Charter 2005 Annual Report Download - page 67

CHARTER COMMUNICATIONS, INC. 2005 FORM 10-K
rate swaps to provide protection against fluctuation in transaction, the Charter Holdings Leverage Ratio would be
interest rates. above 8.75 to 1.0.
Permitted investments include:
Indebtedness under a single facility or agreement may be
(investments by Charter Holdings in restricted subsidiaries
incurred in part under one of the categories listed above and in
or by restricted subsidiaries in Charter Holdings,
part under another. Accordingly, indebtedness under our credit
facilities is incurred under a combination of the categories of (investments in productive assets (including through equity
permitted indebtedness listed above. investments) aggregating up to $150 million since March
The restricted subsidiaries of Charter Holdings are generally 1999,
not permitted to issue debt securities contractually subordinated
(investments aggregating up to 100% of new cash equity
in right of payment to other debt of the issuing subsidiary or proceeds received by Charter Holdings since March 1999
preferred stock, in either case in any public or Rule 144A and not allocated to the debt incurrence or restricted
offering. payments covenant, and
The Charter Holdings indentures permit Charter Holdings
and its restricted subsidiaries to incur debt under one category, (other investments aggregating up to $50 million since
and later reclassify that debt into another category. The Charter March 1999.
Operating credit facilities generally impose more restrictive Charter Holdings is not permitted to grant liens on its
limitations on incurring new debt than Charter Holdings’ assets other than specified permitted liens. Permitted liens
indentures, so our subsidiaries that are subject to the Charter include liens securing debt and other obligations incurred under
Operating credit facilities may not be permitted to utilize the full our subsidiaries’ credit facilities, liens securing the purchase price
debt incurrence that would otherwise be available under the of new assets, liens securing indebtedness of up to $50 million
Charter Holdings indenture covenants. and other specified liens incurred in the ordinary course of
Generally, under Charter Holdings’ high-yield indentures: business. The lien covenant does not restrict liens on assets of
(Charter Holdings and its restricted subsidiaries are generally subsidiaries of Charter Holdings.
permitted to pay dividends on equity interests, repurchase Charter Holdings and Charter Capital, its co-issuer, are
interests, or make other specified restricted payments only generally not permitted to sell all or substantially all of their
if, Charter Holdings can incur $1.00 of new debt under the assets or merge with or into other companies unless their
Charter Holdings leverage ratio test which requires 8.75 to leverage ratio after any such transaction would be no greater
1.0 leverage ratio after giving effect to the transaction and if than their leverage ratio immediately prior to the transaction, or
no default exists or would exist as a consequence of such unless after giving effect to the transaction, the Charter Holdings
incurrence. If those conditions are met, restricted payments Leverage Ratio would be below 8.75 to 1.0, no default exists,
in a total amount of up to 100% of Charter Holding’s and the surviving entity is a U.S. entity that assumes the Charter
consolidated EBITDA, as defined, minus 1.2 times its Holdings notes.
consolidated interest expense, plus 100% of new cash and Charter Holdings and its restricted subsidiaries may gener-
non-cash equity proceeds received by Charter Holdings and ally not otherwise sell assets or, in the case of restricted
not allocated to the debt incurrence covenant or to subsidiaries, issue equity interests, unless they receive considera-
permitted investments, all cumulatively from March 1999, tion at least equal to the fair market value of the assets or equity
the date of the first Charter Holdings indenture, plus interests, consisting of at least 75% in cash, assumption of
$100 million. liabilities, securities converted into cash within 60 days or
productive assets. Charter Holdings and its restricted subsidiaries
In addition, Charter Holdings may make distributions or are then required within 365 days after any asset sale either to
restricted payments, so long as no default exists or would be commit to use the net cash proceeds over a specified threshold
caused by transactions: to acquire assets, including current assets, used or useful in their
(to repurchase management equity interests in amounts not businesses or use the net cash proceeds to repay debt, or to
to exceed $10 million per fiscal year, offer to repurchase the Charter Holdings notes with any
remaining proceeds.
(regardless of the existence of any default, to pay pass-
Charter Holdings and its restricted subsidiaries may gener-
through tax liabilities in respect of ownership of equity
ally not engage in sale and leaseback transactions unless, at the
interests in Charter Holdings or its restricted subsidiaries, or
time of the transaction, Charter Holdings could have incurred
(to make other specified restricted payments including secured indebtedness in an amount equal to the present value of
merger fees up to 1.25% of the transaction value, repur- the net rental payments to be made under the lease, and the
chases using concurrent new issuances, and certain divi- sale of the assets and application of proceeds is permitted by the
dends on existing subsidiary preferred equity interests. covenant restricting asset sales.
Charter Holdings and its restricted subsidiaries may not Charter Holdings’ restricted subsidiaries may generally not
make investments except permitted investments if there is a enter into restrictions on their ability to make dividends or
default under the indentures or if, after giving effect to the distributions or transfer assets to Charter Holdings on terms that
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