Time Warner Cable 2006 Annual Report Download - page 34

covenant actually made by the party under the Exchange Agreement in relation to those Adelphia assets or
liabilities.
Operating Partnerships and Joint Ventures
Time Warner Entertainment Company, L.P.
TWE is a Delaware limited partnership that was formed in 1992. At the time of the restructuring of TWE,
which was completed on March 31, 2003, (the “TWE Restructuring”), subsidiaries of Time Warner owned general
and limited partnership interests in TWE consisting of 72.36% of the pro-rata priority capital and residual equity
capital and 100% of the junior priority capital, and Comcast Trust I owned limited partnership interests in TWE
consisting of 27.64% of the pro rata priority capital and residual equity capital. Prior to the TWE Restructuring,
TWE’s business consisted of interests in cable systems, cable networks and filmed entertainment.
Through a series of steps executed in connection with the TWE Restructuring, TWE transferred its non-cable
businesses, including its filmed entertainment and cable network businesses, along with associated liabilities, to
Warner Communications Inc. (“WCI”), a wholly owned subsidiary of Time Warner, and the ownership structure of
TWE was reorganized so that (i) TWC owned 94.3% of the residual equity interests in TWE, (ii) Comcast Trust I
owned 4.7% of the residual equity interests in TWE and (iii) American Television and Communications Corpo-
ration (“ATC”), a wholly owned subsidiary of Time Warner, owned 1.0% of the residual equity interests in TWE and
$2.4 billion in mandatorily redeemable preferred equity issued by TWE. In addition, following the TWE
Restructuring, Time Warner indirectly held shares of TWC Class A common stock and Class B common stock
representing, in the aggregate, 89.3% of TWC’s voting power and 82.1% of TWC’s outstanding equity.
On July 28, 2006, the partnership interests and preferred equity originally held by ATC, were contributed to
TW NY Cable Holding Inc. (“TW NY Holding”), a wholly owned subsidiary of TWC, in exchange for a 12.4% non-
voting common stock interest in TW NY Holding (the “ATC Contribution”) and upon the closing of the TWE
Redemption, Comcast Trust I’s ownership interest in TWE was redeemed. As a result, Time Warner has no direct
interest in TWE and Comcast no longer has any interest in TWE. As of December 31, 2006, TWE had $3.2 billion in
principal amount of outstanding debt securities with maturities ranging from 2008 to 2033 and fixed interest rates
ranging from 7.25% to 10.15%. See “Management’s Discussion and Analysis of Results of Operations and
Financial Condition — Financial Condition and Liquidity — TWE Notes.”
The TWE partnership agreement requires that transactions between TWC and its subsidiaries, on the one hand,
and TWE and its subsidiaries on the other hand, be conducted on an arm’s-length basis, with management,
corporate or similar services being provided by TWC on a “no mark-up” basis with fair allocations of administrative
costs and general overhead.
Description of Certain Provisions of the TWE-A/N Partnership Agreement
The following description summarizes certain provisions of the partnership agreement relating to the Time
Warner Entertainment-Advance/Newhouse Partnership (“TWE-A/N”). Such description does not purport to be
complete and is subject to, and is qualified in its entirety by reference to, the provisions of the TWE-A/N partnership
agreement.
Partners of TWE-A/N. The general partnership interests in TWE-A/N are held by TW NY and an indirect
subsidiary of TWE (such TWE subsidiary and TW NYare together, the “TW Partners”) and the Advance/Newhouse
Partnership (“A/N”), a partnership owned by wholly owned subsidiaries of Advance Publications Inc. and
Newhouse Broadcasting Corporation. The TW Partners also hold preferred partnership interests.
2002 Restructuring of TWE-A/N. The TWE-A/N cable television joint venture was formed by TWE and A/N
in December 1995. A restructuring of the partnership was completed during 2002. As a result of this restructuring,
cable systems and their related assets and liabilities serving approximately 2.1 million subscribers as of Decem-
ber 31, 2002 (which amount is not included in TWE-A/N’s 4.0 million consolidated subscribers, as of December 31,
2006) located primarily in Florida (the “A/N Systems”), were transferred to a subsidiary of TWE-A/N (the “A/N
Subsidiary”). As part of the restructuring, effective August 1, 2002, A/N’s interest in TWE-A/N was converted into
an interest that tracks the economic performance of the A/N Systems, while the TW Partners retain the economic
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