Time Warner Cable 2007 Annual Report Download - page 27

owned 4.7% of the residual equity interests in TWE and (iii) 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 the 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 Holding, a wholly owned subsidiary of TWC, in exchange for a 12.43% non-voting common stock economic
interest in TW NY Holding 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, 2007, 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—
Outstanding Debt and Mandatorily Redeemable Preferred Equity and Available Financial Capacity.”
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.
TWE-A/N Partnership Agreement
The following description summarizes certain provisions of the partnership agreement relating to 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 NY are together, the “TW Partners”) and 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
December 31, 2002 (which amount is not included in TWE-A/N’s 4.8 million consolidated subscribers, as of
December 31, 2007) 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 interests and associated liabilities in the remaining TWE-A/N cable systems. Also, in connection with
the restructuring, TWC effectively acquired A/N’s interest in Road Runner. TWE-A/N’s financial results, other than
the results of the A/N Systems, are consolidated with TWC’s. Road Runner continues to provide high-speed data
services to the A/N Subsidiary for a fee under a contract that is terminable by A/N upon six months notice.
Management and Operations of TWE-A/N. Subject to certain limited exceptions, a subsidiary of TWE is the
managing partner, with exclusive management rights of TWE-A/N, other than with respect to the A/N Systems.
Also, subject to certain limited exceptions, A/N has authority for the supervision of the day-to-day operations of the
A/N Subsidiary and the A/N Systems. In connection with the 2002 restructuring, TWE entered into a services
agreement with A/N and the A/N Subsidiary under which TWE agreed to exercise various management functions,
including oversight of programming and various engineering-related matters. TWE and A/N also agreed to
periodically discuss cooperation with respect to new product development.
Restrictions on Transfer—TW Partners. Each TW Partner is generally permitted to directly or indirectly
dispose of its entire partnership interest at any time to a wholly owned affiliate of TWE (in the case of transfers by
TWE-A/N Holdco, L.P. (“TWE-A/N Holdco”)) or to TWE, Time Warner or a wholly owned affiliate of TWE or
Time Warner (in the case of transfers by TWC). In addition, the TW Partners are also permitted to transfer their
partnership interests through a pledge to secure a loan, or a liquidation of TWE in which Time Warner, or its
affiliates, receives a majority of the interests of TWE-A/N held by the TW Partners. TWE-A/N Holdco is allowed to
issue additional partnership interests in TWE-A/N Holdco so long as Time Warner continues to own, directly or
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