Charter 2003 Annual Report Download - page 57

Although Mr. Allen and his aÇliates have purchased equity from us and our subsidiaries in the past,
Mr. Allen and his aÇliates are not obligated to purchase equity from, contribute to or loan funds to us or to
our subsidiaries in the future.
In addition, because of our corporate structure, we may have less access to capital than certain of our
operating subsidiaries. Therefore our ability to repay any of our existing convertible senior notes is subject to
additional uncertainties. Charter is a holding company and its principal assets are its interest in Charter
Holdco and the mirror notes payable by Charter Holdco to Charter, which have the same principal amount
and terms as those of Charter's existing convertible senior notes. As a result, if Charter is not able to obtain
additional Ñnancing, its ability to make interest payments on its existing convertible senior notes, and, in 2005
and 2006, to repay the outstanding principal of its existing convertible senior notes as they mature, will depend
on the receipt of payments or distributions from Charter Holdco or its subsidiaries.
The indentures governing the Charter Holdings notes permit Charter Holdings to make distributions up
to its formulaic capacity to Charter Holdco for payment of interest on the convertible senior notes, only if,
after giving eÅect to the distribution, Charter Holdings can incur additional debt under the leverage ratio of
8.75 to 1.0, there is no default under the indentures and other speciÑed tests are met. However, in the event
that Charter Holdings could not incur any additional debt under the 8.75 to 1.0 leverage ratio, the indentures
governing the Charter Holdings notes permit Charter Holdings and its subsidiaries to make speciÑed
investments in Charter Holdco or Charter, up to its formulaic capacity, if there is no default under the
indentures. There were no defaults under the Charter Holdings indentures and other speciÑed tests were met
for the quarter ended December 31, 2003. However, Charter Holdings did not meet the leverage ratio test at
December 31, 2003, and as a result, distributions from Charter Holdings to us will be restricted until that test
is met. Our ability to make payments on our convertible senior notes is dependent on Charter Holdco's
liquidity or on the ability for it to obtain distributions from Charter Holdings and our other subsidiaries making
distributions, loans, or payments to Charter Holdco, and on Charter Holdco paying or distributing such funds
to us. As of December 31, 2003, Charter Holdco had $41 million in cash on hand and is owed $37 million in
intercompany loans, which are available to Charter Holdco to service interest on the convertible senior notes.
Accordingly, our ability to make interest payments, or principal payments at maturity in 2005 and 2006, with
respect to our currently outstanding convertible senior notes is contingent upon us obtaining additional
Ñnancing or receiving distributions or other payments from our subsidiaries.
No assurances can be given that we will not experience liquidity problems because of adverse market
conditions or other unfavorable events or if we do not obtain suÇcient additional Ñnancing on a timely basis.
If, at any time, additional capital or borrowing capacity is required beyond amounts internally generated or
available through existing credit facilities or in traditional debt or equity Ñnancings, we would consider:
‚ requesting waivers or amendments with respect to our credit facilities, the availability and terms of
which would be subject to market conditions;
‚ further reducing our expenses and capital expenditures, which would likely impair our ability to
increase revenue;
‚ selling assets;
‚ issuing debt securities which may have structural or other priorities over our existing notes; or
‚ issuing equity that would be dilutive to existing shareholders.
If the above strategies are not successful, ultimately, we could be forced to restructure our obligations or
seek protection under the bankruptcy laws. In addition, if we need to raise additional capital through the
issuance of equity or Ñnd it necessary to engage in a recapitalization or other similar transaction, our
shareholders could suÅer signiÑcant dilution and our noteholders might not receive all principal and interest
payments to which they are contractually entitled.
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