Charter 2002 Annual Report Download - page 98

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002, 2001 and 2000
(dollars in millions, except where indicated)
operating subsidiaries by their aÇliates, but are not secured by the other assets of each subsidiary or its
operating subsidiaries. The obligations under each subsidiary's credit facilities are also secured by pledges by
the subsidiary's parent of all equity interests it holds in other persons, and intercompany obligations owing to it
by its aÇliates, but are not secured by the other assets of the subsidiary's parent.
Each of the credit facilities of the Company's subsidiaries contain representations and warranties,
aÇrmative and negative covenants similar to those described above with respect to the indentures governing
the public notes of the Company's subsidiaries, information requirements, events of default and Ñnancial
covenants. The Ñnancial covenants, which are generally tested on a quarterly basis, measure performance
against standards set for leverage, debt service coverage, and operating cash Öow coverage of cash interest
expense. Additionally, the credit facilities contain provisions requiring mandatory loan prepayments under
speciÑc circumstances, including when signiÑcant amounts of assets are sold and the proceeds are not
promptly reinvested in assets useful in the business of the borrower. The Charter Operating credit facility also
provides that in the event that any existing Charter Holdings notes or other long-term indebtedness of Charter
Holdings remain outstanding on the date, which is six months prior to the scheduled Ñnal maturity, the term
loans under the Charter Operating credit facility will mature and the revolving credit facilities will terminate
on such date.
In the event of a default under the Company's subsidiaries' credit facilities or public notes, the
subsidiaries' creditors could elect to declare all amounts borrowed, together with accrued and unpaid interest
and other fees, to be due and payable. In such event, the subsidiaries' credit facilities and indentures that were
so accelerated or were otherwise in default will not permit the Company's subsidiaries to distribute funds to
Charter Holdco or the Company to pay interest or principal on the public notes. If the amounts outstanding
under such credit facilities or public notes are accelerated, all of the subsidiaries' debt and liabilities would be
payable from the subsidiaries' assets, prior to any distribution of the subsidiaries' assets to pay the interest and
principal amounts on the public notes. In addition, the lenders under the Company's credit facilities could
foreclose on their collateral, which includes equity interests in the Company's subsidiaries, and exercise other
rights of secured creditors. In any such case, the Company might not be able to repay or make any payments
on its public notes. Additionally, such a default would cause a cross-default in the indentures governing the
Charter Holdings notes and the convertible senior notes and would trigger the cross-default provision of the
Charter Operating Credit Agreement. Any default under any of the subsidiaries' credit facilities or public
notes might adversely aÅect the holders of the Company's public notes and the Company's growth, Ñnancial
condition and results of operations and could force the Company to examine all options, including seeking the
protection of the bankruptcy laws.
Backup Credit Facility. EÅective April 14, 2003, the Company entered into a commitment letter with
Vulcan Inc., which is an aÇliate of Paul Allen, pursuant to which Vulcan Inc. or an aÇliate (the ""lender'')
would lend initially to Charter Communications VII, LLC an aggregate amount of up to $300 million, which
amount includes a subfacility of up to $100 million for the issuance of letters of credit. The borrower would be
able to draw under the facility or have letters of credit issued, in each case within Ñve business days of the end
of each quarter ending on or prior to March 31, 2004. The loans and letters of credit could only be used to
repay loans, or replace letters of credit, under the Company's operating subsidiaries' credit facilities to the
extent required to comply with the leverage ratios under those credit facilities or to create cushions in excess of
the minimum amount necessary to comply with such ratios. The facility would be guaranteed by the Company
and certain of its subsidiaries and would be secured by a lien on the Company's corporate headquarters in St.
Louis and certain corporate aircraft. The Company would be required to use its commercially reasonable
eÅorts to form a new interim holding company (CCH II, LLC) as a subsidiary of Charter Holdings and to
cause Charter Holdings to transfer to it the equity interests in Charter Communications Operating LLC,
CC VI Holdings, LLC, Charter Communications VII, LLC and CC V Holdings, LLC, which transfer the
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