Charter 2007 Annual Report Download - page 28

includes equity interest in our subsidiaries, and exercise other
rights of secured creditors. Any default under those credit
facilities or the indentures governing our convertible senior notes
or our subsidiaries’ debt could adversely affect our growth, our
financial condition, our results of operations, the value of our
equity and our ability to make payments on our convertible
senior notes, Charter Operating’s credit facilities, and other debt
of our subsidiaries, and could force us to seek the protection of
the bankruptcy laws. We and our subsidiaries may incur signifi-
cant additional debt in the future. If current debt amounts
increase, the related risks that we now face will intensify.
The agreements and instruments governing our debt and the debt of
our subsidiaries contain restrictions and limitations that could
significantly affect our ability to operate our business, as well as
significantly affect our liquidity.
Our credit facilities and the indentures governing our and our
subsidiaries’ debt contain a number of significant covenants that
could adversely affect our ability to operate our business, as well
as significantly affect our liquidity, and therefore could adversely
affect our results of operations. These covenants restrict, among
other things, our and our subsidiaries’ ability to:
kincur additional debt;
krepurchase or redeem equity interests and debt;
kissue equity;
kmake certain investments or acquisitions;
kpay dividends or make other distributions;
kdispose of assets or merge;
kenter into related party transactions; and
kgrant liens and pledge assets.
The breach of any covenants or obligations in the foregoing
indentures or credit facilities, not otherwise waived or amended,
could result in a default under the applicable debt obligations
and could trigger acceleration of those obligations, which in turn
could trigger cross defaults under other agreements governing
our long-term indebtedness. In addition, the secured lenders
under the Charter Operating credit facilities, the holders of the
Charter Operating senior second-lien notes, the secured lenders
under the CCO Holdings credit facility, and the holders of the
CCH I notes could foreclose on their collateral, which includes
equity interests in our subsidiaries, and exercise other rights of
secured creditors. Any default under those credit facilities or the
indentures governing our convertible notes or our subsidiaries’
debt could adversely affect our growth, our financial condition,
our results of operations and our ability to make payments on
our convertible senior notes, our credit facilities, and other debt
of our subsidiaries, and could force us to seek the protection of
the bankruptcy laws.
We may not be able to access funds under the Charter Operating
revolving credit facilities if we fail to satisfy the covenant restrictions,
which could adversely affect our financial condition and our ability to
conduct our business.
Our subsidiaries have historically relied on access to credit
facilities to fund operations, capital expenditures, and to service
parent company debt, and we expect such reliance to continue in
the future. Our total potential borrowing availability under our
revolving credit facility was approximately $1.0 billion as of
December 31, 2007, none of which was limited by covenant
restrictions. There can be no assurance that actual availability
under our credit facility will not be limited by covenant restric-
tions in the future.
One of the conditions to the availability of funding under
the Charter Operating revolving credit facility is the absence of a
default under such facility, including as a result of any failure to
comply with the covenants under the facilities. Among other
covenants, the Charter Operating revolving credit facility requires
us to maintain specified leverage ratios. The Charter Operating
revolving credit facility also provides that Charter Operating
obtain an unqualified audit opinion from its independent accoun-
tants for each fiscal year, which, among other things, requires
Charter to demonstrate its ability to fund its projected liquidity
needs for a reasonable period of time following the balance sheet
date of the financial statements being audited. There can be no
assurance that Charter Operating will be able to continue to
comply with these or any other of the covenants under the
credit facilities. See “– We and our subsidiaries have a significant
amount of debt and may incur significant additional debt, includ-
ing secured debt, in the future, which could adversely affect our
financial health and our ability to react to changes in our
business” for a discussion of the consequences of a default under
our debt obligations.
We depend on generating sufficient cash flow and having access to
additional liquidity sources to fund our debt obligations, capital expen-
ditures, and ongoing operations.
Our ability to service our debt and to fund our planned capital
expenditures and ongoing operations will depend on both our
ability to generate and grow cash flow and our access to
additional liquidity sources. Our ability to generate and grow
cash flow is dependent on many factors, including:
kthe impact of competition from other distributors, including
incumbent telephone companies, direct broadcast satellite
operators, wireless broadband providers and DSL providers;
kdifficulties in growing, further introducing, and operating our
telephone services, while adequately meeting customer
expectations for the reliability of voice services;
kour ability to adequately meet demand for installations and
customer service;
kour ability to sustain and grow revenues and cash flows
from operating activities by offering video, high-speed Inter-
net, telephone and other services, and to maintain and grow
CHARTER COMMUNICATIONS, INC. 2007 FORM 10-K
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