Charter 2010 Annual Report Download - page 72

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
e following description is a summary of certain restrictions of our
Debt Agreements. e summary does not restate the terms of the
Debt Agreements in their entirety, nor does it describe all restrictions
of the Debt Agreements. e agreements and instruments governing
each of the Debt Agreements are complicated and you should consult
such agreements and instruments for more detailed information
regarding the Debt Agreements.
e notes issued by certain of our subsidiaries (together, the “note
issuers”) were issued pursuant to indentures that contain covenants
that restrict the ability of the note issuers and their subsidiaries to,
among other things:
incur indebtedness;
pay dividends or make distributions in respect of capital
stock and other restricted payments;
issue equity;
make investments;
create liens;
sell assets;
consolidate, merge, or sell all or substantially all assets;
enter into sale leaseback transactions;
create restrictions on the ability of restricted subsidiaries to
make certain payments; or
enter into transactions with affiliates.
However, such covenants are subject to a number of important
qualifications and exceptions. Below we set forth a brief summary
of certain of the restrictive covenants.
Restrictions on Additional Debt
e limitations on incurrence of debt and issuance of preferred
stock contained in various indentures permit each of the respective
notes issuers and its restricted subsidiaries to incur additional debt
or issue preferred stock, so long as, after giving pro forma effect to
the incurrence, the leverage ratio would be below a specified level
for each of the note issuers. e leverage ratios for CCH II, CCO
Holdings and Charter Operating are as follows:
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Issuer Leverage Ratio
CCH II 5.75 to 1
CCO Holdings 6.0 to 1
Charter Operating 4.25 to 1
In addition, regardless of whether the leverage ratio could be met,
so long as no default exists or would result from the incurrence or
issuance, each issuer and their restricted subsidiaries are permitted to
issue among other permitted indebtedness:
up to an amount of debt under credit facilities not otherwise
allocated as indicated below:
CCH II: $1 billion
CCO Holdings: $1.5 billion
Charter Operating: $6.8 billion
up to $75 million of debt incurred to finance the purchase or
capital lease of new assets;
up to $300 million of additional debt for any purpose (in the
case of CCO Holdings notes, the limit is the greater of $300
million and 5% of consolidated net tangible assets); and
other items of indebtedness for specific purposes such as
intercompany debt, refinancing of existing debt, and interest
rate swaps to provide protection against fluctuation in interest
rates.
Indebtedness under a single facility or agreement may be incurred
in part under one of the categories listed above and in part under
another, and generally may also later be reclassified into another
category including as debt incurred under the leverage ratio.
Accordingly, indebtedness under our credit facilities is incurred under
a combination of the categories of permitted indebtedness listed
above. e restricted subsidiaries of note issuers are generally not
permitted to issue subordinated debt securities.
Restrictions on Distributions
Generally, under the various indentures each of the note issuers and
their respective restricted subsidiaries are permitted to pay dividends
on or repurchase equity interests, or make other specified restricted
payments, only if the applicable issuer can incur $1.00 of new debt
under the applicable leverage ratio test after giving effect to the
transaction and if no default exists or would exist as a consequence
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