Charter 2006 Annual Report Download - page 91

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 2006 FORM 10-K
Notes to Consolidated Financial Statements (continued)
for the next twelve months. As of December 31, 2006, the restricted, however, if any such subsidiary fails to meet these
Company’s potential availability under its credit facilities totaled tests at the time of the contemplated distribution. In the past,
approximately $1.3 billion, although the actual availability at that certain subsidiaries have from time to time failed to meet their
time was only $1.1 billion because of limits imposed by leverage ratio test. There can be no assurance that they will
covenant restrictions. Continued access to the Company’s credit satisfy these tests at the time of the contemplated distribution.
facilities is subject to the Company remaining in compliance Distributions by Charter Operating for payment of principal on
with these covenants, including covenants tied to the Com- parent company notes are further restricted by the covenants in
pany’s operating performance. If any events of non-compliance the credit facilities.
occur, funding under the credit facilities may not be available Distributions by CIH, CCH I, CCH II, CCO Holdings and
and defaults on some or potentially all of the Company’s debt Charter Operating to a parent company for payment of parent
obligations could occur. An event of default under any of the company interest are permitted if there is no default under the
Company’s debt instruments could result in the acceleration of aforementioned indentures, and in the case of such distributions
its payment obligations under that debt and, under certain by Charter Operating for payment of interest on a portion of
circumstances, in cross-defaults under its other debt obligations, the outstanding CCO Holdings notes, Charter Operating’s
which could have a material adverse effect on the Company’s leverage ratio and other specified tests are met.
consolidated financial condition and results of operations. The indentures governing the Charter Holdings notes
permit Charter Holdings to make distributions to Charter
Limitations on Distributions Holdco for payment of interest or principal on the convertible
Charter’s ability to make interest payments on its convertible senior notes, only if, after giving effect to the distribution,
senior notes, and, in 2009, to repay the outstanding principal of Charter Holdings can incur additional debt under the leverage
its convertible senior notes of $413 million, will depend on its ratio of 8.75 to 1.0, there is no default under Charter Holdings’
ability to raise additional capital and/or on receipt of payments indentures, and other specified tests are met. For the quarter
or distributions from Charter Holdco and its subsidiaries. As of ended December 31, 2006, there was no default under Charter
December 31, 2006, Charter Holdco was owed $3 million in Holdings’ indentures and the other specified tests were met.
intercompany loans from its subsidiaries and had $8 million in Such distributions would be restricted, however, if Charter
cash, which were available to pay interest and principal on Holdings fails to meet these tests at the time of the contem-
Charter’s convertible senior notes. In addition, Charter has plated distribution. In the past, Charter Holdings has from time
$50 million of U.S. government securities pledged as security for to time failed to meet this leverage ratio test. There can be no
the semi-annual interest payments on Charter’s convertible assurance that Charter Holdings will satisfy these tests at the
senior notes scheduled in 2007. CCHC also holds an additional time of the contemplated distribution. During periods in which
$450 million of Charter’s convertible senior notes. As a result, if distributions are restricted, the indentures governing the Charter
CCHC continues to hold those notes, CCHC will receive Holdings notes permit Charter Holdings and its subsidiaries to
interest payments on the convertible senior notes from the make specified investments (that are not restricted payments) in
pledged government securities. The cumulative amount of Charter Holdco or Charter, up to an amount determined by a
interest payments expected to be received by CCHC may be formula, as long as there is no default under the indentures.
available to be distributed to pay interest on the outstanding
$413 million principal amount of the convertible senior notes Recent Financing Transactions
due in 2008 and May 2009, although CCHC may use those In January 2006, CCH II and CCH II Capital Corp. issued
amounts for other purposes. $450 million in debt securities, the proceeds of which were
Distributions by Charter’s subsidiaries to a parent company provided to Charter Operating, which used such funds to reduce
(including Charter, Charter Holdco and CCHC) for payment of borrowings, but not commitments, under the revolving portion
principal on parent company notes, are restricted under the of its credit facilities.
indentures governing the CCH I Holdings, LLC (‘‘CIH’’) notes, In April 2006, Charter Operating completed a $6.85 billion
CCH I, LLC (‘‘CCH I’’) notes, CCH II, LLC (‘‘CCH II’’) notes, refinancing of its credit facilities including a new $350 million
CCO Holdings, LLC (‘‘CCO Holdings’’) notes, and Charter revolving/term facility (which converts to a term loan no later
Operating notes unless there is no default under the applicable than April 2007), a $5.0 billion term loan due in 2013, and
indenture, and each applicable subsidiary’s leverage ratio test is certain amendments to the existing $1.5 billion revolving credit
met at the time of such distribution, and, in the case of such facility. In addition, the refinancing reduced margins on
distributions by Charter Operating for payment of principal on a Eurodollar rate term loans to 2.625% from a weighted average
portion of the outstanding CCO Holdings notes, other specified of 3.15% previously, and margins on base rate term loans to
tests are met. For the quarter ended December 31, 2006, there 1.625% from a weighted average of 2.15% previously. Concur-
was no default under any of these indentures and each such rent with this refinancing, the CCO Holdings bridge loan was
subsidiary met its applicable leverage ratio tests based on terminated. The refinancing resulted in a loss on extinguishment
December 31, 2006 financial results. Such distributions would be of debt of approximately $27 million.
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