Charter 2006 Annual Report Download - page 32

CHARTER COMMUNICATIONS, INC. 2006 FORM 10-K
operate our business, as well as significantly affect our liquidity, assurance that Charter Operating will be able to continue to
and therefore could adversely affect our results of operations. comply with these or any other of the covenants under the
These covenants will restrict, among other things, our and our credit facilities.
subsidiaries’ ability to: An event of default under the credit facilities or indentures,
if not waived, could result in the acceleration of those debt
(incur additional debt; obligations and, consequently, could trigger cross defaults under
(repurchase or redeem equity interests and debt; other agreements governing our long-term indebtedness. In
addition, the secured lenders under the Charter Operating credit
(issue equity; facilities and the holders of the Charter Operating senior
(make certain investments or acquisitions; second-lien notes could foreclose on their collateral, which
includes equity interest in our subsidiaries, and exercise other
(pay dividends or make other distributions;
rights of secured creditors. Any default under those credit
(dispose of assets or merge; facilities or the indentures governing our convertible notes or
(enter into related party transactions; and our subsidiaries’ debt could adversely affect our growth, our
financial condition, our results of operations, and our ability to
(grant liens and pledge assets. make payments on our convertible notes, Charter Operating’s
The breach of any covenants or obligations in the credit facilities, and other debt of our subsidiaries, and could
foregoing indentures or credit facilities, not otherwise waived or force us to seek the protection of the bankruptcy laws, which
amended, could result in a default under the applicable debt could materially adversely impact our ability to operate our
obligations and could trigger acceleration of those obligations, business and to make payments under our debt instruments.
which in turn could trigger cross defaults under other agree- We depend on generating sufficient cash flow and having access to
ments governing our long-term indebtedness. In addition, the additional external liquidity sources to fund our debt obligations,
secured lenders under the Charter Operating credit facilities and capital expenditures, and ongoing operations.
the holders of the Charter Operating senior second-lien notes
could foreclose on their collateral, which includes equity Our ability to service our debt and to fund our planned capital
interests in our subsidiaries, and exercise other rights of secured expenditures and ongoing operations will depend on both our
creditors. Any default under those credit facilities or the ability to generate cash flow and our access to additional
indentures governing our convertible notes or our subsidiaries’ external liquidity sources. Our ability to generate cash flow is
debt could adversely affect our growth, our financial condition, dependent on many factors, including:
our results of operations and our ability to make payments on (competition from other video programming distributors,
our convertible notes, Charter Operating’s credit facilities, and including incumbent telephone companies, direct broadcast
other debt of our subsidiaries, and could force us to seek the satellite operators, wireless broadband providers and DSL
protection of the bankruptcy laws. providers;
Charter Operating may not be able to access funds under its credit (unforeseen difficulties we may encounter in our continued
facilities if it fails to satisfy the covenant restrictions in its credit introduction of our telephone services such as our ability to
facilities, which could adversely affect our financial condition and our meet heightened customer expectations for the reliability of
ability to conduct our business. voice services compared to other services we provide, and
Our subsidiaries have historically relied on access to credit our ability to meet heightened demand for installations and
facilities in order to fund operations and to service parent customer service;
company debt, and we expect such reliance to continue in the (our ability to sustain and grow revenues by offering video,
future. Our total potential borrowing availability under the high-speed Internet, telephone and other services, and to
Charter Operating credit facilities was approximately $1.3 billion maintain and grow a stable customer base, particularly in
as of December 31, 2006, although the actual availability at that the face of increasingly aggressive competition from other
time was only $1.1 billion because of limits imposed by service providers;
covenant restrictions. There can be no assurance that actual
(our ability to obtain programming at reasonable prices or
availability under our credit facilities will not be limited by
to pass programming cost increases on to our customers;
covenant restrictions in the future.
One of the conditions to the availability of funding under (general business conditions, economic uncertainty or slow-
Charter Operating’s credit facilities is the absence of a default down; and
under such facilities, including as a result of any failure to
(the effects of governmental regulation, including but not
comply with the covenants under the facilities. Among other limited to local franchise authorities, on our business.
covenants, the facilities require Charter Operating to maintain
specific financial ratios. The facilities also provide that Charter Some of these factors are beyond our control. If we are
Operating has to obtain an unqualified audit opinion from its unable to generate sufficient cash flow or access additional
independent accountants for each fiscal year. There can be no external liquidity sources, we may not be able to service and
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