Open / Close Advertisement

Letter of Intent Signed for Acquisition of Kentucky Electric Assets

07/20/2004 - YouthStream Media Networks, Inc. has entered into a preliminary letter of intent with KES Holdings, LLC to acquire KES Acquisition Co., LLC, a 100%-owned subsidiary of KES Holdings. YouthStream currently owns a 1.00% membership interest in KES Holdings.

YouthStream Media Networks, Inc. has entered into a preliminary letter of intent with KES Holdings, LLC to acquire KES Acquisition Co., LLC, a 100%-owned subsidiary of KES Holdings. YouthStream currently owns a 1.00% membership interest in KES Holdings.

In conjunction with the proposed acquisition, YouthStream Media Networks will form a new subsidiary in which it will own 80.01% of the outstanding common stock, and will capitalize that subsidiary with $500,000.

In connection with the acquisition, the new subsidiary is expected to issue

  1. $25 million of its non-convertible non-voting redeemable preferred stock with a redemption price equal to $25 million and a 13% annual cumulative dividend and
  2. Senior subordinated promissory notes in the aggregate principal amount of $40 million with an annual interest rate of 8% to holders of KES Holdings, excluding the company.

The remaining 19.99% common stock interest in the new subsidiary will be owned by KES Holdings and other persons or entities that, prior to the acquisition, were investors in KES Holdings.

KES Holdings acquired Kentucky Electric Steel, Inc.’s steel minimill in Ashland, Ky., in Sep. 2003. Although the bankrupt producer was no longer operating at that time, the facility had been in operation for approximately 50 years and had been refurbished by KES Acquisition subsequent to the acquisition. The refurbished steel mini-mill has been generating revenues since early 2004.

The letter of intent is subject to satisfactory completion of due diligence; negotiation, preparation and execution of definitive transaction documents; preparation of consolidated financial statements; compliance with state and federal securities laws and regulations; and receipt of the requisite corporate approvals. The transaction is expected to close in the fourth calendar quarter of 2004. However, there can be no assurances that the transaction will be completed or that future operation of the steel minimill will be successful.

Robert Scott Fritz, a director of YouthStream Media Networks, is an investor in KES Holdings. Hal G. Byer, another director of the company, is a senior officer of Libra Securities, LLC, a registered NASD broker-dealer, and has an economic interest in KES Holdings through his relationship with Libra. Certain other affiliates of Libra are also investors in KES Holdings, including one such investor who is also a principal stockholder of the company.