DESCRIPTION OF THE CREDIT FACILITIES
On March 18, 1999, all of our then-existing senior indebtedness, consisting
of seven separate credit facilities, was refinanced with proceeds of the sale of
the original notes and proceeds of our initial senior secured credit facilities.
The borrower under our initial senior secured credit facilities is Charter
Operating. The initial senior secured credit facilities were arranged by The
Chase Manhattan Bank, NationsBank, N.A., Toronto Dominion (Texas), Inc., Fleet
Bank, N.A. and Credit Lyonnais New York Branch. The initial senior secured
credit facilities provided for borrowings of up to $2.75 billion.
The initial senior secured credit facilities were increased on April 30,
1999 by $1.35 billion of additional senior secured credit facilities.
Obligations under the credit facilities are guaranteed by Charter Operating's
parent, Charter Holdings, and by Charter Operatings' subsidiaries. The
obligations under the credit facilities are secured by pledges by Charter
Operating of inter-company obligations and the ownership interests of Charter
Operating in its subsidiaries, but are not secured by the other assets of
Charter Operating or its subsidiaries. The guarantees are secured by pledges of
inter-company obligations and the ownership interests of Charter Holdings in
Charter Operating, but are not secured by the other assets of Charter Holdings
or Charter Operating.
The initial senior secured credit facilities of $4.1 billion consist of:
- an eight and one-half year reducing revolving loan in the amount of $1.25
- an eight and one-half year Tranche A term loan in the amount of $1.0
- a nine-year Tranche B term loan in the amount of $1.85 billion.
The credit facilities provide for the amortization of the principal amount
of the Tranche A term loan facility and the reduction of the revolving loan
facility beginning on June 30, 2002 with respect to the Tranche A term loan and
on March 31, 2004 with respect to the revolving credit facility, with a final
maturity date of September 18, 2007. The amortization of the principal amount of
the Tranche B term loan facility is substantially "back-ended," with more than
ninety percent of the principal balance due in the year of maturity. The credit
facilities also provide for an incremental term facility, which is conditioned
upon receipt of additional new commitments from lenders. If the incremental term
facility becomes available, 50% of the borrowings under it will be repaid on
terms substantially similar to that of the Tranche A term loan and 50% on terms
substantially similar to the Tranche B term loan. After an initial period in
which interest rate margins will be fixed, interest rates for the credit
facilities will depend upon performance measured by a "leverage ratio," or, the
ratio of indebtedness to annualized operating cash flow. Annualized operating
cash flow is defined as the immediately preceding quarter's operating cash flow,
before management fees, multiplied by four. This leverage ratio is based on the
indebtedness of Charter Operating and its subsidiaries, exclusive of the
outstanding notes and other indebtedness for money borrowed, including
guarantees by Charter Operating and its subsidiaries by Charter Holdings.
The credit facilities provide Charter Operating with two interest rate
options, to which a margin is added: a base rate, generally, the "prime rate" of
interest option and an interest rate option based on the London InterBank
Offered Rate. The credit facilities contain representations and warranties,
affirmative and negative covenants, information requirements, events of default
and financial covenants. The financial covenants, which are generally tested on
a quarterly basis, measure performance against standards set for leverage, debt
service coverage, and operating cash flow coverage of cash interest expense.