Charter 2005 Annual Report Download - page 71

CHARTER COMMUNICATIONS, INC. 2005 FORM 10-K
amounts of debt or preferred stock, if, after giving effect to the (regardless of the existence of any default, to pay interest
incurrence, CCH II could meet a leverage ratio (ratio of when due on Charter Holdings notes, CIH notes and
consolidated debt to four times EBITDA from the most recent CCH I notes,
fiscal quarter for which internal financial reports are available) of (to purchase, redeem or refinance, so long as CCH II could
5.5 to 1.0. incur $1.00 of indebtedness under the 5.5 to 1.0 leverage
In addition, regardless of whether the leverage ratio could ratio test referred to above and there is no default, Charter
be met, so long as no default exists or would result from the Holdings notes, CIH notes, CCH I notes, Charter converti-
incurrence or issuance, CCH II and its restricted subsidiaries are ble notes, and other direct or indirect parent company
permitted to incur or issue: notes,
(up to $9.75 billion of debt under credit facilities, including (to make distributions in connection with the private
debt under credit facilities outstanding on the issue date of exchanges pursuant to which the CCH II notes were
the CCH II notes, issued, and
(up to $75 million of debt incurred to finance the purchase (other specified restricted payments including merger fees up
or capital lease of new assets, to 1.25% of the transaction value, repurchases using
(up to $300 million of additional debt for any purpose, and concurrent new issuances, and certain dividends on existing
subsidiary preferred equity interests.
(other items of indebtedness for specific purposes such as
intercompany debt, refinancing of existing debt, and interest The indenture governing the CCH II notes restricts CCH II
rate swaps to provide protection against fluctuation in and its restricted subsidiaries from making investments, except
interest rates. specified permitted investments, or creating new unrestricted
subsidiaries, if there is a default under the indenture or if
The restricted subsidiaries of CCH II are generally not CCH II could not incur $1.00 of new debt under the 5.5 to 1.0
permitted to issue debt securities contractually subordinated to leverage ratio test described above after giving effect to the
other debt of the issuing subsidiary or preferred stock, in either transaction.
case in any public or Rule 144A offering. Permitted investments include:
The CCH II indenture permits CCH II and its restricted
subsidiaries to incur debt under one category, and later reclassify (investments by CCH II and its restricted subsidiaries in
that debt into another category. Our and our subsidiaries’ credit CCH II and in other restricted subsidiaries, or entities that
agreements generally impose more restrictive limitations on become restricted subsidiaries as a result of the investment,
incurring new debt than the CCH II indenture, so we and our (investments aggregating up to 100% of new cash equity
subsidiaries that are subject to credit agreements are not proceeds received by CCH II since September 23, 2003 to
permitted to utilize the full debt incurrence that would the extent the proceeds have not been allocated to the
otherwise be available under the CCH II indenture covenants. restricted payments covenant described above,
Generally, under the CCH II indenture, CCH II and its
(investments resulting from the private exchanges pursuant
restricted subsidiaries are permitted to pay dividends on equity
to which the CCH II notes were issued,
interests, repurchase interests, or make other specified restricted
payments only if CCH II can incur $1.00 of new debt under the (other investments up to $750 million outstanding at any
leverage ratio test, which requires that CCH II meet a 5.5 to 1.0 time, and
leverage ratio after giving effect to the transaction, and if no
(certain specified additional investments, such as investments
default exists or would exist as a consequence of such in customers and suppliers in the ordinary course of
incurrence. If those conditions are met, restricted payments are business and investments received in connection with
permitted in a total amount of up to 100% of CCH II’s permitted asset sales.
consolidated EBITDA, as defined, minus 1.3 times its consoli-
dated interest expense, plus 100% of new cash and non-cash CCH II is not permitted to grant liens on its assets other
equity proceeds received by CCH II and not allocated to the than specified permitted liens. Permitted liens include liens
debt incurrence covenant, all cumulatively from the fiscal quarter securing debt and other obligations incurred under our subsidi-
commenced July 1, 2003, plus $100 million. aries’ credit facilities, liens securing the purchase price of new
In addition, CCH II may make distributions or restricted assets, and liens securing indebtedness up to $50 million and
payments, so long as no default exists or would be caused by other specified liens incurred in the ordinary course of business.
transactions: The lien covenant does not restrict liens on assets of subsidiaries
of CCH II.
(to repurchase management equity interests in amounts not
to exceed $10 million per fiscal year,
(regardless of the existence of any default, to pay pass-
through tax liabilities in respect of ownership of equity
interests in CCH II or its restricted subsidiaries,
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