Charter 2004 Annual Report Download - page 70

CHARTER COMMUNICATIONS, INC. 2004 FORM 10-K
the issuance of additional equity or if we were to engage in a We have historically funded liquidity and capital require-
recapitalization or other similar transaction, our shareholders ments through cash flows from operating activities, borrowings
could suffer significant dilution and our noteholders might not under our credit facilities, issuances of debt and equity securities
receive principal and interest payments to which they are and cash on hand.
contractually entitled on a timely basis or at all. For more Our ability to operate depends upon, among other things,
information, see the section above entitled ‘‘Liquidity and our continued access to capital, including credit under the
Capital Resources.’’ Charter Operating credit facilities. These credit facilities are
Restrictive Covenants. The credit facilities of our sub- subject to certain restrictive covenants, some of which require us
sidiaries and the indentures governing our and our subsidiaries’ to maintain specified financial ratios and meet financial tests and
other debt contain a number of significant covenants that could to provide audited financial statements with an unqualified
adversely affect our ability to operate our business, and therefore opinion from our independent auditors. As of December 31,
could adversely affect our results of operations and the price of 2004, we were in compliance with the covenants under our
our Class A common stock. These covenants restrict our and indentures and under the credit facilities and indentures of our
our subsidiaries’ ability to: subsidiaries, and we expect to remain in compliance with those
covenants for the next twelve months. If our operating
(incur additional debt; performance results in non-compliance with these covenants, or
(repurchase or redeem equity interests and debt; if any of certain other events of non-compliance under these
credit facilities or indentures governing our debt occurs, funding
(issue equity; under the credit facilities may not be available and defaults on
(make certain investments or acquisitions; some or potentially all of our debt obligations could occur. An
event of default under the credit facilities or indentures, if not
(pay dividends or make other distributions;
waived, could result in the acceleration of those debt obligations
(dispose of assets or merge; and, consequently, other debt obligations. Such acceleration
(enter into related party transactions; could result in exercise of remedies by our creditors and could
force us to seek the protection of the bankruptcy laws, which
(grant liens; and could materially adversely impact our ability to operate our
(pledge assets. business and to make payments under our debt instruments. As
Furthermore, our credit facilities require us to, among other of December 31, 2004, we had borrowing availability under our
things, maintain specified financial ratios, meet specified financial credit facilities of $804 million, none of which was restricted due
tests and provide audited financial statements with an unquali- to covenants.
fied opinion from our independent auditors. See ‘‘Description of If, at any time, additional capital or capacity is required
Our Outstanding Debt’’ for details on our debt covenants. Our beyond amounts internally generated or available under our
ability to comply with these provisions may be affected by credit facilities or through additional debt or equity financings,
events beyond our control. we would consider:
The breach of any covenants or obligations in the
(issuing equity that would significantly dilute existing
foregoing indentures or credit facilities, not otherwise waived or shareholders;
amended, could result in a default under the applicable debt
agreement or instrument and could trigger acceleration of the (issuing convertible debt or some other securities that may
related debt, which in turn could trigger defaults under other have structural or other priority over our existing notes and
agreements governing our long-term indebtedness. In addition, may also significantly dilute Charter’s existing shareholders;
the secured lenders under the Charter Operating credit facilities (further reducing our expenses and capital expenditures,
and the Charter Operating senior second-lien notes could which may impair our ability to increase revenue;
foreclose on their collateral, which includes equity interests in
(selling assets; or
our subsidiaries, and exercise other rights of secured creditors.
Any default under those credit facilities, the indentures gov- (requesting waivers or amendments with respect to our
erning our convertible notes or our subsidiaries’ debt could credit facilities, the availability and terms of which would
adversely affect our growth, our financial condition and our be subject to market conditions.
results of operations and our ability to make payments on our If the above strategies were not successful, could be forced
notes and the credit facilities and other debt of our subsidiaries. to restructure our obligations or seek protection under the
For more information, see the section above entitled ‘‘— Liquid- bankruptcy laws. If we need to raise additional capital through
ity and Capital Resources.’’ the issuance of equity or find it necessary to engage in a
Liquidity. Our business requires significant cash to fund recapitalization or other similar transaction, our shareholders
capital expenditures, debt service costs and ongoing operations. could suffer significant dilution and our noteholders might not
Our ongoing operations will depend on our ability to generate receive principal and interest payments to which they are
cash and to secure financing in the future. contractually entitled. For more information, see the section
above entitled ‘‘— Liquidity and Capital Resources.’’
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