Charter 2004 Annual Report Download - page 55

CHARTER COMMUNICATIONS, INC. 2004 FORM 10-K
The Charter Operating credit facilities permit Charter OUTSTANDING NOTES
Operating and its subsidiaries to make distributions to pay
interest on the Charter Operating senior second-lien notes, the Charter Communications, Inc. Notes
CCH II senior notes, the CCO Holdings senior notes, the 4.75% Charter Convertible Notes due 2006
Charter convertible senior notes and the Charter Holdings
senior notes, provided that, among other things, no default has In May 2001, Charter issued 4.75% convertible senior notes with
occurred and is continuing under the Charter Operating credit a total principal amount at maturity of $633 million. As of
facilities. Conditions to future borrowings include absence of a December 31, 2004, there was $156 million in total principal
default or an event of default under the Charter Operating credit amount of these notes outstanding. The 4.75% convertible notes
facilities and the continued accuracy in all material respects of rank equally with any of our future unsubordinated and
the representations and warranties, including the absence since unsecured indebtedness, but are structurally subordinated to all
December 31, 2003 of any event, development or circumstance existing and future indebtedness and other liabilities of our
that has had or could reasonably be expected to have a material subsidiaries.
adverse effect on our business. The 4.75% convertible notes are convertible at the option
The events of default under the Charter Operating credit of the holder into shares of Class A common stock at a
facilities include, among other things: conversion rate of 38.0952 shares per $1,000 principal amount of
(i) the failure to make payments when due or within the notes, which is equivalent to a price of $26.25 per share, subject
applicable grace period, to certain adjustments. Specifically, the adjustments include anti-
(ii) the failure to comply with specified covenants, includ- dilutive provisions, which automatically occur based on the
ing but not limited to a covenant to deliver audited occurrence of specified events to provide protection rights to
financial statements with an unqualified opinion from holders of the notes. Additionally, Charter may adjust the
our independent auditors, conversion ratio under certain circumstances when deemed
(iii) the failure to pay or the occurrence of events that appropriate. These notes are redeemable at our option at
cause or permit the acceleration of other indebtedness amounts decreasing from 101.9% to 100% of the principal
owing by CCO Holdings, Charter Operating or amount, plus accrued and unpaid interest beginning on June 4,
Charter Operating’s subsidiaries in amounts in excess 2004, to the date of redemption. Interest is payable semiannually
of $50 million in aggregate principal amount, on December 1 and June 1, beginning December 1, 2001, until
(iv) the failure to pay or the occurrence of events that maturity on June 1, 2006.
result in the acceleration of other indebtedness owing Upon a change of control, subject to certain conditions and
by certain of CCO Holdings’ direct and indirect restrictions, Charter may be required to repurchase the notes, in
parent companies in amounts in excess of $200 mil- whole or in part, at 100% of their principal amount plus accrued
lion in aggregate principal amount, interest at the repurchase date.
(v) Paul Allen and/or certain of his family members Charter 5.875% Convertible Senior Notes due 2009
and/or their exclusively owned entities (collectively,
the ‘‘Paul Allen Group’’) ceasing to have the power, In November 2004, Charter issued 5.875% convertible senior
directly or indirectly, to vote at least 35% of the notes due 2009 with a total original principal amount of
ordinary voting power of Charter Operating, $862.5 million. The 5.875% convertible senior notes are
(vi) the consummation of any transaction resulting in any unsecured (except with respect to the collateral as described
person or group (other than the Paul Allen Group) below) and rank equally with our existing and future
having power, directly or indirectly, to vote more unsubordinated and unsecured indebtedness (except with respect
than 35% of the ordinary voting power of Charter to the collateral described below), but are structurally subordi-
Operating, unless the Paul Allen Group holds a nated to all existing and future indebtedness and other liabilities
greater share of ordinary voting power of Charter of our subsidiaries. Interest is payable semi-annually in arrears.
Operating, The 5.875% convertible senior notes are convertible at any
(vii) certain of Charter Operating’s indirect or direct parent time at the option of the holder into shares of Class A common
companies having indebtedness in excess of $500 mil- stock at an initial conversion rate of 413.2231 shares per $1,000
lion aggregate principal amount which remains principal amount of notes, which is equivalent to a conversion
undefeased three months prior to the final maturity of price of approximately $2.42 per share, subject to certain
such indebtedness, and adjustments. Specifically, the adjustments include anti-dilutive
(viii) Charter Operating ceasing to be a wholly-owned provisions, which cause adjustments to occur automatically
direct subsidiary of CCO Holdings, except in certain based on the occurrence of specified events to provide protec-
very limited circumstances. tion rights to holders of the notes. The conversion rate may also
be increased (but not to exceed 462 shares per $1,000 principal
amount of notes) upon a specified change of control transaction.
Additionally, Charter may elect to increase the conversion rate
under certain circumstances when deemed appropriate and
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