DESCRIPTION OF CERTAIN INDEBTEDNESS
The following description is qualified in its entirety by reference to the
credit facilities and related documents governing such debt.
CHARTER OPERATING CREDIT FACILITIES
On March 18, 1999, all of our then-existing senior debt, 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 Chase
Securities, Inc., NationsBank Montgomery Securities LLC and TD Securities (USA)
Inc. 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 and 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, of up to $500 million
which is conditioned upon receipt of additional new commitments from lenders. If
the incremental term facility becomes available, up to 50% of the borrowings
under it may be repaid on terms substantially similar to that of the Tranche A
term loan and the remaining portion on terms substantially similar to the
Tranche B term loan. The credit facilities also contain provisions requiring
mandatory loan prepayments under certain circumstances, such as when significant
amounts of assets are sold and the proceeds are not promptly reinvested in
assets useful in the business.
Interest rate margins 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 debt of Charter Operating and its subsidiaries, exclusive
of the outstanding notes and other debt for money borrowed, of Charter Holdings.