Charter 2004 Annual Report Download - page 126

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 2004 FORM 10-K
Notes to Consolidated Financial Statements (continued)
to the cash proceeds from the sale by the trustee of that portion Citigroup Global Markets pursuant to a share lending agree-
of the remaining pledged U.S. government securities which ment. The members of Charter Holdco (including the entities
secure interest payments on the notes so converted, subject to controlled by Mr. Allen) also at that time entered into a letter
certain limitations with respect to notes that have not been sold agreement providing, among other things, that for purposes of
prior to being registered under the Securities Act of 1933. the allocation provisions of the Limited Liability Company
Following the earlier of the sale of the notes pursuant to an Agreement of Charter Holdco, the mirror units be treated as
effective registration statement or the date two years following disregarded and not outstanding until such time (and except to
the issue date, the notes in whole or in part may be redeemed the extent) that, under Charter’s share lending agreement,
for cash at any time at a redemption price equal to 100% of the Charter treats the loaned shares in a manner that assumes they
aggregate principal amount plus accrued and unpaid interest, will neither be returned by Charter by the borrower nor
deferred interest and liquidated damages, if any, but only if for otherwise be acquired by Charter in lieu of such a return.
any 20 trading days in any 30 consecutive trading day period March 1999 Charter Holdings Notes. The March 1999 Charter
the closing price has exceeded 180% of the conversion price, if
Holdings notes are general unsecured obligations of Charter
such 30 trading day period begins prior to November 16, 2007
Holdings and Charter Communications Capital Corporation
or 150% of the conversion price, if such 30 trading period
(‘‘Charter Capital’’). The March 1999 8.250% Charter Holdings
begins thereafter. Holders who convert notes that the Company
notes mature on April 1, 2007, and as of December 31, 2004,
has called for redemption shall receive, in addition to the early
there was $451 million in total principal amount outstanding. The
conversion make whole amount, if applicable, the present value
March 1999 8.625% Charter Holdings notes mature on April 1,
of the interest on the notes converted that would have been
2009 and as of December 31, 2004, there was $1.2 billion in total
payable for the period from the later of November 17, 2007 and
principal amount outstanding. The March 1999 9.920% Charter
the redemption date through the scheduled maturity date for
Holdings notes mature on April 1, 2011 and as of December 31,
the notes, plus any accrued deferred interest.
2004, the total principal amount outstanding and accreted value
The Company is required to register the 5.875% Charter
was $1.1 billion. Cash interest on the March 1999 9.920% Charter
convertible notes by April 21, 2005. If the 5.875% Charter
Holdings notes began to accrue on April 1, 2004.
convertible notes are not registered by such date, the Company
The March 1999 Charter Holdings notes are senior debt
will incur liquidating damages as defined in the related
obligations of Charter Holdings and Charter Capital. They rank
indenture. In conjunction with issuing the 5.875% Charter
equally with all other current and future unsubordinated obligations
convertible notes, the Company filed a registration statement to
of Charter Holdings and Charter Capital. They are structurally
sell up to 150 million shares of the Company’s Class A common
subordinated to the obligations of Charter Holdings’ subsidiaries,
stock pursuant to a share lending agreement. The share lending
including the CCH II notes, the CCO Holdings notes, the
agreement is required to be registered by April 1, 2005. If the
Renaissance notes, the CC V Holdings notes, the Charter
share lending agreement is not registered by such date, the
Operating credit facilities and the Charter Operating notes.
Company will incur liquidating damages as defined in the
Charter Holdings and Charter Capital will not have the
related indenture.
right to redeem the March 1999 8.250% Charter Holdings notes
In connection with our November 2004 sale of the
prior to their maturity on April 1, 2007. On or after April 1,
$862.5 million principal amount of 5.875% convertible senior
2004, Charter Holdings and Charter Capital may redeem some
notes due 2009, Charter Holdco issued to Charter mirror notes
or all of the March 1999 8.625% Charter Holdings notes and
in identical principal amount in exchange for the proceeds from
the March 1999 9.920% Charter Holdings notes at any time, in
its offering. Charter Holdco then purchased and pledged certain
each case, at a premium. The optional redemption price declines
U.S. government securities to Charter as security for the mirror
to 100% of the principal amount of March 1999 Charter
notes (which were in turn repledged by Charter to the trustee
Holdings notes redeemed, plus accrued and unpaid interest, if
for the benefit of holders of Charter’s 5.875% convertible senior
any, for redemption on or after April 1, 2007.
notes and which Charter expects to use to fund the first six
In the event that a specified change of control event occurs,
interest payments on the notes), and agreed to lend common
Charter Holdings and Charter Capital must offer to repurchase
units to Charter, the terms of which will, to the extent
any then outstanding March 1999 Charter Holdings notes at
practicable, mirror the terms of the shares. Charter Holdco also
101% of their principal amount or accreted value, as applicable,
redeemed the remaining $588 million principal amount of the
plus accrued and unpaid interest, if any.
mirror notes in respect of our 5.75% convertible senior notes
The indentures governing the March 1999 Charter Hold-
due 2005 concurrently with its December 23, 2004 redemption
ings notes contain restrictive covenants that limit certain
of its 5.75% convertible senior notes.
transactions or activities by Charter Holdings and its restricted
In addition, in December 2004, Charter Holdco entered
subsidiaries. Substantially all of Charter Holdings’ direct and
into a unit lending agreement with Charter in which it agreed
indirect subsidiaries are currently restricted subsidiaries.
to lend common units to Charter that would mirror the
anticipated loan of Class A common shares by Charter to
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