Time Warner Cable 2009 Annual Report Download - page 26

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 a trust established for the benefit of Comcast (“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., 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 Corporation (“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 Time Warner NY Cable
LLC (“TW NY Cable”), a wholly owned subsidiary of TWC, in exchange for a 12.43% non-voting common stock economic interest in
TW NY, and Comcast Trust I’s ownership interest in TWE was redeemed. As a result, Time Warner had no direct interest in TWE and
Comcast no longer had any interest in TWE. As a result of the Separation Transactions, Time Warner no longer has an ownership interest
in TWC or TW NY. As of December 31, 2009, TWE had $2.6 billion in principal amount of outstanding debt securities with maturities
ranging from 2012 to 2033 and fixed interest rates ranging from 8.375% 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.”
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 Cable and TWE (the “TW Partners”)
and 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. TWE acquired its interest in TWE-A/N
as the result of a merger of its wholly owned subsidiary, TWE-A/N Holdco, L.P. (which previously held the interest), into TWE on
December 31, 2008.
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
4.7 million consolidated subscribers, as of December 31, 2009) located primarily in Florida (the “A/N Systems”), were transferred to a
wholly owned 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.
Management and operations of TWE-A/N. Subject to certain limited exceptions, 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. TWC receives a fee for providing the A/N Subsidiary with
high-speed data services and the management functions noted above.
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) or to TWE, TWC or a wholly owned
affiliate of TWE or TWC (in the case of transfers by TW NY Cable). 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 TWC, or its affiliates, receives a majority of the
interests of TWE-A/N held by the TW Partners. TWE is allowed to issue additional partnership interests in TWE so long as TWC
continues to own, directly or indirectly, either 35% or 43.75% of the residual equity capital of TWE, depending on when the issuance
occurs.
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