Charter 2015 Annual Report Download - page 80

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Additionally, the Charter Operating credit facilities provisions contain an allowance for restricted payments so long as the
consolidated leverage ratio is no greater than 3.5 after giving pro forma effect to such restricted payment. 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 the covenant to maintain the consolidated leverage ratio at or
below 5.0 to 1.0 and the consolidated first lien leverage ratio at or below 4.0 to 1.0;
• 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;
and
• similar to provisions contained in the note indentures and credit facility, the consummation of any change of control
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 and the occurrence of a ratings event
including a downgrade in the corporate family rating during a ratings decline period.
At December 31, 2015, Charter Operating had a consolidated leverage ratio of approximately 1.1 to 1.0 and a consolidated first
lien leverage ratio of 0.9 to 1.0. Both ratios are in compliance with the ratios required by the Charter Operating credit facilities.
A failure by Charter Operating to maintain the financial covenants would result in an event of default under the Charter Operating
credit facilities and the debt of CCO Holdings. See “— Cross Acceleration” and “Part I. Item 1A. Risk Factors — The agreements
and instruments governing our debt contain restrictions and limitations that could significantly affect our ability to operate our
business, as well as significantly affect our liquidity."
CCO Safari III Credit Facilities — Restrictive Covenants
The CCO Safari III credit facilities are subject to the terms and conditions of a separate credit facility and escrow agreement until
Charter Operating re-assumes its obligations for the loan. The CCO Safari III credit facilities contain customary representations
and warranties and affirmative covenants with limited negative covenants prohibiting CCO Safari III from engaging in any material
activities other than performing its obligations under the credit facilities and the escrow agreement or otherwise issuing other
indebtedness pursuant to escrow arrangements similar to the CCO Safari III credit facilities and escrow agreement. As required
by the CCO Safari III credit facilities, CCO Safari III, Bank of America, N.A., and U.S. Bank, N.A., as escrow agent, entered into
an escrow agreement pursuant to which, CCO Safari III is required to maintain an escrow account over which the administrative
agent has a perfected first priority security interest on behalf of the CCO Safari III credit facilities lenders. The events of default
under the CCO Safari III credit facilities include, among others:
• the failure to make payments when due or within the applicable grace period;
• any acceleration of the loans and termination of the commitments under the Charter Operating credit facilities; and
• the escrow agreement shall cease to be in full force and effect or the lien in the escrow account shall cease to be enforceable
with the same effect and priority.
CCO Safari II Notes
In July 2015, CCO Safari II, a wholly owned subsidiary of Charter, closed on transactions in which it issued $15.5 billion in
aggregate principal amount of senior secured notes comprised of $2.0 billion aggregate principal amount of 3.579% senior secured
notes due 2020, $3.0 billion aggregate principal amount of 4.464% senior secured notes due 2022, $4.5 billion aggregate principal
amount of 4.908% senior secured notes due 2025, $2.0 billion aggregate principal amount of 6.384% senior secured notes due
2035, $3.5 billion aggregate principal amount of 6.484% senior secured notes due 2045 and $500 million aggregate principal
amount of 6.834% senior notes due 2055. The net proceeds from the issuance of the CCO Safari II notes were deposited into an
escrow account and will be used to partially finance the TWC Transaction as well as for general corporate purposes. The release
of the proceeds to us is subject to satisfaction of certain conditions, including the closing of the TWC Transaction. Upon release
of the proceeds, CCO Safari II will merge into Charter Operating and the CCO Safari II notes will become obligations of Charter
Operating and Charter Communications Operating Capital Corp. Should the Merger Agreement be terminated prior to the
consummation of the TWC Transaction, or upon expiration of the escrow agreement on May 23, 2016 (or six months following
such date in the event of an extension of the Merger Agreement), such amounts placed in escrow must be used to settle any
outstanding CCO Safari II notes at a price of 101% of the aggregate principal amount. See "Part I. Item I. Business" for a discussion
of the TWC Transaction and Bright House Transaction.