Charter 2004 Annual Report Download - page 63

CHARTER COMMUNICATIONS, INC. 2004 FORM 10-K
debt under the 4.5 to 1.0 leverage ratio test described above assets and application of proceeds is permitted by the covenant
after giving effect to the transaction. restricting asset sales.
Permitted investments include: CCO Holdings’ restricted subsidiaries may generally not
enter into restrictions on their ability to make dividends or
(investments by CCO Holdings and its restricted subsidiaries distributions or transfer assets to CCO Holdings on terms that
in CCO Holdings and in other restricted subsidiaries, or are materially more restrictive than those governing their debt,
entities that become restricted subsidiaries as a result of the lien, asset sale, lease and similar agreements existing when they
investment, entered into the indentures, unless those restrictions are on
(investments aggregating up to 100% of new cash equity customary terms that will not materially impair CCO Holdings’
proceeds received by CCO Holdings since November 10, ability to repay its notes.
2003 to the extent the proceeds have not been allocated to The restricted subsidiaries of CCO Holdings are generally
the restricted payments covenant described above, not permitted to guarantee or pledge assets to secure debt of
CCO Holdings, unless the guarantying subsidiary issues a
(other investments up to $750 million outstanding at any guarantee of the notes of comparable priority and tenor, and
time, and waives any rights of reimbursement, indemnity or subrogation
(certain specified additional investments, such as investments arising from the guarantee transaction for at least one year.
in customers and suppliers in the ordinary course of The indenture also restricts the ability of CCO Holdings
business and investments received in connection with and its restricted subsidiaries to enter into certain transactions
permitted asset sales. with affiliates involving consideration in excess of $15 million
CCO Holdings is not permitted to grant liens on its assets without a determination by the board of directors that the
other than specified permitted liens. Permitted liens include liens transaction is on terms no less favorable than arms length, or
securing debt and other obligations incurred under our subsidi- transactions with affiliates involving over $50 million without
aries’ credit facilities, liens securing the purchase price of new receiving an independent opinion as to the fairness of the
assets, other liens securing indebtedness up to $50 million and transaction to the holders of the CCO Holdings notes.
specified liens incurred in the ordinary course of business. The Charter Communications Operating, LLC Notes
lien covenant does not restrict liens on assets of subsidiaries of
On April 27, 2004, Charter Operating and Charter Communica-
CCO Holdings.
tions Operating Capital Corp. jointly issued $1.1 billion of
CCO Holdings and CCO Holdings Capital, its co-issuer, are
8% senior second-lien notes due 2012 and $400 million of
generally not permitted to sell all or substantially all of their
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/8% senior second-lien notes due 2014, for total gross proceeds
assets or merge with or into other companies unless their
of $1.5 billion.
leverage ratio after any such transaction would be no greater
The Charter Operating notes were sold in a private
than their leverage ratio immediately prior to the transaction, or
transaction that was not subject to the registration requirements
unless CCO Holdings and its subsidiaries could incur $1.00 of
of the Securities Act of 1933. The Charter Operating notes are
new debt under the 4.50 to 1.0 leverage ratio test described
not expected to have the benefit of any exchange or other
above after giving effect to the transaction, no default exists, and
registration rights, except in specified limited circumstances.
the surviving entity is a U.S. entity that assumes the CCO
On the issue date of the Charter Operating notes, because
Holdings senior notes.
of restrictions contained in the Charter Holdings indentures,
CCO Holdings and its restricted subsidiaries may generally
there were no Charter Operating note guarantees, even though
not otherwise sell assets or, in the case of restricted subsidiaries,
Charter Operating’s immediate parent, CCO Holdings, and
issue equity interests, unless they receive consideration at least
certain of our subsidiaries were obligors and/or guarantors
equal to the fair market value of the assets or equity interests,
under the Charter Operating credit facilities. Upon the occur-
consisting of at least 75% in cash, assumption of liabilities,
rence of the guarantee and pledge date (generally, the fifth
securities converted into cash within 60 days or productive
business day after the Charter Holdings leverage ratio is certified
assets. CCO Holdings and its restricted subsidiaries are then
to be below 8.75 to 1.0), CCO Holdings and those subsidiaries
required within 365 days after any asset sale either to commit to
of Charter Operating that are then guarantors of, or otherwise
use the net cash proceeds over a specified threshold to acquire
obligors with respect to, indebtedness under the Charter
assets, including current assets, used or useful in their businesses
Operating credit facilities and related obligations will be required
or use the net cash proceeds to repay debt, or to offer to
to guarantee the Charter Operating notes. The note guarantee
repurchase the CCO Holdings senior notes with any remaining
of each such guarantor will be:
proceeds.
CCO Holdings and its restricted subsidiaries may generally (a senior obligation of such guarantor;
not engage in sale and leaseback transactions unless, at the time
(structurally senior to the outstanding senior notes of CCO
of the transaction, CCO Holdings could have incurred secured Holdings and CCO Holdings Capital Corp. (except in the
indebtedness in an amount equal to the present value of the net case of CCO Holdings’ note guarantee, which is structurally
rental payments to be made under the lease, and the sale of the pari passu with such senior notes), the outstanding senior
notes of CCH II and CCH II Capital Corp., the outstanding
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