Charter 2010 Annual Report Download - page 104

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F- F-PB
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010, 2009, AND 2008
(dollars in millions, except share or per share data or where indicated)
subsidiaries of Charter Operating, except for certain subsidiaries,
including immaterial subsidiaries and subsidiaries precluded from
guaranteeing by reason of the provisions of other indebtedness to
which they are subject (the “non-guarantor subsidiaries”). e
Obligations are also secured by (i) a lien on substantially all of the
assets of Charter Operating and its subsidiaries (other than assets
of the non-guarantor subsidiaries), to the extent such lien can be
perfected under the Uniform Commercial Code by the filing of
a financing statement, and (ii) a pledge by CCO Holdings of the
equity interests owned by it in Charter Operating or any of Charter
Operating’s subsidiaries, as well as intercompany obligations owing to
it by any of such entities.
Credit Facilities — Restrictive Covenants
CCO Holdings Credit Facility
e CCO Holdings credit facility contains covenants that are
substantially similar to the restrictive covenants for the CCO
Holdings notes except that the leverage ratio is 5.50 to 1.0 and the
change of control definition provides that a change of control occurs
if a holder becomes the beneficial owner of 35% or more of Charter’s
voting stock unless Paul G. Allen (“Mr. Allen”) beneficially owns
a greater percentage. e CCO Holdings credit facility contains
provisions requiring mandatory loan prepayments under specific
circumstances, including in connection with certain sales of assets,
so long as the proceeds have not been reinvested in the business.
e CCO Holdings credit facility permits CCO Holdings and
its subsidiaries to make distributions to pay interest on the CCH
II notes, the CCO Holdings notes, and the Charter Operating
second-lien notes, provided that, among other things, no default has
occurred and is continuing under the CCO Holdings credit facility.
Charter Operating Credit Facilities
e Charter Operating credit facilities contain representations and
warranties, and affirmative and negative covenants customary for
financings of this type. e financial covenants measure performance
against standards set for leverage to be tested as of the end of each
quarter. Additionally, the Charter Operating credit facilities contain
provisions requiring mandatory loan prepayments under specific
circumstances, including in connection with certain sales of assets, so
long as the proceeds have not been reinvested in the business. e
Charter Operating credit facilities permit Charter Operating and its
subsidiaries to make distributions to pay interest on the currently
outstanding subordinated and parent company indebtedness,
provided that, among other things, no default has occurred and is
continuing under the Charter Operating credit facilities.
e events of default under the Charter Operating credit facilities
include, among other things:
the failure to make payments when due or within the applicable
grace period;
the failure to comply with specified covenants, including but
not limited to a covenant to deliver audited financial statements
for Charter Operating with an unqualified opinion from the
Company’s independent accountants and without a “going
concern” or like qualification or exception;
the failure to pay or the occurrence of events that cause
or permit the acceleration of other indebtedness owing by
CCO Holdings, Charter Operating, or Charter Operating’s
subsidiaries in aggregate principal amounts in excess of $100
million;
the failure to pay or the occurrence of events that result in the
acceleration of other indebtedness owing by certain of CCO
Holdings’ direct and indirect parent companies in aggregate
principal amounts in excess of $200 million;
the consummation of any transaction resulting in any person
or group having power, directly or indirectly, to vote more
than 50% of the ordinary voting power for the management of
Charter Operating on a fully diluted basis or a change of control
shall occur under any indebtedness of CCO Holdings, any
first lien notes of Charter Operating or any specified long-term
indebtedness of Charter Operating (as defined in the Credit
Agreement) in excess of $200 million in aggregate principal
amount some of which instruments contain a 35% beneficial
ownership change of control provision; and
Charter Operating ceasing to be a wholly-owned direct
subsidiary of CCO Holdings, except in certain limited
circumstances.
Limitations on Distributions
Distributions by the Company’s subsidiaries to a parent company for
payment of principal on parent company notes are restricted under
the indentures and credit facilities discussed above, unless there is no
default under the applicable indenture and credit facilities, and unless
each applicable subsidiary’s leverage ratio test is met at the time of
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