8-KMaterial AgreementsFinancial EventsOther Events+1

CHARTER COMMUNICATIONS, INC. /MO/ 8-K Report, Material Agreement (Aug 22, 2012)

Filed August 22, 2012For Securities:CHTR

Summary

Charter Communications, Inc. (CHTR) announced on August 22, 2012, the issuance of $1.25 billion aggregate principal amount of 5.250% Senior Notes due 2022. These notes are issued by CCO Holdings, LLC and CCO Holdings Capital Corp., with Charter Communications, Inc. providing a full and unconditional senior unsecured guarantee. The offering, made under a shelf registration statement, resulted in net proceeds of approximately $1.22 billion after underwriting discounts and commissions. The primary use of these proceeds is to fund general corporate purposes, including repaying amounts outstanding under the company's revolving credit facility, covering offering-related fees and expenses, and importantly, to redeem the higher-interest 13.5% senior notes due 2016 issued by CCH II, LLC and CCH II Capital Corp. by November 30, 2012. This move indicates a strategic effort to refinance debt at a lower interest rate, potentially improving the company's future interest expense and financial flexibility.

Key Highlights

  • 1Charter Communications (CHTR) issued $1.25 billion of 5.250% Senior Notes due 2022 on August 22, 2012.
  • 2CCO Holdings, LLC and CCO Holdings Capital Corp. are the primary issuers, with CHTR providing a senior unsecured guarantee.
  • 3Net proceeds from the issuance were approximately $1.22 billion.
  • 4Proceeds will be used for general corporate purposes, including repaying the revolving credit facility.
  • 5A significant use of proceeds is the redemption of CCH II, LLC and CCH II Capital Corp's 13.5% senior notes due 2016, indicating a debt refinancing strategy.
  • 6The Indenture governing the notes includes covenants that limit the Issuers' ability to incur additional debt, pay dividends, make investments, create liens, and restrict subsidiary payments.
  • 7A 'Change of Control' event would trigger an offer to repurchase the notes at 101% of the principal amount.

Frequently Asked Questions

The primary purposes are to refinance existing, higher-interest debt (specifically the 13.5% senior notes due 2016), repay amounts outstanding under Charter's revolving credit facility, and cover general corporate purposes and offering expenses. The refinancing of higher-cost debt is a key strategic objective.

Redeeming the 13.5% senior notes due 2016 with proceeds from the new 5.250% senior notes due 2022 will significantly reduce Charter's annual interest expense. This debt refinancing is expected to improve the company's profitability and cash flow by lowering its cost of capital.

The Indenture places several restrictions on the Issuers and the Company, including limitations on incurring additional debt, paying dividends or making restricted payments, making certain investments, creating liens, restricting subsidiary payments, selling assets, merging, and engaging in affiliate transactions. These covenants are designed to protect the noteholders.

In the event of a 'Change of Control,' as defined in the Supplemental Indenture, the Issuers are obligated to make an offer to repurchase the Notes from the holders at a price of 101% of the principal amount, plus accrued and unpaid interest.