Charter 2005 Annual Report Download - page 74

CHARTER COMMUNICATIONS, INC. 2005 FORM 10-K
The restricted subsidiaries of CCO Holdings are generally Exchange Notes. However, asset sales that generate net pro-
not permitted to guarantee or pledge assets to secure debt of ceeds of less than $75 million will not be subject to such
CCO Holdings, unless the guarantying subsidiary issues a commitment reduction obligation, unless the aggregate net
guarantee of the notes of comparable priority and tenor, and proceeds from such asset sales exceed $200 million, in which
waives any rights of reimbursement, indemnity or subrogation case the aggregate unused commitment will be reduced by the
arising from the guarantee transaction for at least one year. amount of such excess.
The indenture also restricts the ability of CCO Holdings CCO Holdings will be required to prepay loans (and
and its restricted subsidiaries to enter into certain transactions redeem or offer to repurchase Exchange Notes, if issued) from
with affiliates involving consideration in excess of $15 million the net proceeds from (i) the issuance of equity or incurrence of
without a determination by the board of directors that the debt by Charter and its subsidiaries, with certain exceptions, and
transaction is on terms no less favorable than arms-length, or (ii) certain asset sales (to the extent not used for purposes
transactions with affiliates involving over $50 million without permitted under the bridge loan).
receiving an independent opinion as to the fairness of the The covenants and events of default applicable to
transaction to the holders of the CCO Holdings notes. CCO Holdings under the bridge loan are similar to the
covenants and events of default in the indenture for the senior
Bridge Loan secured notes of CCH I with various additional limitations.
In October 2005, CCO Holdings and CCO Holdings Capital The Exchange Notes will mature on the sixth anniversary
Corp., as guarantor thereunder, entered into the bridge loan of the first borrowing under the bridge loan. The Exchange
with the Lenders whereby the Lenders have committed to make Notes will bear interest at a rate equal to the rate that would
loans to CCO Holdings in an aggregate amount of $600 million. have been borne by the loans. The same mandatory redemption
In January 2006, upon the issuance of $450 million principal provisions will apply to the Exchange Notes as applied to the
amount CCH II notes, the commitment under the bridge loan loans, except that CCO Holdings will be required to make an
agreement was reduced to $435 million. CCO Holdings may, offer to redeem upon the occurrence of a change of control at
subject to certain conditions, including the satisfaction of certain 101% of principal amount plus accrued and unpaid interest.
of the conditions to borrowing under the credit facilities, draw The Exchange Notes will, if held by a person other than an
upon the facility between January 2, 2006 and September 29, initial lender or an affiliate thereof, be (a) non-callable for the
2006 and the loans will mature on the sixth anniversary of the first three years after the first borrowing date and (b) thereafter,
first borrowing under the bridge loan. Each loan will accrue callable at par plus accrued interest plus a premium equal to
interest at a rate equal to an adjusted LIBOR rate plus a spread. 50% of the coupon in effect on the first anniversary of the first
The spread will initially be 450 basis points and will increase borrowing date, which premium shall decline to 25% of such
(a) by an additional 25 basis points at the end of the six-month coupon in the fourth year and to zero thereafter. Otherwise, the
period following the date of the first borrowing, (b) by an Exchange Notes will be callable at any time at 100% of the
additional 25 basis points at the end of each of the next two amount thereof plus accrued and unpaid interest.
subsequent three month periods and (c) by 62.5 basis points at
the end of each of the next two subsequent three-month Charter Communications Operating, LLC Notes
periods. On April 27, 2004, Charter Operating and Charter Communica-
Beginning on the first anniversary of the first date that tions Operating Capital Corp. jointly issued $1.1 billion of
CCO Holdings borrows under the bridge loan and at any time 8% senior second-lien notes due 2012 and $400 million of
thereafter, any Lender will have the option to receive ‘‘exchange 83
/8% senior second-lien notes due 2014, for total gross proceeds
notes’’ (the terms of which are described below, the ‘‘Exchange of $1.5 billion. In March and June 2005, Charter Operating
Notes’’) in exchange for any loan that has not been repaid by consummated exchange transactions with a small number of
that date. Upon the earlier of (x) the date that at least a institutional holders of Charter Holdings 8.25% senior notes due
majority of all loans that have been outstanding have been 2007 pursuant to which Charter Operating issued, in private
exchanged for Exchange Notes and (y) the date that is placement transactions, approximately $333 million principal
18 months after the first date that CCO Holdings borrows amount of its 83
/8% senior second-lien notes due 2014 in
under the bridge loan, the remainder of loans will be automati- exchange for approximately $346 million of the Charter Hold-
cally exchanged for Exchange Notes. ings 8.25% senior notes due 2007. Interest on the Charter
As conditions to each draw, (i) there shall be no default Operating notes is payable semi-annually in arrears on each
under the bridge loan, (ii) all the representations and warranties April 30 and October 30.
under the bridge loan shall be true and correct in all material The Charter Operating notes were sold in a private
respects and (iii) all conditions to borrowing under the Charter transaction that was not subject to the registration requirements
Operating credit facilities (with certain exceptions) shall be of the Securities Act of 1933. The Charter Operating notes are
satisfied. not expected to have the benefit of any exchange or other
The aggregate unused commitment will be reduced by registration rights, except in specified limited circumstances.
100% of the net proceeds from certain asset sales, to the extent On the issue date of the Charter Operating notes, because
such net proceeds have not been used to prepay loans or of restrictions contained in the Charter Holdings indentures,
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