Charter 2005 Annual Report Download - page 56

CHARTER COMMUNICATIONS, INC. 2005 FORM 10-K
In September 2005, Charter Holdings and its wholly owned and bridge loan, contain certain restrictive covenants, some of
subsidiaries, CCH I and CIH, completed the exchange of which require us to maintain specified financial ratios and meet
approximately $6.8 billion total principal amount of outstanding financial tests and to provide audited financial statements with an
debt securities of Charter Holdings in a private placement for unqualified opinion from our independent auditors. As of Decem-
new debt securities. Holders of Charter Holdings notes due in ber 31, 2005, we are in compliance with the covenants under our
2009 and 2010 exchanged $3.4 billion principal amount of notes indentures, bridge loan and credit facilities, and we expect to
for $2.9 billion principal amount of new 11% CCH I notes due remain in compliance with those covenants for the next twelve
2015. Holders of Charter Holdings notes due 2011 and 2012 months. As of December 31, 2005, our potential availability under
exchanged $845 million principal amount of notes for $662 mil- our credit facilities totaled approximately $553 million, none of
lion principal amount of 11% CCH I notes due 2015. In which was limited by covenants. In addition, as of January 2,
addition, holders of Charter Holdings notes due 2011 and 2012 2006 we have additional borrowing availability of $600 million
exchanged $2.5 billion principal amount of notes for $2.5 billion under the bridge loan (which was reduced to $435 million as a
principal amount of various series of new CIH notes. Each series result of the issuance of the CCH II notes). Continued access to
of new CIH notes has the same interest rate and provisions for our credit facilities and bridge loan is subject to our remaining in
payment of cash interest as the series of old Charter Holdings compliance with these covenants, including covenants tied to our
notes for which such CIH notes were exchanged. In addition, operating performance. If any events of non-compliance occur,
the maturities for each series were extended three years. funding under the credit facilities and bridge loan may not be
Our business requires significant cash to fund debt service available and defaults on some or potentially all of our debt
costs, capital expenditures and ongoing operations. We have obligations could occur. An event of default under any of our
historically funded these requirements through cash flows from debt instruments could result in the acceleration of our payment
operating activities, borrowings under our credit facilities, sales obligations under that debt and, under certain circumstances, in
of assets, issuances of debt and equity securities and cash on cross-defaults under our other debt obligations, which could have
hand. However, the mix of funding sources changes from period a material adverse effect on our consolidated financial condition
to period. For the year ended December 31, 2005, we generated and results of operations.
$260 million of net cash flows from operating activities after Specific Limitations
paying cash interest of $1.5 billion. In addition, the Company Our ability to make interest payments on our convertible senior
used $1.1 billion for purchases of property, plant and equipment. notes, and, in 2006 and 2009, to repay the outstanding principal
Finally, we had net cash flows from financing activities of of our convertible senior notes of $20 million and $863 million,
$136 million. We expect that our mix of sources of funds will respectively, will depend on our ability to raise additional capital
continue to change in the future based on overall needs relative and/or on receipt of payments or distributions from Charter
to our cash flow and on the availability of funds under the Holdco and its subsidiaries. During 2005, Charter Holdings
credit facilities of our subsidiaries, our access to the debt and distributed $60 million to Charter Holdco. As of December 31,
equity markets, the timing of possible asset sales and our ability 2005, Charter Holdco was owed $22 million in intercompany
to generate cash flows from operating activities. We continue to loans from its subsidiaries, which were available to pay interest
explore asset dispositions as one of several possible actions that and principal on our convertible senior notes. In addition,
we could take in the future to improve our liquidity, but we do Charter has $98 million of governmental securities pledged as
not presently consider unannounced future asset sales as a security for the next four scheduled semi-annual interest
significant source of liquidity. payments on Charter’s 5.875% convertible senior notes.
We expect that cash on hand, cash flows from operating Distributions by Charter’s subsidiaries to a parent company
activities and the amounts available under our credit facilities (including Charter, CCHC and Charter Holdco) for payment of
and bridge loan will be adequate to meet our cash needs in principal on parent company notes are restricted under the
2006. We believe that cash flows from operating activities and indentures governing the CIH notes, CCH I notes, CCH II
amounts available under our credit facilities and bridge loan will notes, CCO Holdings notes and Charter Operating notes unless
not be sufficient to fund our operations and satisfy our interest there is no default, each applicable subsidiary’s leverage ratio test
and principal repayment obligations in 2007 and beyond. We is met at the time of such distribution and, in the case of our
are working with our financial advisors to address these funding convertible senior notes, other specified tests are met. For the
requirements. However, there can be no assurance that such quarter ended December 31, 2005, there was no default under
funding will be available to us. In addition, Mr. Allen and his any of these indentures and each such subsidiary met its
affiliates are not obligated to purchase equity from, contribute to applicable leverage ratio tests based on December 31, 2005
or loan funds to us. financial results. Such distributions would be restricted, however,
Debt Covenants if any such subsidiary fails to meet these tests. In the past,
Our ability to operate depends upon, among other things, our certain subsidiaries have from time to time failed to meet their
continued access to capital, including credit under the Charter leverage ratio test. There can be no assurance that they will
Operating credit facilities and bridge loan. The Charter Operating satisfy these tests at the time of such distribution. Distributions
credit facilities, along with our and our subsidiaries’ indentures by Charter Operating and CCO Holdings for payment of
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