Charter 2003 Annual Report Download - page 86

Charter Operating Notes
On April 27, 2004, Charter Operating and Charter Communications Operating Capital Corp. jointly
issued $1.1 billion of 8% senior second lien notes due 2012 and $400 million of 8
3
/ 8 % senior second lien notes
due 2014, for total gross proceeds of $1.5 billion.
The Charter Operating notes were sold in a private transaction that was not subject to the registration
requirements of the Securities Act of 1933. The Charter Operating notes are not expected to have the beneÑt
of any exchange or other registration rights, except in speciÑed limited circumstances.
On the issue date of the Charter Operating notes, because of restrictions contained in the Charter
Holdings indentures, there were no Charter Operating note guarantees, even though Charter Operating's
immediate parent, CCO Holdings, and certain of our subsidiaries were obligors and/or guarantors under the
amended and restated Charter Operating credit facilities. Upon the occurrence of the guarantee and pledge
date (generally, the Ñfth business day after the Charter Holdings leverage ratio is certiÑed to be below 8.75 to
1.0), CCO Holdings and those subsidiaries of Charter Operating that are then guarantors of, or otherwise
obligors with respect to, indebtedness under the amended and restated Charter Operating credit facilities and
related obligations will be required to guarantee the Charter Operating notes. The note guarantee of each such
guarantor will be:
‚ a senior obligation of such guarantor;
‚ structurally senior to the outstanding senior notes of CCO Holdings and CCO Holdings Capital Corp.
(except in the case of CCO Holdings' note guarantee, which is structurally pari passu with such senior
notes), the outstanding senior notes of CCH II and CCH II Capital Corp., the outstanding senior
notes and senior discount notes of Charter Holdings and the outstanding convertible senior notes of
Charter (but subject to provisions in the Charter Operating indenture that permit interest and subject
to meeting the 4.25 and 1.0 leverage ratio test, principal payments to be made thereon); and
‚ senior in right of payment to any future subordinated indebtedness of such guarantor.
All the subsidiaries of Charter Operating (except CCO NR Sub, LLC, and certain other subsidiaries that
are not deemed material and are designated as nonrecourse subsidiaries under the amended and restated
Charter Operating credit facilities) are restricted subsidiaries of Charter Operating under the Charter
Operating notes. Unrestricted subsidiaries generally will not be subject to the restrictive covenants in the
Charter Operating indenture.
In the event of speciÑed change of control events, Charter Operating must oÅer to purchase the Charter
Operating notes at a purchase price equal to 101% of the total principal amount of the Charter Operating notes
repurchased plus any accrued and unpaid interest thereon.
The limitations on incurrence of debt contained in the indenture governing the Charter Operating notes
permit Charter Operating and its restricted subsidiaries that are guarantors of the Charter Operating notes to
incur additional debt or issue shares of preferred stock if, after giving pro forma eÅect to the incurrence,
Charter Operating could meet a leverage ratio test (ratio of consolidated debt to four times EBITDA, as
deÑned, from the most recent Ñscal quarter for which internal Ñnancial reports are available) of 4.25 to 1.0.
In addition, regardless of whether the leverage ratio test could be met, so long as no default exists or
would result from the incurrence or issuance, Charter Operating and its restricted subsidiaries are permitted to
incur or issue:
‚ up to $6.5 billion of debt under credit facilities (but such incurrence is permitted only by Charter
Operating and its restricted subsidiaries that are guarantors of the Charter Operating notes, so long as
there are such guarantors), including debt under credit facilities outstanding on the issue date of the
Charter Operating notes;
‚ up to $75 million of debt incurred to Ñnance the purchase or capital lease of assets;
‚ up to $300 million of additional debt for any purpose; and
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