Charter 2005 Annual Report Download - page 75

CHARTER COMMUNICATIONS, INC. 2005 FORM 10-K
there were no Charter Operating note guarantees, even though the incurrence or issuance, Charter Operating and its restricted
Charter Operating’s immediate parent, CCO Holdings, and subsidiaries are permitted to incur or issue:
certain of our subsidiaries were obligors and/or guarantors (up to $6.5 billion of debt under credit facilities (but such
under the Charter Operating credit facilities. Upon the occur- incurrence is permitted only by Charter Operating and its
rence of the guarantee and pledge date (generally, the fifth restricted subsidiaries that are guarantors of the Charter
business day after the Charter Holdings leverage ratio was Operating notes, so long as there are such guarantors),
certified to be below 8.75 to 1.0), CCO Holdings and those including debt under credit facilities outstanding on the
subsidiaries of Charter Operating that were then guarantors of, issue date of the Charter Operating notes;
or otherwise obligors with respect to, indebtedness under the
(up to $75 million of debt incurred to finance the purchase
Charter Operating credit facilities and related obligations were
or capital lease of assets;
required to guarantee the Charter Operating notes. The note
guarantee of each such guarantor is: (up to $300 million of additional debt for any purpose; and
(a senior obligation of such guarantor; (other items of indebtedness for specific purposes such as
refinancing of existing debt and interest rate swaps to
(structurally senior to the outstanding CCO Holdings notes
provide protection against fluctuation in interest rates and,
(except in the case of CCO Holdings’ note guarantee,
subject to meeting the leverage ratio test, debt existing at
which is structurally pari passu with such senior notes), the
the time of acquisition of a restricted subsidiary.
outstanding CCH II notes, the outstanding CCH I notes,
the outstanding CIH notes, the outstanding Charter Hold- The indenture governing the Charter Operating notes
ings notes and the outstanding Charter convertible senior permits Charter Operating to incur debt under one of the
notes (but subject to provisions in the Charter Operating categories above, and later reclassify the debt into a different
indenture that permit interest and, subject to meeting the category. The Charter Operating credit facilities generally
4.25 to 1.0 leverage ratio test, principal payments to be impose more restrictive limitations on incurring new debt than
made thereon); and the Charter Operating indenture, so our subsidiaries that are
subject to the Charter Operating credit facilities are not
(senior in right of payment to any future subordinated
permitted to utilize the full debt incurrence that would
indebtedness of such guarantor.
otherwise be available under the Charter Operating indenture
As a result of the above leverage ratio test being met, CCO covenants.
Holdings and certain of its subsidiaries provided the additional Generally, under Charter Operating’s indenture Charter
guarantees described above during the first quarter of 2005. Operating and its restricted subsidiaries are permitted to pay
All the subsidiaries of Charter Operating (except CCO NR dividends on equity interests, repurchase interests, or make other
Sub, LLC, and certain other subsidiaries that are not deemed specified restricted payments only if Charter Operating could
material and are designated as nonrecourse subsidiaries under incur $1.00 of new debt under the leverage ratio test, which
the Charter Operating credit facilities) are restricted subsidiaries requires that Charter Operating meet a 4.25 to 1.0 leverage ratio
of Charter Operating under the Charter Operating notes. after giving effect to the transaction, and if no default exists or
Unrestricted subsidiaries generally will not be subject to the would exist as a consequence of such incurrence. If those
restrictive covenants in the Charter Operating indenture. conditions are met, restricted payments are permitted in a total
In the event of specified change of control events, Charter amount of up to 100% of Charter Operating’s consolidated
Operating must offer to purchase the Charter Operating notes at EBITDA, as defined, minus 1.3 times its consolidated interest
a purchase price equal to 101% of the total principal amount of expense, plus 100% of new cash and appraised non-cash equity
the Charter Operating notes repurchased plus any accrued and proceeds received by Charter Operating and not allocated to the
unpaid interest thereon. debt incurrence covenant, all cumulatively from the fiscal quarter
The limitations on incurrence of debt contained in the commenced April 1, 2004, plus $100 million.
indenture governing the Charter Operating notes permit Charter In addition, Charter Operating may make distributions or
Operating and its restricted subsidiaries that are guarantors of restricted payments, so long as no default exists or would be
the Charter Operating notes to incur additional debt or issue caused by the transaction:
shares of preferred stock if, after giving pro forma effect to the
(to repurchase management equity interests in amounts not
incurrence, Charter Operating could meet a leverage ratio test
to exceed $10 million per fiscal year;
(ratio of consolidated debt to four times EBITDA, as defined,
from the most recent fiscal quarter for which internal financial (regardless of the existence of any default, to pay pass-
reports are available) of 4.25 to 1.0. through tax liabilities in respect of ownership of equity
In addition, regardless of whether the leverage ratio test interests in Charter Operating or its restricted subsidiaries;
could be met, so long as no default exists or would result from
(to pay, regardless of the existence of any default, interest
when due on the Charter convertible notes, Charter
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