
These confidentiality agreements terminated upon the signing of the
Restructuring Agreement. Set forth below is a description of certain information
provided to the Participating Noteholders during the course of the discussions
and negotiations surrounding the Restructuring Agreement. In certain cases, the
information set forth below has been updated to reflect developments since the
time information regarding these matters was provided to the Participating
Noteholders.
Operational Restructuring of the Company
As part of the Restructuring, the Company transferred all of its operating
and management functions and activities for its operating subsidiaries to
newly-formed subsidiaries. In addition, the Company transferred the majority of
its trade creditors and contracts to these new subsidiaries. The Restructuring
Agreement contemplates that those new subsidiaries will not be affected by the
Chapter 11 bankruptcy case or the Dutch moratorium proceeding.
The Company's operating subsidiaries will continue to operate their
businesses during the Company's Restructuring. However, it is possible that the
Restructuring could adversely affect the relationships of the Company's
subsidiaries with their suppliers, customers and employees. If such
relationships are adversely affected, the Company's working capital position and
financial condition could materially deteriorate. This deterioration could
adversely affect the Company's ability to consummate the Restructuring.
Certain Financial Projections Provided by the Company
The Company does not, as a matter of course, make public any forecasts as
to its future financial performance. However, in connection with the
negotiations with UGC and the Participating Noteholders and the Participating
Noteholders' review of the Company's and UGC's Restructuring proposals, the
Company provided the Participating Noteholders with certain projected financial
information concerning the Company. The information set forth herein contains a
summary of the projected financial information provided to the Participating
Noteholders, with such information updated as of September 30, 2002. The
Company has advised the Participating Noteholders that its internal financial
forecasts (upon which the projections provided to the Participating Noteholders
were based in part) are, in general, prepared solely for internal use and
capital budgeting and other management decisions and are subjective in many
respects and thus susceptible to multiple interpretations and periodic revisions
based on actual experience and business developments. The projections disclosed
herein also reflect numerous assumptions (not all of which were provided to the
Participating Noteholders), all made by management of the Company, with respect
to industry performance, general business, economic, market and financial
conditions and other matters. Such assumptions regarding future events are
difficult to predict, and many are beyond the Company's
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control. Accordingly, there can be no assurance that the assumptions made by the
Company in preparing the projections will prove accurate. It is expected that
there will be differences between actual and projected results, and actual
results may be materially greater or less than those contained in the
projections. The inclusion of the projections herein should not be regarded as
an indication that any of the Participating Noteholders, UGC (or any member of
the UGC Group), the Company or their respective affiliates, representatives or
advisors consider the projections to be a reliable prediction of future events,
and the projections should not be relied upon as such. These projections are
being provided only because the Company made the projections available to the
Participating Noteholders, UGC and their respective advisors in connection with
their discussions regarding the Restructuring proposals and the Restructuring
Agreement. None of the Participating Noteholders, UGC, the Company or any of
their respective affiliates, representatives or advisors makes any
representation to any person regarding the projections, and none of them has or
intends to update or otherwise revise the projections to reflect circumstances
existing after the date when made or to reflect the occurrence of future events
even in the event that any or all of the assumptions underlying the projections
are shown to be in error.
The Company provided to the Participating Noteholders and UGC (and
other members of the UGC Group) the forecasts and targets in the table below for
the fiscal years indicated for the Company on a pro forma consolidated basis.
These forecasts and targets do not take into account any future dispositions or
acquisitions.
United Pan-Europe Communications N.V.(1)
Year ended December 31,
2002 2003 2004
---- ---- ----
(in millions of Euros, except for basic
subscribers and revenue generating units)
Pro Forma Consolidated Statement of Operations Data:
Total revenues............................................. 1,440 1,631 1,960
Total Adjusted EBITDA(2)................................... 278 547 792
Pro Forma Consolidated Statement of Cash Flow Data:(3)
Total capital expenditures................................. (385) (338) (335)
Free cash flow before financing(4)......................... (107) 209 457
Pro Forma Balance Sheet Data (year-end):
Total net debt(5).......................................... 3,530 3,531 3,345
Pro Forma Operating Data (year-end):
Basic subscribers (in thousands)........................... 6,680 6,830 6,900
Total revenue generating units (in thousands)(6)........... 8,200 9,000 9,700
--------------------
(1) Excludes UPC Germany from August 1, 2002 and Priority Telecom from January 1, 2003.
(2) "Adjusted EBITDA" is net operating loss before depreciation,
amortization, stock-based compensation expense and impairment and
restructuring charges. Industry analysts generally consider EBIDTA to
be a helpful way to measure the performance of cable television
operations and communications companies. Management believes that
Adjusted EBITDA helps investors to assess the cash flow from operations
from period to period and thus value the Company's business. The
presentation of Adjusted EBITDA may not be comparable to statistics
with a similar name reported by other companies. Not all companies and
analysts calculate Adjusted EBITDA in the same manner.
(3) The Company anticipates that working capital will remain relatively flat
for each year in the three year period ended December 31, 2004.
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(4) "Free cash flow before financing" represents Adjusted EBITDA less capital
expenditures before debt servicing costs.
(5) "Net debt" represents consolidated gross debt less consolidated cash
balances. As of December 31, 2002, pro forma net debt assumes the
elimination of the UPC Notes and the Belmarken Notes.
(6) Total revenue generating units represent illustrative revenue
generating units which the Company may target in order to achieve its
total revenue targets. As noted in previous announcements, the
Company's strategic focus has shifted toward improving adjusted EBITDA
and cash flow.
These projections should be read together with the audited consolidated
financial statements of the Company for the three years ended December 31, 2001
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001 and the unaudited consolidated financial statements of the
Company for the fiscal quarters ended March 31, 2002 and June 30, 2002 contained
in the Company's Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 2002 and June 30, 2002, respectively, that can be obtained from the
Securities and Exchange Commission on its Internet website (www.sec.gov) or the
Company's Internet website (www.upccorp.com).
It is the understanding of the Participating Noteholders and UGC that the
projections were not prepared with a view to public disclosure or compliance
with published guidelines of the Securities and Exchange Commission or the
guidelines established by the American Institute of Certified Public Accountants
regarding projections or forecasts. The projections do not purport to present
operations in accordance with generally accepted accounting principles, and the
Company's independent auditors have not examined, compiled or performed any
procedures with respect to the projections presented herein, nor have they
expressed any opinion or any other form of assurance of such information or its
achievability, and accordingly assume no responsibility for them.
This Current Report on Form 8-K (this "Report") contains forward-looking
statements (any statement other than those made solely with respect to
historical fact) based upon management's beliefs, as well as assumptions made by
and data currently available to management. This information has been, or in the
future may be, included in reliance on the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on a variety of assumptions that may not be realized and
are subject to significant business, economic, judicial and competitive risks
and uncertainties, including those set forth below, many of which are beyond the
Company's control. The Company's actual operations, financial condition, cash
flows or operating results may differ materially from those expressed or implied
by any such forward-looking statements. These statements relate to the Company's
future plans, objectives, expectations and intentions. These statements may be
identified by the use of words like "believes," "expects," "may," "will,"
"would," "should," "seeks," "pro forma," "anticipates" and similar expressions.
The Company undertakes no obligation to update or revise any such
forward-looking statements.
The forward-looking statements and the Company's liquidity, capital
resources and results of operations are subject to a number of risks and
uncertainties including, but not limited to, the following: the ability of the
Company to continue as a going concern; the ability of the Company and its
subsidiaries to operate pursuant to the terms of their existing credit
facilities and arrangements; the ability to fund, develop and execute the
Company's business plan; the
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ability of the Company to restructure its outstanding indebtedness on a
satisfactory and timely basis; the ability of the Company to develop, confirm
and consummate the Plan under the U.S. Bankruptcy Code and an Akkoord under the
Dutch Bankruptcy Code; the ramifications of any restructuring; risks associated
with not completing the Restructuring consistent with the Company's timetable;
risks associated with third parties seeking and obtaining approval of the U.S.
Bankruptcy Court or the Dutch Court to take actions inconsistent with, or
detrimental to, the consummation of the Plan and the Akkoord; potential adverse
developments with respect to the Company's liquidity or results of operations;
competitive pressures from other companies in the same or similar lines of
business as the Company; trends in the economy as a whole which may affect
subscriber confidence and demand for the goods and services supplied by the
Company; the ability of the Company to predict consumer demand as a whole, as
well as demand for specific goods and services; the acceptance and continued use
by subscribers and potential subscribers of the Company's services; changes in
technology and competition; the Company's ability to achieve expected
operational efficiencies and economies of scale and its ability to generate
expected revenue and achieve assumed margins; the ability of the Company to
attract, retain and compensate key executives and other personnel; the ability
of the Company to maintain existing arrangements and/or enter into new
arrangements with third party providers and contract partners; potential adverse
publicity, as well as other factors detailed from time to time in the Company's
filings with the Securities and Exchange Commission. Given these uncertainties,
readers are cautioned not to place undue reliance on the forward-looking
statements contained in this Report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
UNITED PAN-EUROPE COMMUNICATIONS N.V.
By: /s/ ANTON A.M. TUIJTEN
-----------------------------------------------
Name: Anton A.M. Tuijten
Title: Member of the Board of Management and General Counsel
Dated: September 30, 2002
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