Charter 2005 Annual Report Download - page 64

CHARTER COMMUNICATIONS, INC. 2005 FORM 10-K
amount of notes) upon a specified change of control transaction. CCHC, LLC Note
Additionally, Charter may elect to increase the conversion rate In October 2005, Charter, acting through a Special Committee
under certain circumstances when deemed appropriate and of Charter’s Board of Directors, and Mr. Allen, settled a dispute
subject to applicable limitations of the NASDAQ stock market. that had arisen between the parties with regard to the
Holders who convert their notes prior to November 16, 2007 ownership of CC VIII. As part of that settlement, CCHC issued
will receive an early conversion make whole amount in respect the CCHC note to CII. The CCHC note has a 15-year maturity.
of their notes based on a proportional share of the portfolio of The CCHC note has an initial accreted value of $48 million
pledged securities described below, with specified adjustments. accreting at the rate of 14% per annum compounded quarterly,
No holder of notes will be entitled to receive shares of our except that from and after February 28, 2009, CCHC may pay
Class A common stock on conversion to the extent that receipt any increase in the accreted value of the CCHC note in cash
of the shares would cause the converting holder to become, and the accreted value of the CCHC note will not increase to
directly or indirectly, a ‘‘beneficial holder’’ (within the meaning the extent such amount is paid in cash. The CCHC note is
of Section 13(d) of the Exchange Act and the rules and exchangeable at CII’s option, at any time, for Charter Holdco
regulations promulgated thereunder) of more than 4.9% of the Class A Common units at a rate equal to the then accreted
outstanding shares of our Class A common stock if such value, divided by $2.00 (the ‘‘Exchange Rate’’). Customary anti-
conversion would take place prior to November 16, 2008, or dilution protections have been provided that could cause future
more than 9.9% thereafter. changes to the Exchange Rate. Additionally, the Charter Holdco
If a holder tenders a note for conversion, we may direct Class A Common units received will be exchangeable by the
that holder (unless we have called those notes for redemption) holder into Charter common stock in accordance with existing
to a financial institution designated by us to conduct a agreements between CII, Charter and certain other parties
transaction with that institution, on substantially the same terms signatory thereto. Beginning February 28, 2009, if the closing
that the holder would have received on conversion. But if any price of Charter common stock is at or above the Exchange
such financial institution does not accept such notes or does not Rate for a certain period of time as specified in the Exchange
deliver the required conversion consideration, we remain obli- Agreement, Charter Holdco may require the exchange of the
gated to convert the notes. CCHC note for Charter Holdco Class A Common units at the
Charter Holdco used a portion of the proceeds from the Exchange Rate. Additionally, CCHC has the right to redeem
sale of the notes to purchase a portfolio of U.S. government the CCHC note under certain circumstances for cash in an
securities in an amount which we believe will be sufficient to amount equal to the then accreted value, such amount, if
make the first six interest payments on the notes. These redeemed prior to February 28, 2009, would also include a make
government securities were pledged to us as security for a whole up to the accreted value through February 28, 2009.
mirror note issued by Charter Holdco to Charter and pledged CCHC must redeem the CCHC note at its maturity for cash in
to the trustee under the indenture governing the notes as an amount equal to the initial stated value plus the accreted
security for our obligations thereunder. We expect to use such return through maturity. The accreted value of the CCHC note
securities to fund the first six interest payments under the notes, is $49 million as of December 31, 2005 and is recorded in
two of which were funded in 2005. The fair value of the Notes Payable — Related Party in the accompanying consoli-
pledged securities was $97 million at December 31, 2005. dated financial statements contained in ‘‘Item 8. Financial
Upon a change of control and certain other fundamental Statements and Supplementary Data.’’
changes, subject to certain conditions and restrictions, Charter
may be required to repurchase the notes, in whole or in part, at CHARTER COMMUNICATIONS HOLDINGS, LLC NOTES
100% of their principal amount plus accrued interest at the
March 1999 Charter Holdings Notes
repurchase date.
The March 1999 Charter Holdings notes were issued under
We may redeem the notes in whole or in part for cash at
three separate indentures, each dated as of March 17, 1999,
any time at a redemption price equal to 100% of the aggregate
among Charter Holdings and Charter Capital, as the issuers, and
principal amount plus accrued and unpaid interest, deferred
BNY Midwest Trust Company, as trustee. Charter Holdings and
interest and liquidated damages, if any, but only if for any 20
Charter Capital exchanged these notes for new notes with
trading days in any 30 consecutive trading day period the
substantially similar terms, except that the new notes are
closing price has exceeded 180% of the conversion price, if such
registered under the Securities Act.
30 trading day period begins prior to November 16, 2007 or
The March 1999 Charter Holdings notes are general
150% of the conversion price, if such 30 trading period begins
unsecured obligations of Charter Holdings and Charter Capital.
thereafter. Holders who convert notes that we have called for
Cash interest on the March 1999 9.920% Charter Holdings
redemption shall receive, in addition to the early conversion
notes began to accrue on April 1, 2004.
make whole amount, if applicable, the present value of the
The March 1999 Charter Holdings notes are senior debt
interest on the notes converted that would have been payable
obligations of Charter Holdings and Charter Capital. They rank
for the period from the later of November 17, 2007 and the
equally with all other current and future unsubordinated
redemption date through the scheduled maturity date for the
obligations of Charter Holdings and Charter Capital. They are
notes, plus any accrued deferred interest.
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