Charter 2010 Annual Report Download - page 32

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While we believe that our relevant subsidiaries currently have surplus
and are not insolvent, there can otherwise be no assurance that these
subsidiaries will not become insolvent or will be permitted to make
distributions in the future in compliance with these restrictions
in amounts needed to service our indebtedness. Our direct or
indirect subsidiaries include the borrowers under the CCO Holdings
credit facility and the borrowers and guarantors under the Charter
Operating credit facilities. Charter Operating is also an obligor, and
its subsidiaries are guarantors under senior second-lien notes, and
CCO Holdings is an obligor under its senior notes. As of December
31, 2010, our total principal amount of debt was approximately
$12.3 billion.
In the event of bankruptcy, liquidation, or dissolution of one or more
of our subsidiaries, that subsidiary's assets would first be applied
to satisfy its own obligations, and following such payments, such
subsidiary may not have sufficient assets remaining to make payments
to its parent company as an equity holder or otherwise. In that event:
the lenders under CCO Holdings’ credit facility and Charter
Operating's credit facilities and senior second-lien notes, whose
interests are secured by substantially all of our operating assets,
and all holders of other debt of CCO Holdings and Charter
Operating, will have the right to be paid in full before us from
any of our subsidiaries' assets; and
Charter and CCH I, the holders of preferred membership
interests in our subsidiary, CC VIII, would have a claim on
a portion of CC VIII’s assets that may reduce the amounts
available for repayment to holders of our outstanding notes.
All of our outstanding debt is subject to change of control
provisions. We may not have the ability to raise the funds
necessary to fulll our obligations under our indebtedness
following a change of control, which would place us in default
under the applicable debt instruments.
We may not have the ability to raise the funds necessary to fulfill
our obligations under our notes and our credit facilities following a
change of control. Under the indentures governing our notes, upon
the occurrence of specified change of control events, the applicable
note issuer is required to offer to repurchase all of its outstanding
notes. However, we may not have sufficient access to funds at the
time of the change of control event to make the required repurchase
of the applicable notes, and all of the notes issuers are limited in their
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ability to make distributions or other payments to their respective
parent company to fund any required repurchase. In addition,
a change of control under the Charter Operating credit facilities
would result in a default under those credit facilities. Because such
credit facilities and our subsidiaries’ notes are obligations of our
subsidiaries, the credit facilities and our subsidiaries’ notes would
have to be repaid by our subsidiaries before their assets could be
available to their parent companies to repurchase their notes. Any
failure to make or complete a change of control offer would place
the applicable note issuer or borrower in default under its notes. e
failure of our subsidiaries to make a change of control offer or repay
the amounts accelerated under their notes and credit facilities would
place them in default.
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We operate in a very competitive business environment, which
affects our ability to attract and retain customers and can
adversely affect our business and operations.
e industry in which we operate is highly competitive and has
become more so in recent years. In some instances, we compete
against companies with fewer regulatory burdens, better access
to financing, greater personnel resources, greater resources for
marketing, greater and more favorable brand name recognition,
and long-established relationships with regulatory authorities and
customers. Increasing consolidation in the cable industry and the
repeal of certain ownership rules have provided additional benefits
to certain of our competitors, either through access to financing,
resources, or efficiencies of scale.
Our principal competitors for video services throughout our territory
are DBS providers. e two largest DBS providers are DirecTV
and DISH Network. Competition from DBS, including intensive
marketing efforts with aggressive pricing, exclusive programming and
increased high definition broadcasting has had an adverse impact on
our ability to retain customers. DBS companies have also expanded
their activities in the MDU market. e cable industry, including us,
has lost a significant number of video customers to DBS competition,
and we face serious challenges in this area in the future.
Telephone companies, including two major telephone companies,
AT&T and Verizon, offer video and other services in competition
with us, and we expect they will increasingly do so in the future.