CHARTER HOLDINGS IS A HOLDING COMPANY WHICH HAS NO OPERATIONS AND WILL DEPEND ON
ITS OPERATING SUBSIDIARIES FOR CASH. OUR SUBSIDIARIES MAY BE LIMITED IN THEIR
ABILITY TO MAKE FUNDS AVAILABLE FOR THE PAYMENT OF THE NOTES AND OUR OTHER
As a holding company, Charter Holdings will depend entirely on its
operating subsidiaries for the cash necessary to satisfy its obligations to you
as a holder of the notes. These operating subsidiaries may not be able to make
funds available to Charter Holdings.
Charter Holdings will not hold any significant assets other than its direct
and indirect interests in its subsidiaries which conduct all of its operations.
Charter Holdings' cash flow will depend upon the cash flow of its operating
subsidiaries and the payment of funds by these operating subsidiaries to Charter
Holdings. This may adversely affect the ability of Charter Holdings to meet its
obligations to the holders of the notes.
Our operating subsidiaries are not obligated to make funds available for
payment of these obligations in the form of loans, distributions or otherwise.
In addition, our operating subsidiaries' ability to make any such loans,
distributions or other payments to Charter Holdings will depend on their
earnings, business and tax considerations and legal restrictions. Covenants in
the indentures and credit agreements governing the debt of Charter Holdings'
subsidiaries restrict their ability to make loans, distributions or other
payments to Charter Holdings. This could adversely impact our ability to pay
interest and principal due on the notes. See "Description of Certain
BECAUSE OF OUR HOLDING COMPANY STRUCTURE, THE NOTES WILL BE SUBORDINATED TO ALL
LIABILITIES OF OUR SUBSIDIARIES.
The borrowers and guarantors under the Charter Operating credit facilities,
the Falcon credit facilities, the Fanch credit facilities and the Avalon credit
facilities are, and after giving effect to the Bresnan transfer, any borrowers
and guarantors under the anticipated Bresnan credit facilities will be, direct
or indirect subsidiaries of Charter Holdings. A number of Charter Holdings'
subsidiaries are also obligors under other debt instruments. As of September 30,
1999, as adjusted to give effect to the sale of the original notes, acquisitions
completed since that date, the recent transfer to us of the Fanch, Falcon and
Avalon cable systems and the Pending Transactions, as if such transactions had
occurred on that date, indebtedness of Charter Holdings and its subsidiaries
would have totaled approximately $10.7 billion, $6.4 billion of which would have
ranked senior to the notes. The lenders under all of these credit facilities and
the holders of the other debt instruments will have the right to be paid before
Charter Holdings from any of our subsidiaries' assets. In the event of
bankruptcy, liquidation or dissolution of a subsidiary, following payment by
such subsidiary of its liabilities, such subsidiary may not have sufficient
assets remaining to make payments to Charter Holdings as a shareholder or
otherwise. This will adversely affect our ability to make payments to you as a
holder of the notes.
WE HAVE GROWN RAPIDLY AND HAVE A LIMITED HISTORY OF OPERATING OUR CURRENT
SYSTEMS. THIS MAKES IT DIFFICULT FOR YOU TO COMPLETELY EVALUATE OUR PERFORMANCE.
We commenced active operations in 1994 and have grown rapidly since then
through acquisitions of cable systems. As of September 30, 1999, after giving
effect to acquisitions completed since that date, the recent transfer to us of
the Fanch, Falcon and Avalon cable systems and the Bresnan acquisition and
transfer to us, our systems served approximately 393% more customers than were
served as of December 31, 1998. As a result, historical financial information
about us may not be indicative of the future or of results that we can achieve
with the cable systems which will be under our control. Our recent growth in
revenue over our short operating history is not necessarily indicative of future