Charter 2004 Annual Report Download - page 69

CHARTER COMMUNICATIONS, INC. 2004 FORM 10-K
dispose of all or substantially all of their assets or merge with or All of these covenants are subject to additional specified
into other companies unless their consolidated net worth after exceptions. In general, the covenants of our subsidiaries’ credit
any such transaction would be no greater than their consoli- agreements are more restrictive than those of our indentures.
dated net worth immediately prior to the transaction, or unless
CROSS-DEFAULTS
Renaissance Media Group could incur $1.00 of additional debt
under the debt incurrence test, which would require them to Our indentures and those of certain of our subsidiaries include
meet a leverage ratio of 6.75 to 1.00 after giving effect to the various events of default, including cross-default provisions.
transaction. Under these provisions, a failure by any of the issuers or any of
Renaissance Media Group and its subsidiaries may gener- their restricted subsidiaries to pay at the final maturity thereof
ally not otherwise sell assets or, in the case of subsidiaries, the principal amount of other indebtedness having a principal
equity interests, unless they receive consideration at least equal amount of $100 million or more (or any other default under any
to the fair market value of the assets, consisting of at least 75% such indebtedness resulting in its acceleration) would result in
cash, temporary cash investments or assumption of debt. an event of default under the indenture governing the applicable
Charter Holdings and its restricted subsidiaries are then required notes. The Renaissance indenture contains a similar cross-default
within 12 months after any asset sale either to commit to use provision with a $10 million threshold that applies to the issuers
the net cash proceeds over a specified threshold either to of the Renaissance notes and their restricted subsidiaries. As a
acquire assets used in their own or related businesses or use the result, an event of default related to the failure to repay principal
net cash proceeds to repay debt, or to offer to repurchase the at maturity or the acceleration of the indebtedness under the
Renaissance notes with any remaining proceeds. Charter Holdings notes, CCH II notes, CCO Holding notes,
Renaissance Media Group and its restricted subsidiaries Charter Operating notes, the Charter Operating credit facilities
may generally not engage in sale and leaseback transactions or the Renaissance notes could cause cross-defaults under our
unless the lease term does not exceed three years or the subsidiaries’ indentures.
proceeds are applied in accordance with the covenant limiting
asset sales. RELATED PARTY TRANSACTIONS
Renaissance Media Group’s restricted subsidiaries may See ‘‘Item 13. Certain Relationships and Related Transactions —
generally not enter into restrictions on their abilities to make Business Relationships’’ for information regarding related party
dividends or distributions or transfer assets to Renaissance transactions and transactions with other parties with whom we
Media Group except those not more restrictive than is or our related parties may have a relationship that enables the
customary in comparable financings. parties to negotiate terms of material transactions that may not
The restricted subsidiaries of Renaissance Media Group are be available from other, more clearly independent parties, on an
not permitted to guarantee or pledge assets to secure debt of arms length basis.
the Renaissance Media Group or its restricted subsidiaries,
unless the guarantying subsidiary issues a guarantee of the CERTAIN TRENDS AND UNCERTAINTIES
Renaissance notes of comparable priority and tenor, and waives
any rights of reimbursement, indemnity or subrogation arising The following discussion highlights a number of trends and
from the guarantee transaction. uncertainties, in addition to those discussed elsewhere in this
Renaissance Media Group and its restricted subsidiaries are annual report and in other documents that we file with the
generally not permitted to issue or sell equity interests in SEC, that could materially impact our business, results of
restricted subsidiaries, except sales of common stock of operations and financial condition.
restricted subsidiaries so long as the proceeds of the sale are Substantial Leverage. We have a significant amount of
applied in accordance with the asset sale covenant, and debt. As of December 31, 2004, our total debt was approxi-
issuances as a result of which the restricted subsidiary is no mately $19.5 billion. In 2005, $30 million of our debt matures
longer a restricted subsidiary and any remaining investment in and in 2006, an additional $186 million matures. In 2007 and
that subsidiary is permitted by the covenant limiting restricted beyond, significant additional amounts will become due under
payments. our remaining obligations. We believe that as a result of our
The indenture governing the Renaissance notes also significant levels of debt and operating performance, our access
restricts the ability of Renaissance Media Group and its to the debt markets could be limited when substantial amounts
restricted subsidiaries to enter into certain transactions with of our indebtedness become due. If our business does not
affiliates involving consideration in excess of $2 million without generate sufficient cash flow from operating activities, and
a determination by the disinterested members of the board of sufficient funds are not available to us from borrowings under
directors that the transaction is on terms no less favorable than our credit facilities or from other sources, we may not be able to
arms length, or transactions with affiliates involving over repay our debt, fund our other liquidity and capital needs, grow
$4 million with affiliates without receiving an independent our business or respond to competitive challenges. Further, if we
opinion as to the fairness of the transaction to Renaissance are unable to repay or refinance our debt, as it becomes due, we
Media Group. could be forced to restructure our obligations or seek protection
under the bankruptcy laws. If we were to raise capital through
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