Charter 2004 Annual Report Download - page 14

CHARTER COMMUNICATIONS, INC. 2004 FORM 10-K
and the corresponding expected issuance of an equal number of mirror membership units by Charter Holdco to Charter. Further, if such shares are issued, we expect
that, for accounting purposes, Charter’s common equity interest in Charter Holdco will nonetheless remain at 47%, and Paul G. Allen’s ownership of Charter Holdco will
remain at 53%, because the 150 million shares are expected to be returned to Charter under the terms of the share lending agreement and, upon such return, the mirror
membership units would be returned to Charter Holdco.
(4) Represents 100% of the preferred membership interests in CC VIII, LLC, a subsidiary of CC V Holdings, LLC. An issue has arisen regarding the ultimate ownership of
such CC VIII, LLC membership interests following Mr. Allen’s acquisition of those interests on June 6, 2003. See ‘‘Item 13. Certain Relationships and Related
Transactions — Transactions Arising out of Our Organizational Structure and Mr. Allen’s Investment in Charter Communications, Inc. and Its Subsidiaries — Equity Put
Rights — CC VIII.’’
(5) CC V Holdings, LLC, the issuer of $113 million accreted value of senior discount notes, is a direct wholly owned subsidiary of CCO NR Holdings, LLC, and holds 100%
of the common membership units of CC VIII, LLC. Mr. Allen, through Charter Investment, Inc., holds 100% of the preferred membership units in CC VIII, LLC. CC
VIII, LLC holds 100% of the equity of CC VIII Operating, LLC, which in turn holds 100% of the equity of a number of operating subsidiaries. One such operating
subsidiary (CC Michigan, LLC) is a guarantor of the CC V Holdings senior discount notes. The Charter Operating credit facilities require us to redeem the CC V
Holdings notes within 45 days after the first date that the Charter Holdings leverage ratio is less than 8.75 to 1.0. In satisfaction of this requirement, CC V Holdings, LLC
has called for redemption all of its outstanding notes, at 103.958% of principal amount, plus accrued and unpaid interest to the date of redemption, which is anticipated
to be March 14, 2005.
Charter Communications, Inc. Certain provisions of Charter’s interest in Charter Holdco, ‘‘mirror’’ notes that are payable by
certification of incorporation and Charter Holdco’s limited Charter Holdco to Charter that have the same principal amount
liability company agreement effectively require that Charter’s and terms as Charter’s convertible senior notes and preferred
investment in Charter Holdco replicate, on a ‘‘mirror’’ basis, units in Charter Holdco that mirror the terms and liquidation
Charter’s outstanding equity and debt structure. As a result of preferences of Charter’s outstanding preferred stock. Charter
these coordinating provisions, whenever Charter issues equity or Holdco, through its subsidiaries, owns cable systems and certain
debt, Charter transfers the proceeds from such issuance to strategic investments. As sole manager under applicable operat-
Charter Holdco, and Charter Holdco issues a ‘‘mirror’’ security ing agreements, Charter controls the affairs of Charter Holdco
to Charter that replicates the characteristics of the security and most of its subsidiaries. In addition, Charter also provides
issued by Charter. Consequently, Charter’s principal assets are management services to Charter Holdco and its subsidiaries
an approximate 47% common equity interest and a 100% voting under a management services agreement.
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