Charter 2003 Annual Report Download - page 87

‚ other items of indebtedness for speciÑc purposes such as reÑnancing of existing debt and interest rate
swaps to provide protection against Öuctuation in interest rates and, subject to meeting the leverage
ratio test, debt existing at the time of acquisition of a restricted subsidiary.
The Charter Operating indenture provides that Charter Operating will not pay, or permit its subsidiaries
to pay, any interest or principal on $361 million of intercompany loans received by it and its subsidiaries in
November 2003 from CCO Holdings, all of which shall become a common equity capital contribution to
Charter Operating on the guarantee and pledge date.
The indenture governing the Charter Operating notes permits Charter Operating to incur debt under one
of the categories above, and later reclassify the debt into a diÅerent category. The amended and restated
Charter Operating credit facilities generally impose more restrictive limitations on incurring new debt than the
Charter Operating indenture, so our subsidiaries that are subject to credit facilities are not permitted to utilize
the full debt incurrence that would otherwise be available under the Charter Operating indenture covenants.
Generally, under Charter Operating's indenture, Charter Operating and its restricted subsidiaries are
permitted to pay dividends on equity interests, repurchase interests, or make other speciÑed restricted
payments only if Charter Operating could incur $1.00 of new debt under the leverage ratio test, which requires
that Charter Operating meet a 4.25 to 1.0 leverage ratio after giving eÅect to the transaction, and if no default
exists or would exist as a consequence of such incurrence. If those conditions are met, restricted payments are
permitted in a total amount of up to 100% of Charter Operating's consolidated EBITDA, as deÑned, minus 1.3
times its consolidated interest expense, plus 100% of new cash and appraised non-cash equity proceeds
received by Charter Operating and not allocated to the debt incurrence covenant, all cumulatively from the
Ñscal quarter commenced April 1, 2004, plus $100 million.
In addition, Charter Operating may make distributions or restricted payments, so long as no default exists
or would be caused by the transaction:
‚ to repurchase management equity interests in amounts not to exceed $10 million per Ñscal year;
‚ regardless of the existence of any default, to pay pass-through tax liabilities in respect of ownership of
equity interests in Charter Operating or its restricted subsidiaries;
‚ to pay, regardless of the existence of any default, interest when due on the Charter Holdings notes, the
CCO Holdings notes, and our notes;
‚ to pay, so long as there is no default, interest on the Charter convertible notes;
‚ to purchase, redeem or reÑnance the Charter Holdings notes, our notes, the CCO Holdings notes, the
Charter notes, and other direct or indirect parent company notes, so long as Charter Operating could
incur $1.00 of indebtedness under the 4.25 to 1.0 leverage ratio test referred to above and there is no
default; or
‚ to make other speciÑed restricted payments including merger fees up to 1.25% of the transaction value,
repurchases using concurrent new issuances, and certain dividends on existing subsidiary preferred
equity interests.
The indenture governing the Charter Operating notes restricts Charter Operating and its restricted
subsidiaries from making investments, except speciÑed permitted investments, or creating new unrestricted
subsidiaries, if there is a default under the indenture or if Charter Operating could not incur $1.00 of new debt
under the 4.25 to 1.0 leverage ratio test described above after giving eÅect to the transaction.
Permitted investments include:
‚ investments by Charter Operating and its restricted subsidiaries in Charter Operating and in other
restricted subsidiaries, or entities that become restricted subsidiaries as a result of the investment;
‚ investments aggregating up to 100% of new cash equity proceeds received by Charter Operating since
April 27, 2004 to the extent the proceeds have not been allocated to the restricted payments covenant
described above;
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