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Home My WebLink About1979-04-03; City Council; 5207-6; Carlsbad Cablevision Finance AgreementCITY OF CARLSBAD -- Initial: AGENDA BILL NO. 5207 - Supplement No. 6 _ Dept. Hd. DATE: April 3, 1979 _ DEPARTMENT: Utilities & Maintenance Subject: APPROVING FINANCE AGREEMENT OF CARLSBAD CABLEVISION BY SECURITY PACIFIC NATIONAL BANK Statement of the Matter Council approved the assignment of a cable TV franchise from Daniel's Cablevision, Inc. to Carlsbad Cablevision, a limited partnership, at the regular meeting of December 5, 1978. Supporting documentation provided for Council consideration included a letter of commit- ment from the Security Pacific National Bank to Carlsbad Cablevision for a loan in the amount of $1,000,000, to be secured by a first mortgage. The Carlsbad Municipal Code (Para. 5.28»._140 (d)) requires Council approval of any financial arrangement whereby 50% or more of the market value of the franchise is pledged as security. The market value of the franchise has-not been established and as a practical matter it would be most difficult to do so at this time, since the system is undergoing construction. Counsel for the Security Pacific National Bank has expressed concern to Carlsbad Cablevision (Daniel's) that Council did not specifically consent to the mortgage as outlined in Mr. Saeman's letter of March 23, 1979 (Exhibit A). Carlsbad Cablevision has requested that Council approve their mortgage arrangement by Resolution. All City costs associated with this action will be reimbursed by Carlsbad Cablevision. EXHIBITS: A. Letter from Mr. John V. Saeman to Council of March 23, 1979. B. Resolution No.^"^?j^ approving mortgage of $1,000,000 for Carlsbad Cablevision. RECOMMENDATION: If Council approves the mortgage of Carlsbad Cablevision by Security Pacific National Bank, approve Resolution No. ^"^3^. Council Action: >*• 4-3-79 Council adopted Resolution 5732, approving the mortgaging and hypothecation of the property of Carlsbad Cablevision by Security Pacific National Bank. doniels coblevision March 23, 1979 City Council City of Carlsbad Carlsbad, California Dear Council Members: During November of last year, I wrote to you requesting your consent to the transfer of the cable television franchise from our company to Carlsbad Cablevision, A Limited Partnership. In my request, I described our financing arrangements with Security Pacific National Bank and enclosed a copy of their commitment letter. One of the conditions, stated by Security Pacific in their letter, was that their loan would be secured by a first mortgage and security interest in all of the cable company's as- sets. The Cable Television Ordinance, Number 6055, requires prior Council consent for the Grantee to mortgage more than 50% of the market value of the system. Al- though in our opinion the Council already gave its consent to the mortgage when it approved the transfer of the franchise, the bank's lawyer has requested that we ob- tain specific authorization for this lien. Therefore, we respectfully request the consent of the Carlsbad City Council to Carlsbad Cablevision granting a security interest in all of its assets to the Security Pacific National Bank. In closing, let me emphasize that this request is not due to any changes in the financial arrangements described in my letter of November 9, 1978. We are imple- menting our plan exactly as proposed, and the bank has merely requested this ac- tion as a clarification of their position. Very leman President JVS:LBC daniels Cablevision, inc. 2606 Ocean Front | Del Mar. California 92014 | 714481-9314 2930 East 3rd Avenue I Denver, Colorado 80206 I 303321-7550 Daniels & 293° East Third Avenue Associates Inc P.O. Box 6008Associates, inc. Denver Co|0rado g^g 303 321-7550 John Seaman President and Chief Executive Officer November 9, 1978 City Council City of Carlsbad Carlsbad, California Dear Council Members: In December, 1977, Daniels Properties, Inc. was granted a cable television fran- chise for Carlsbad, California. The franchise was accepted in April, 1978 by Daniels Cablevision, Inc., a company wholly owned by Bill Daniels. Daniels Ca- blevision, Inc. received it's Federal Communications Commission authorization for Carlsbad on August 19, 1978. All of the system electronics, cable, hardware and headend equipment required to construct the Carlsbad system have been ordered (over $800,000 total cost) and 85% have been received to our storage yard in Carlsbad. A temporary office has been leased in Carlsbad, a permanent office site has been selected in Carlsbad, the first five (5) miles of system construc- tion have been completed in the Seaport area of Carlsbad, and construction is continuing on schedule for the remainder of Carlsbad (a detailed progress re- port is attached as Exhibit A). Daniels Cablevision intended to use a bank construction loan to finance the con- struction phase of the project. Upon completion, we intended to put the perma- nent financing for the system in place. However, due to the extraordinary in- crease in interest rates and certain minor problems with our construction loan, we would like to permanently finance the system now and not wait until next year. In order to do that, we need your approval. The permanent financing method that we have chosen involves a limited partnership called Carlsbad Cablevision. The following points highlight this arrangement: 1. The partnership has entered into a ten-year management contract with Dan- iels & Associates, Inc. (see Exhibit B). This is the same company that manages all of Daniels' cable systems throughout the United States. As a result, the people of Carlsbad are assured that the cable television sys- tem will be operated by the same highly skilled people. In other words, the permanent financing method will not affect the construction or opera- tion of the system in any manner whatsoever. Mayor of City Council Page 2 November 9, 1978 2. The general partner in the partnership is a company jointly owned by Dan- iels & Associates, Inc. and Integrated Resources, Inc. (through its wholly owned subsidiary IR Cable Company). Daniels & Associates is a company wholly owned by Bill Daniels. Integrated Resources, Inc. is a publicly owned com- pany that specializes in leasing, partnership financing, and insurance. In- tegrated has committed to raise $700,000 for the partnership by selling Limited Partnership Interests. If for any reason they are unable to do so, they (Integrated) will advance the funds so that the project will be fully funded. A copy of this commitment is enclosed as Exhibit C. 3. The partnership has a firm commitment from a bank for $1,000,000 in senior debt. This, combined with the $700,000 in equity mentioned above, will pro- vide ample funds to construct and operate the system. (Exhibit D is a copy of the bank's commitment). 4. The partnership has arranged for all bonds and insurance required by the franchise (see Exhibit E). 5. Daniels Cablevision, Inc. has formally assigned the franchise to the part- nership, and the latter has formally accepted it. Copies of these documents are included herein as Exhibit F. 6. The partnership has executed the "hold harmless" clause contained in the franchise and is committed to an Affirmative Action Plan for equal employ- ment opportunity. 7. Enclosed as Exhibit G is a copy of the partnership agreement, and enclosed as Exhibit H is a list of all cable systems currently operated by Daniels & Associates, Inc. In summary, Daniels Cablevision respectfully requests that you approve of the assignment of the cable television franchise to Carlsbad Cablevision, a Limited Partnership. The transfer will provide permanent financing for the system, and the city will get exactly the same high quality cable television system, managed by the same company, on the same schedule as previously promised. In all respects, it is a change only in form and not of substance. Very jtrulvyo/drs, /• ^^^y^B&f^^^^*^^^^^ V. Saeman President JVS:LBC Enclosures cc Roger Greer Howard Gann SECURITY PACIFIC NATIONAL BANK HEAD OFFICE, SECURITY PACIFIC PLAZA, 333 SO. HOPE STREET, LOS ANGELES, CALIFORNIA MAILING ADDRESS: P. 0. BOX 2097, TERMINAL ANNEX, LOS ANGELES, CALIFORNIA 90051 October 26, 1978 Carlsbad Cablevision A Limited Partnership 2930 East Third Avenue Denver, Colorado 80206 Attention: Mr. Samuel P. Evans, Vice President Gentlemen: This letter will confirm our commitment to make a $1,000,000 non-recourse loan to Carlsbad Cablevision, a Limited Partnership. The purpose of the loan is to meet, in part, the cost of construction of a cable television system in Carlsbad, California. The loan will be structured as a one-year Revolving Credit converting into a seven year Term Loan. Principal payments during the Term Loan will be as follows: Year I Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 $0 50,000 100,000 150,000 200,000 250,000 250,000 $ 1,000.000 The loan will bear interest at 37o over our prime rate until the annualized cash flow, as customarily defined, exceeds 20% of the outstanding debt. At such time, the interest rate will become 2%7o over prime. It is understood that you will pay a loan closing fee of %% and also will pay a commitment fee on unused funds at a rate of %% per annum. The loan will be secured by a First Mortgage and security interest on all of the borrower's plant, equipment, and general tangibles now owned or hereafter acquired. We agree, however, that we will have recourse only to the collateral and will not have recourse against the Partnership nor any third party for any deficiency arising hereunder. Page two October 26, 1978 Our commitment to make a loan is conditioned on the following: (a) An irrevocable guarantee, acceptable to us, that $700,000 in equity or subordinated debt will be available to the Partnership upon its deiaand. It is agreed that up to $500,000 may be advanced against the Revolving Credit prior to the Partnership's receipt of the aforementioned equity/ subordinated debt provided that the guarantee is and continues in full force and effect. (b) Evidence acceptable to us that the city of Carlsbad, California will authorize the transfer of the cable television franchise from Daniels Cablevision, a Limited Partnership. (c) The definitization of a formal loan agreement in form and substance satisfactory to you and the Bank as well as receipt from you of the Management Agreement with Daniels & Associates, Inc., the Partnership Agreement and other related documentation. If the foregoing is acceptable to you, please sign the enclosed copy of this letter at the indicated place, and return it to us. B. J. Howell Assistant Vice President AGREED AND ACCEPTED CARLSBAD CABLEVISION, A LIMITED PARTNERSHIP BY: SECOND IR DANIELS CORPORATION ITS GENERAL PARTNER. Samuel P. Evans Vice President 1 RESOLUTION NO. 5732 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING 8 THE MORTGAGING AND HYPOTHECATION OF THE PROPERTY OF CARLSBAD CABLEVISION PURSUANT * TO SECTION 5.28.140(d) OF THE CARLSBAD MUNICIPAL CODE.6 : 6 WHEREAS, in accordance with'the provisions of Section 7 5.28.140(d) of the Carlsbad Muncipal Code Carlsbad Cablevision, g A Limited Partnership, has requested approval to mortgage 9 and hypothecate its property in favor of Security Pacific 10 National Bank; and 11 WHEREAS, this change has resulted in administrative 12 costs to the city due solely for the benefit of Carlsbad 18 Cablevision, A Limited Partnership; and 14 • NOW, THEREFORE, BE IT RESOLVED by the City Council of 15 the City of Carlsbad as follows: 16 1. That the above recitations are true and correct. 17 2. Costs borne by the city relative to the mortgage 18 and hypothecation will be reimbursed to the city. 19 3. Pursuant to Section 5.28.140(d) of the Carlsbad 20 Municipal Code the City Council of the City of Carlsbad 21 approves the mortgaging and hypothecation of the assets, 22 properties and interests of Carlsbad Cablevision, A Limited 23 Partnership to secure an indebtedness in favor of Security 24 Pacific National Bank. 25 /// 26 /// 27 /// 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PARSED, APPROVED AND ADOPTED at a Regular Meeting of the Carlsbad City Council, held on the 3rd day of Apri 1 1979, by the following vote, to wit: AYES: Councilmen Packard, Skotnicki, Lewis and Councilwoman Casler NOES: None ABSENT: Councilman Anear RONALD C. PACKARD, Mayor ATTEST: ALETHA L. RAUTENKRANZ, City Cletk (SEAL)