Charter 2003 Annual Report Download - page 74

The restricted subsidiaries of Charter Holdings are generally not permitted to guarantee or pledge assets
to secure debt of Charter Holdings, unless the guarantying subsidiary issues a guarantee of the notes of
comparable priority and tenor, and waives any rights of reimbursement, indemnity or subrogation arising from
the guarantee transaction for at least one year.
The indentures also restrict the ability of Charter Holdings and its restricted subsidiaries to enter into
certain transactions with aÇliates involving consideration in excess of $15 million without a determination by
the board of directors of Charter Holdings that the transaction is on terms no less favorable than arms length,
or transactions with aÇliates involving over $50 million without receiving an independent opinion as to the
fairness of the transaction to the holders of the Charter Holdings notes.
CCH II Notes
In September 2003, CCH II and CCH II Capital Corp. jointly issued approximately $1.6 billion total
principal amount of 10.25% senior notes due 2010. The CCH II notes are general unsecured obligations of
CCH II and CCH II Capital Corp. They rank equally with all other current or future unsubordinated
obligations of CCH II and CCH II Capital Corp. The CCH II notes are structurally subordinated to all
obligations of subsidiaries of CCH II, including the CCO Holdings notes and the credit facilities.
Interest on the CCH II notes accrues at 10.25% per annum, from September 23, 2003 or, if interest
already has been paid, from the date it was most recently paid. Interest is payable semi-annually in arrears on
each March 15 and September 15, commencing on March 15, 2004.
At any time prior to September 15, 2006, the issuers of the CCH II notes may redeem up to 35% of the
total principal amount of the CCH II notes on a pro rata basis at a redemption price equal to 110.25% of the
principal amount of CCH II notes redeemed, plus any accrued and unpaid interest.
On or after September 15, 2008, the issuers of the CCH II notes may redeem all or a part of the notes at
a redemption price that declines ratably from the initial redemption price of 105.125% to a redemption price
on or after September 15, 2009 of 100.0% of the principal amount of the CCH II notes redeemed, plus, in
each case, any accrued and unpaid interest.
In the event of speciÑed change of control events, CCH II must oÅer to purchase the outstanding
CCH II notes from the holders at a purchase price equal to 101% of the total principal amount of the notes,
plus any accrued and unpaid interest.
The indenture governing the CCH II notes contains restrictive covenants that limit certain transactions or
activities by CCH II and its restricted subsidiaries, including the covenants summarized below. As of the issue
date, all but two of CCH II's direct and indirect subsidiaries were restricted subsidiaries.
The covenant in the indenture governing the CCH II notes that restricts incurrence of debt and issuance
of preferred stock permits CCH II and its subsidiaries to incur or issue speciÑed amounts of debt or preferred
stock, if, after giving eÅect to the incurrence, CCH II could meet a leverage ratio (ratio of consolidated debt
to four times EBITDA from the most recent Ñscal quarter for which internal Ñnancial reports are available) of
5.5 to 1.0.
In addition, regardless of whether the leverage ratio could be met, so long as no default exists or would
result from the incurrence or issuance, CCH II and its restricted subsidiaries are permitted to incur or issue:
‚ up to $9.75 billion of debt under credit facilities, including debt under credit facilities outstanding on
the issue date of the CCH II notes,
‚ up to $75 million of debt incurred to Ñnance the purchase or capital lease of new assets,
‚ up to $300 million of additional debt for any purpose, and
‚ other items of indebtedness for speciÑc purposes such as intercompany debt, reÑnancing of existing
debt, and interest rate swaps to provide protection against Öuctuation in interest rates.
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