Charter 2012 Annual Report Download - page 30

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Restrictions in our subsidiaries' debt instruments and under applicable law limit their ability to provide funds to us and our
subsidiaries that are debt issuers.
Our primary assets are our equity interests in our subsidiaries. Our operating subsidiaries are separate and distinct legal entities
and are not obligated to make funds available to their debt issuer holding companies for payments on our notes or other obligations
in the form of loans, distributions, or otherwise. Charter Operating’s ability to make distributions to us or CCO Holdings, our
other primary debt issuer, to service debt obligations is subject to its compliance with the terms of its credit facilities, and restrictions
under applicable law. See “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
— Liquidity and Capital Resources — Limitations on Distributions” and “— Summary of Restrictive Covenants of Our Notes –
Restrictions on Distributions.” Under the Delaware Limited Liability Company Act (the “Act”), our subsidiaries may only make
distributions if the relevant entity has “surplus” as defined in the Act. Under fraudulent transfer laws, our subsidiaries may not
pay dividends if the relevant entity is insolvent or is rendered insolvent thereby. The measures of insolvency for purposes of these
fraudulent transfer laws vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has
occurred. Generally, however, an entity would be considered insolvent if:
• the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all its assets;
• the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability
on its existing debts, including contingent liabilities, as they become absolute and mature; or
• it could not pay its debts as they became due.
While we believe that our relevant subsidiaries currently have surplus and are not insolvent, these subsidiaries may become
insolvent in the future. 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. CCO Holdings is also an obligor under its senior notes.
As of December 31, 2012, our total principal amount of debt was approximately $12.9 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, 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 CCO Holdings' 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 fulfill 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 and the CCO Holdings credit facility, upon the occurrence of
specified change of control events, CCO Holdings is required to offer to repurchase all of its outstanding notes and the debt under
its credit facility. 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 the debt under the CCO Holdings credit facility, and Charter Operating is limited
in its ability to make distributions or other payments to CCO Holdings 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 are obligations of Charter Operating, the credit facilities would have to be repaid before Charter Operating's assets could
be available to CCO Holdings to repurchase their notes. Any failure to make or complete a change of control offer would place
CCO Holdings in default under its notes and credit facility. The 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.
Risks Related to Our Business
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.
The 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