Charter 2015 Annual Report Download - page 36

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Our ability to service our debt and to fund our planned capital expenditures and ongoing operations will depend on our ability to
continue to generate cash flow and our access (by dividend or otherwise) to additional liquidity sources at the applicable obligor.
Our ability to continue to generate cash flow is dependent on many factors, including:
• our ability to sustain and grow revenues and cash flow from operations by offering video, Internet, voice, advertising and
other services to residential and commercial customers, to adequately meet the customer experience demands in our
markets and to maintain and grow our customer base, particularly in the face of increasingly aggressive competition, the
need for innovation and the related capital expenditures;
• the impact of competition from other market participants, including but not limited to incumbent telephone companies,
direct broadcast satellite operators, wireless broadband and telephone providers, DSL providers, video provided over the
Internet and providers of advertising over the Internet;
• general business conditions, economic uncertainty or downturn, high unemployment levels and the level of activity in
the housing sector;
• our ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher
programming costs (including retransmission consents);
• the development and deployment of new products and technologies including our cloud-based user interface, Spectrum
Guide®, and downloadable security for set-top boxes;
• the effects of governmental regulation on our business or potential business combination transactions; and
• any events that disrupt our networks, information systems or properties and impair our operating activities and negatively
impact our reputation.
Some of these factors are beyond our control. If we are unable to generate sufficient cash flow or we are unable to access additional
liquidity sources, we may not be able to service and repay our debt, operate our business, respond to competitive challenges, or
fund our other liquidity and capital needs.
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 Charter, CCO Holdings,
CCOH Safari, CCO Safari II or CCO Safari III, our other primary debt issuers, 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 and guarantors under the Charter Operating credit
facilities and the entities that will be issuers and guarantors under the CCO Safari II notes upon consummation of the TWC
Transaction. CCO Holdings and CCOH Safari are also obligors under their respective senior notes and CCO Safari III is an obligor
under its credit facilities. As of December 31, 2015, our total principal amount of debt was approximately $35.9 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 Charter Operating's credit
facilities, the CCO Safari II notes and any other indebtedness of our subsidaries whose interests are (or will be following the
consummation of the TWC Transaction) secured by substantially all of our operating assets, and all holders of other debt of Charter
Operating, CCO Safari II, CCO Safari III, CCO Holdings and CCOH Safari will have the right to be paid in full before us from
any of our subsidiaries' assets.