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Bresnan, Managers Out of Charter Holdings

3/17/2002 7:00 PM Eastern

Bresnan Communications Co. president Bill Bresnan has divested his holdings in Charter Communications Inc., the result of exercising "put" rights that netted about $147.5 million for him and about 20 of his key managers.

According to Securities and Exchange Commission documents filed Monday, Bresnan Communications exercised its put rights for 14.8 million membership units of Charter Holding Co. at $26 per share, plus interest. Bresnan said his company's cut — including interest — worked out to 5.2 million units at $28.37 per share.

The membership units can be converted into Charter Class A common stock on a one-to-one basis.

Bresnan had the right to put the membership units to Charter chairman Paul Allen between Feb. 14 and April 15, according to the SEC document. Bresnan said he exercised his puts on Feb. 15, when Charter stock closed at $9.92 per share, or nearly one-third the value of the puts.

According to Bresnan, the New York merchant bank The Blackstone Group — his former backer — owned the other 9.6 million units, valued at about $272.4 million.

Bresnan received the put rights after selling his 690,000-subscriber MSO to Charter in February of 2000. That deal included $1 billion in cash, $1 billion in membership interests and $1.1 billion in assumed debt, according to Bresnan.

Bresnan Communications' other partner — AT&T Corp. — has put rights for 24.3 million membership units in another Charter holding company, called CC VIII, valued at about $689 million. It could not be determined whether AT&T had exercised those rights.

AT&T officials declined to comment.

The proceeds from the put rights were distributed among Bresnan, his personal partnerships and about 20 of Bresnan Communications's key managers, Bresnan said.

"We're out of Charter entirely at this point," said Bresnan, except for a small amount of Charter shares his investment company — Bresnan Communications Inc. — may have purchased on the open market.

Charter stock closed at $12.65 per share on March 13, down 35 cents apiece.

Bresnan declined to disclose what he would use the money for, but some observers believe it will go toward the purchase of about 340,000 subscribers in Montana, Wyoming and Colorado from systems now owned by AT&T Broadband. Sources pegged the value of those systems at between $2,100 and $2,500 per subscriber, making the total price tag between $714 million and $850 million.

Alaska-based cable and telephone company General Communications Inc. is also rumored to be in the bidding.

FALCON, RIFKIN EXTEND PUTS

Allen may have been forced to shell out a large sum to Bresnan, but the billionaire managed to avoid an even bigger payout after put rights attributable to Falcon Cable and Rifkin Acquisition Partners expired on Nov. 12, 2001, when Charter stock closed at $13.19 per share.

According to the SEC document, Falcon — which sold its cable systems to Charter in May 1999 for $3.6 billion — had the right to put 10.1 million membership units to Allen at $28.23 each. That would have cost the Microsoft Corp. co-founder another $282.3 million.

Rifkin, which sold its 460,000-subscriber operations to Charter in February 1999, had puts for 3.1 million membership units at $20.75 per share. Both Falcon and Rifkin extended their put agreements to Nov. 12, 2003.

All in all, it's been a costly past six months for Allen, who had to purchase $71 million worth of membership units from former Charter president and CEO Jerry Kent after Kent resigned in September. Kent's employment agreement required Allen to purchase his membership units for $20 each.

Charter co-founders and former executives Barry Babcock and Howard Wood also have membership interests — worth $52 million and $20 million, respectively — and are negotiating with Allen about buying them back, according to sources.

Kent and Woods formed their own investment company — called Cequel III — to invest in cable and telecommunications companies in January. They have access to about $6 billion in funding.

September