8-KMaterial AgreementsFinancial EventsOther Events+1

CHARTER COMMUNICATIONS, INC. /MO/ 8-K Report, Material Agreement (Sep 19, 2006)

Filed September 19, 2006For Securities:CHTR

Summary

This Form 8-K filing from Charter Communications, Inc. (CHTR) on September 19, 2006, details the closing of significant debt exchange offers that occurred on September 14, 2006. These transactions aimed to restructure Charter's debt by issuing new notes and stock in exchange for existing convertible and other senior debt. The primary goal appears to be extending debt maturities and potentially improving the company's capital structure. Specifically, Charter completed an offer where its subsidiaries issued cash, Class A Common Stock, and new 10.25% Senior Notes due 2010 in exchange for $450.0 million of its 5.875% Convertible Senior Notes due 2009. Additionally, another set of offers closed where subsidiaries issued new 10.25% Senior Notes due 2013 and 11.00% Senior Secured Notes due 2015 in exchange for $797.4 million of Charter Holdings' outstanding debt. These exchanges represent a material refinancing effort by the company.

Key Highlights

  • 1Charter Communications closed significant debt exchange offers on September 14, 2006.
  • 2Subsidiaries issued cash, stock, and new debt (10.25% Senior Notes due 2010) to retire $450 million of 5.875% Convertible Senior Notes due 2009.
  • 3Further exchanges involved subsidiaries issuing $250 million of 10.25% Senior Notes due 2013 and $462 million of 11.00% Senior Secured Notes due 2015.
  • 4These new notes were exchanged for approximately $797.4 million of Charter Communications Holdings, LLC debt.
  • 5The new debt instruments carry higher interest rates (10.25% and 11.00%) compared to some of the debt being retired.
  • 6Covenants in the indentures for the new notes restrict certain activities of CCH II and CCH I, such as incurring additional indebtedness or making investments, often tied to leverage ratios.
  • 7Charter Communications entered into registration rights agreements to facilitate the exchange of these newly issued notes for freely transferable registered notes.

Frequently Asked Questions

The primary purpose of these debt exchanges was to restructure Charter Communications' debt. This involved retiring existing convertible and other senior debt with a combination of cash, newly issued common stock, and new senior notes, effectively extending debt maturities and modifying the company's debt profile.

Charter's subsidiaries issued several new debt instruments: 10.25% Senior Notes due 2010, 10.25% Senior Notes due 2013, and 11.00% Senior Secured Notes due 2015. The 11.00% notes are secured by a pledge of equity interests in a subsidiary and related assets.

In one exchange, $450.0 million of Charter's 5.875% Convertible Senior Notes due 2009 were exchanged for cash, Charter Class A Common Stock, and $146.2 million aggregate principal amount of 10.25% Senior Notes due 2010. In a separate private exchange, $797.4 million principal amount of Charter Holdings debt was exchanged for $250.0 million of new 10.25% Senior Notes due 2013 and $462.0 million of 11.00% Senior Secured Notes due 2015.

The indentures for the newly issued notes contain covenants that restrict Charter's subsidiaries (CCH II and CCH I) from incurring additional indebtedness, creating liens, making restricted payments, or selling assets, among other limitations. These covenants are often tied to maintaining specific leverage ratios (e.g., 5.5 to 1.0 for CCH II and 7.5 to 1.0 for CCH I), providing some flexibility while aiming to protect debt holders.