Charter 2005 Annual Report Download - page 57

CHARTER COMMUNICATIONS, INC. 2005 FORM 10-K
principal on parent company notes are further restricted by the If the above strategies are not successful, we could be
covenants in the credit facilities and bridge loan, respectively. forced to restructure our obligations or seek protection under
Distributions by CIH, CCH I, CCH II, CCO Holdings and the bankruptcy laws. In addition, if we need to raise additional
Charter Operating to a parent company for payment of parent capital through the issuance of equity or find it necessary to
company interest are permitted if there is no default under the engage in a recapitalization or other similar transaction, our
aforementioned indentures. However, distributions for payment shareholders could suffer significant dilution and our noteholders
of interest on our convertible senior notes are further limited to might not receive principal and interest payments to which they
when each applicable subsidiary’s leverage ratio test is met and are contractually entitled.
other specified tests are met. There can be no assurance that Issuance of Charter Operating Notes in Exchange for Charter Holdings
they will satisfy these tests at the time of such distribution. Notes; Repurchase of Convertible Notes
The indentures governing the Charter Holdings notes In March and June 2005, our subsidiary, Charter Operating,
permit Charter Holdings to make distributions to Charter consummated exchange transactions with a small number of
Holdco for payment of interest or principal on the convertible institutional holders of Charter Holdings 8.25% senior notes due
senior notes, only if, after giving effect to the distribution, 2007 pursuant to which Charter Operating issued, in private
Charter Holdings can incur additional debt under the leverage placement transactions, approximately $333 million principal
ratio of 8.75 to 1.0, there is no default under Charter Holdings’ amount of its 8.375% senior second lien notes due 2014 in
indentures and other specified tests are met. For the quarter exchange for approximately $346 million of the Charter Hold-
ended December 31, 2005, there was no default under Charter ings 8.25% senior notes due 2007. In addition, during the year
Holdings’ indentures and Charter Holdings met its leverage ratio ended December 31, 2005, we repurchased, in private transac-
test based on December 31, 2005 financial results. Such tions, from a small number of institutional holders, a total of
distributions would be restricted, however, if Charter Holdings $136 million principal amount of our 4.75% convertible senior
fails to meet these tests. In the past, Charter Holdings has from notes due 2006. Approximately $20 million principal amount of
time to time failed to meet this leverage ratio test. There can be these notes remain outstanding.
no assurance that Charter Holdings will satisfy these tests at the
time of such distribution. During periods in which distributions Sale of Assets
are restricted, the indentures governing the Charter Holdings In July 2005, we closed the sale of certain cable systems in
notes permit Charter Holdings and its subsidiaries to make Texas and West Virginia and closed the sale of an additional
specified investments (that are not restricted payments) in cable system in Nebraska in October 2005 for a total sales price
Charter Holdco or Charter up to an amount determined by a of approximately $37 million, representing a total of 33,000
formula, as long as there is no default under the indentures. analog video customers.
Our significant amount of debt could negatively affect our In March 2004, we closed the sale of certain cable systems
ability to access additional capital in the future. Additionally, our in Florida, Pennsylvania, Maryland, Delaware and West Virginia
ability to incur additional debt may be limited by the restrictive to Atlantic Broadband Finance, LLC. We closed the sale of an
covenants in our indentures, bridge loan and credit facilities. No additional cable system in New York to Atlantic Broadband
assurances can be given that we will not experience liquidity Finance, LLC in April 2004. The total net proceeds from the
problems if we do not obtain sufficient additional financing on a sale of all of these systems were approximately $735 million.
timely basis as our debt becomes due or because of adverse The proceeds were used to repay a portion of our revolving
market conditions, increased competition or other unfavorable credit facilities.
events. If, at any time, additional capital or borrowing capacity is Acquisition
required beyond amounts internally generated or available under In January 2006, we closed the purchase of certain cable systems
our credit facilities and bridge loan or through additional debt in Minnesota from Seren Innovations, Inc. We acquired approxi-
or equity financings, we would consider: mately 18,900 analog video customers and 14,800 telephone
(issuing equity that would significantly dilute existing customers for a total purchase price of approximately
shareholders; $43 million.
(issuing convertible debt or some other securities that may
have structural or other priority over our existing notes and
may also significantly dilute Charter’s existing shareholders;
(further reducing our expenses and capital expenditures,
which may impair our ability to increase revenue;
(selling assets; or
(requesting waivers or amendments with respect to our
credit facilities, the availability and terms of which would
be subject to market conditions.
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