Charter 2011 Annual Report Download - page 67

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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
The 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% of more of Charter’s voting stock unless Mr. Allen beneficially owns a greater
percentage. See “—Summary of Restricted Covenants of Our Notes.” The 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. The 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, the Charter Operating credit
facilities 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
The Charter Operating credit facilities contain representations and warranties, and affirmative and negative covenants customary
for financings of this type. The 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. The 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.
The 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 our 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 with the CCO Holdings credit facilities containing 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.
The term loan A lenders agreed to vote in favor of certain future amendments to the Charter Operating credit facilities should
Charter Operating decide to pursue such future amendments. The potential amendments were set out in the activation notice for
the term loan A and included, among other amendments, (i) amending the restricted payments provisions to allow for restricted
payments as long as pro forma leverage is no greater than 3.5 times EBITDA; (ii) amending the definitions to provide for a credit
against the calculation of indebtedness of up to $300 million for cash on the balance sheet; (iii) amending the change of control
definition to require a ratings downgrade in addition to a holder acquiring 50% of the voting control for the management of Charter
Operating; and (iv) allow additional capacity for the repurchase of term loans under the Charter Operating credit facilities. No
time period has been established for Charter Operating to pursue these potential amendments, and such amendments may never
become effective.