Charter 2005 Annual Report Download - page 70

CHARTER COMMUNICATIONS, INC. 2005 FORM 10-K
The indenture governing the CCH I notes restricts CCH I With certain exceptions, CCH I’s restricted subsidiaries may
and its restricted subsidiaries from making investments, except generally not enter into restrictions on their ability to make
specified permitted investments, or creating new unrestricted dividends or distributions or transfer assets to CCH I.
subsidiaries, if there is a default under the indenture or if CCH I The restricted subsidiaries of CCH I are generally not
could not incur $1.00 of new debt under the 7.5 to 1.0 leverage permitted to guarantee or pledge assets to secure other debt of
ratio test described above after giving effect to the transaction. CCH I, except in respect of credit facilities unless the
Permitted investments include: guarantying subsidiary issues a guarantee of the CCH I notes
and waives any rights of reimbursement, indemnity or subroga-
(investments by CCH I and its restricted subsidiaries in tion arising from the guarantee transaction for at least one year.
CCH I and in other restricted subsidiaries, or entities that The indenture also restricts the ability of CCH I and its
become restricted subsidiaries as a result of the investment, restricted subsidiaries to enter into certain transactions with
(investments aggregating up to 100% of new cash equity affiliates involving consideration in excess of $15 million without
proceeds received by CCH I since September 28, 2005 to a determination by the board of directors that the transaction is
the extent the proceeds have not been allocated to the on terms no less favorable than arms-length, or transactions
restricted payments covenant described above, with affiliates involving over $50 million without receiving an
independent opinion as to the fairness of the transaction to the
(other investments up to $750 million outstanding at any holders of the CCH I notes.
time, and
CCH II, LLC Notes
(certain specified additional investments, such as investments
In September 2003, CCH II and CCH II Capital Corp. jointly
in customers and suppliers in the ordinary course of
issued approximately $1.6 billion total principal amount of
business and investments received in connection with
10.25% senior notes due 2010 and in January 2006, they issued
permitted asset sales.
an additional $450 million principal amount of these notes. The
CCH I is not permitted to grant liens on its assets other CCH II notes are general unsecured obligations of CCH II and
than specified permitted liens. Permitted liens include liens CCH II Capital Corp. They rank equally with all other current
securing the purchase price of new assets, liens securing or future unsubordinated obligations of CCH II and CCH II
obligations up to $50 million and other specified liens. The lien Capital Corp. The CCH II notes are structurally subordinated to
covenant does not restrict liens on assets of subsidiaries of all obligations of subsidiaries of CCH II, including the CCO
CCH I. Holdings notes, the Renaissance notes, the Charter Operating
CCH I and CCH I Capital Corp., its co-issuer, are generally notes and the Charter Operating credit facilities.
not permitted to sell all or substantially all of their assets or Interest on the CCH II notes accrues at 10.25% per annum
merge with or into other companies unless their leverage ratio and is payable semi-annually in arrears on each March 15 and
after any such transaction would be no greater than their September 15, commencing on March 15, 2004.
leverage ratio immediately prior to the transaction, or unless At any time prior to September 15, 2006, the issuers of the
CCH I and its subsidiaries could incur $1.00 of new debt under CCH II notes may redeem up to 35% of the total principal
the 7.50 to 1.0 leverage ratio test described above after giving amount of the CCH II notes on a pro rata basis at a redemption
effect to the transaction, no default exists, and the surviving price equal to 110.25% of the principal amount of CCH II notes
entity is a U.S. entity that assumes the CCH I notes. redeemed, plus any accrued and unpaid interest.
CCH I and its restricted subsidiaries may generally not On or after September 15, 2008, the issuers of the CCH II
otherwise sell assets or, in the case of restricted subsidiaries, notes may redeem all or a part of the notes at a redemption
issue equity interests, unless they receive consideration at least price that declines ratably from the initial redemption price of
equal to the fair market value of the assets or equity interests, 105.125% to a redemption price on or after September 15, 2009
consisting of at least 75% in cash, assumption of liabilities, of 100.0% of the principal amount of the CCH II notes
securities converted into cash within 60 days or productive redeemed, plus, in each case, any accrued and unpaid interest.
assets. CCH I and its restricted subsidiaries are then required In the event of specified change of control events, CCH II
within 365 days after any asset sale either to commit to use the must offer to purchase the outstanding CCH II notes from the
net cash proceeds over a specified threshold to acquire assets, holders at a purchase price equal to 101% of the total principal
including current assets, used or useful in their businesses or use amount of the notes, plus any accrued and unpaid interest.
the net cash proceeds to repay certain debt, or to offer to The indenture governing the CCH II notes contains
repurchase the CCH I notes with any remaining proceeds. restrictive covenants that limit certain transactions or activities
CCH I and its restricted subsidiaries may generally not by CCH II and its restricted subsidiaries, including the cove-
engage in sale and leaseback transactions unless, at the time of nants summarized below. Substantially all of CCH II’s direct and
the transaction, CCH I could have incurred secured indebted- indirect subsidiaries are currently restricted subsidiaries.
ness in an amount equal to the present value of the net rental The covenant in the indenture governing the CCH II notes
payments to be made under the lease, and the sale of the assets that restricts incurrence of debt and issuance of preferred stock
and application of proceeds is permitted by the covenant permits CCH II and its subsidiaries to incur or issue specified
restricting asset sales.
60