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BERNICK AND LIF$ON <br /> <br /> I The objectives of the financial analysis as explained in the <br /> attached~rep~t were to assess: <br />' I The :financial strength of the proposed buyer <br /> <br /> I The reasonableness of the proposed financing arrangement <br /> The reasonableness of financial projections for the system <br /> <br /> I The ability of the buyer to meet debt obligations <br /> otherI financial issues that may arise in the course of the <br /> I analysis <br /> Public iKnowledge arrived at the following conclusions <br /> i regarding thei financial analysis: <br /> The ~ropgsed purchase price of about $2,136 per subscriber is <br /> consistent with the market range in the past few years. <br /> I <br /> The i~i~iat debt-to-equity ratio of 1.12 under the proposed <br /> ownership is less leveraged than the industry average of 3.0. <br /> I Because Meredith/New Heritage Strategic Partners L.P. (the <br /> buyer} iS recently formed, audited financial statements are <br /> not available for the partnership, and therefore its <br /> I historical financial condition cannot be assessed. <br /> The North Central system currently performs slightly below <br /> I norms!:f0r certain selected financial indicators, and slightly <br /> better far others. <br /> <br /> The buyer's financial projections for the North Central system <br /> I appear optimistic, <br /> but <br /> achievable. <br /> <br /> SensitiVity analysis of the buyer's projections suggests that <br /> I the bUye~ can service the acquisition debt even if certain <br /> con~£tiohs materialize somewhat less favorably than assumed. <br /> <br /> i However, l there are unlikely to be sufficient funds for any <br /> sig~ifio&nt plant rebuild or upgrade before the year 2000 <br /> unless ~here is a significant amount, of additional borrowing <br /> or an ~quity infusion; debt service and normal capital <br /> I expenditures will consume most of the operating cash flow.** <br /> <br />I <br />I <br /> <br /> <br />