Charter 2004 Annual Report Download - page 64

CHARTER COMMUNICATIONS, INC. 2004 FORM 10-K
senior notes and senior discount notes of Charter Holdings Holdings, all of which shall become a common equity capital
and the outstanding convertible senior notes of Charter (but contribution to Charter Operating on the guarantee and pledge
subject to provisions in the Charter Operating indenture date.
that permit interest and, subject to meeting the 4.25 to 1.0 The indenture governing the Charter Operating notes
leverage ratio test, principal payments to be made permits Charter Operating to incur debt under one of the
thereon); and categories above, and later reclassify the debt into a different
category. The Charter Operating credit facilities generally
(senior in right of payment to any future subordinated impose more restrictive limitations on incurring new debt than
indebtedness of such guarantor. the Charter Operating indenture, so our subsidiaries that are
As a result of the above leverage ratio test being met, CCO subject to the Charter Operating credit facilities are not
Holdings and certain of its subsidiaries provided the additional permitted to utilize the full debt incurrence that would
guarantees described above during the first quarter of 2005. otherwise be available under the Charter Operating indenture
All the subsidiaries of Charter Operating (except CCO NR covenants.
Sub, LLC, and certain other subsidiaries that are not deemed Generally, under Charter Operating’s indenture Charter
material and are designated as nonrecourse subsidiaries under Operating and its restricted subsidiaries are permitted to pay
the Charter Operating credit facilities) are restricted subsidiaries dividends on equity interests, repurchase interests, or make other
of Charter Operating under the Charter Operating notes. specified restricted payments only if Charter Operating could
Unrestricted subsidiaries generally will not be subject to the incur $1.00 of new debt under the leverage ratio test, which
restrictive covenants in the Charter Operating indenture. requires that Charter Operating meet a 4.25 to 1.0 leverage ratio
In the event of specified change of control events, Charter after giving effect to the transaction, and if no default exists or
Operating must offer to purchase the Charter Operating notes at would exist as a consequence of such incurrence. If those
a purchase price equal to 101% of the total principal amount of conditions are met, restricted payments are permitted in a total
the Charter Operating notes repurchased plus any accrued and amount of up to 100% of Charter Operating’s consolidated
unpaid interest thereon. EBITDA, as defined, minus 1.3 times its consolidated interest
The limitations on incurrence of debt contained in the expense, plus 100% of new cash and appraised non-cash equity
indenture governing the Charter Operating notes permit Charter proceeds received by Charter Operating and not allocated to the
Operating and its restricted subsidiaries that are guarantors of debt incurrence covenant, all cumulatively from the fiscal quarter
the Charter Operating notes to incur additional debt or issue commenced April 1, 2004, plus $100 million.
shares of preferred stock if, after giving pro forma effect to the In addition, Charter Operating may make distributions or
incurrence, Charter Operating could meet a leverage ratio test restricted payments, so long as no default exists or would be
(ratio of consolidated debt to four times EBITDA, as defined, caused by the transaction:
from the most recent fiscal quarter for which internal financial
reports are available) of 4.25 to 1.0. (to repurchase management equity interests in amounts not
In addition, regardless of whether the leverage ratio test to exceed $10 million per fiscal year;
could be met, so long as no default exists or would result from (regardless of the existence of any default, to pay pass-
the incurrence or issuance, Charter Operating and its restricted through tax liabilities in respect of ownership of equity
subsidiaries are permitted to incur or issue: interests in Charter Operating or its restricted subsidiaries;
(up to $6.5 billion of debt under credit facilities (but such (to pay, regardless of the existence of any default, interest
incurrence is permitted only by Charter Operating and its when due on the Charter Holdings notes, the CCO
restricted subsidiaries that are guarantors of the Charter Holdings notes, and our notes;
Operating notes, so long as there are such guarantors),
(to pay, so long as there is no default, interest on the
including debt under credit facilities outstanding on the
Charter convertible notes;
issue date of the Charter Operating notes;
(to purchase, redeem or refinance the Charter Holdings
(up to $75 million of debt incurred to finance the purchase
notes, our notes, the CCO Holdings notes, the Charter
or capital lease of assets;
notes, and other direct or indirect parent company notes,
(up to $300 million of additional debt for any purpose; and so long as Charter Operating could incur $1.00 of indebted-
(other items of indebtedness for specific purposes such as ness under the 4.25 to 1.0 leverage ratio test referred to
refinancing of existing debt and interest rate swaps to above and there is no default, or
provide protection against fluctuation in interest rates and, (to make other specified restricted payments including
subject to meeting the leverage ratio test, debt existing at merger fees up to 1.25% of the transaction value, repur-
the time of acquisition of a restricted subsidiary. chases using concurrent new issuances, and certain divi-
The Charter Operating indenture provides that Charter dends on existing subsidiary preferred equity interests.
Operating will not pay, or permit its subsidiaries to pay, any The indenture governing the Charter Operating notes
interest or principal on $361 million of intercompany loans restricts Charter Operating and its restricted subsidiaries from
received by it and its subsidiaries in November 2003 from CCO
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