Time Warner Cable 2009 Annual Report Download - page 87

(now known as AOL Inc.) and Time Warner Inc. (now known as Historic TW Inc.). The fair value adjustment is amortized over the term
of the related debt instrument as a reduction to interest expense. TWE’s obligations under the TWE Debt Securities are guaranteed by
TWC and TW NY (the “TWE Debt Guarantors”). TWE has no obligation to file reports with the SEC under the Exchange Act.
The TWE Debt Securities were issued pursuant to an indenture, dated as of April 30, 1992, as it has been and may be amended from
time to time (the “TWE Indenture”) by and among TWE, the TWE Debt Guarantors and The Bank of New York Mellon, as trustee. The
TWE Indenture contains customary covenants relating to restrictions on the ability of TWE or any material subsidiary to create liens and
on the ability of TWE and the TWE Debt Guarantors to consolidate, merge or convey or transfer substantially all of their assets. The TWE
Indenture also contains customary events of default. The TWE Debt Securities are unsecured senior obligations of TWE and rank equally
with its other unsecured and unsubordinated obligations. Interest on each series of TWE Debt Securities is payable semi-annually in
arrears. The guarantees of the TWE Debt Securities are unsecured senior obligations of the TWE Debt Guarantors and rank equally in
right of payment with all other unsecured and unsubordinated obligations of the TWE Debt Guarantors. The TWE Debt Securities are not
redeemable.
TW NY Cable Preferred Membership Units
In connection with the financing of the Adelphia Acquisition, TW NY Cable issued $300 million of its Series A Preferred
Membership Units (the “TW NY Cable Preferred Membership Units”) to a limited number of third parties. The TW NY Cable Preferred
Membership Units pay cash dividends at an annual rate equal to 8.210% of the sum of the liquidation preference thereof and any accrued
but unpaid dividends thereon, on a quarterly basis. The TW NY Cable Preferred Membership Units are subject to mandatory redemption
by TW NY Cable on August 1, 2013 and are not redeemable by TW NY Cable at any time prior to that date. The redemption price of the
TW NY Cable Preferred Membership Units is equal to their liquidation preference plus any accrued and unpaid dividends through the
redemption date. Except under limited circumstances, holders of TW NY Cable Preferred Membership Units have no voting rights.
The terms of the TW NY Cable Preferred Membership Units require that holders owning a majority of the TW NY Cable Preferred
Membership Units must approve any agreement for a material sale or transfer by TW NY Cable and its subsidiaries of assets at any time
during which TW NY Cable and its subsidiaries maintain, collectively, cable systems serving fewer than 500,000 cable subscribers, or
that would (after giving effect to such asset sale) cause TW NY Cable to maintain, directly or indirectly, fewer than 500,000 cable
subscribers, unless the net proceeds of the asset sale are applied to fund the redemption of the TW NY Cable Preferred Membership Units
and the sale occurs on or immediately prior to the redemption date. Additionally, for so long as the TW NY Cable Preferred Membership
Units remain outstanding, TW NY Cable may not merge or consolidate with another company, or convert from a limited liability
company to a corporation, partnership or other entity, unless (i) such merger or consolidation is permitted by the asset sale covenant
described above, (ii) if TW NY Cable is not the surviving entity or is no longer a limited liability company, the then holders of the TW NY
Cable Preferred Membership Units have the right to receive from the surviving entity securities with terms at least as favorable as the TW
NY Cable Preferred Membership Units and (iii) if TW NY Cable is the surviving entity, the tax characterization of the TW NY Cable
Preferred Membership Units would not be affected by the merger or consolidation. Any securities received from a surviving entity as a
result of a merger or consolidation or the conversion into a corporation, partnership or other entity must rank senior to any other securities
of the surviving entity with respect to dividends and distributions or rights upon a liquidation.
Debt Issuance Costs
For the year ended December 31, 2009, the Company capitalized debt issuance costs of $34 million in connection with the issuance
of the 2009 Debt Securities. For the year ended December 31, 2008, the Company capitalized debt issuance costs of $97 million in
connection with the 2008 Bridge Facility and the issuance of the 2008 Debt Securities. For the year ended December 31, 2007, the
Company capitalized debt issuance costs of $29 million in connection with the issuance of the 2007 Debt Securities. These capitalized
costs are amortized over the term of the related debt instrument and are included as a component of interest expense, net, in the
consolidated statement of operations. For the years ended December 31, 2009 and 2008, the Company recognized as expense
Separation-related debt issuance costs of $13 million and $45 million, respectively, which are included as a component of interest
expense, net, in the consolidated statement of operations. The Separation-related debt issuance costs recognized as expense in 2009
primarily relate to the portion of the upfront loan fees for the 2008 Bridge Facility that was expensed due to the repayment of all
borrowings outstanding under, and the resulting termination of, such facility as a result of the Company’s public debt issuance in March
2009. The Separation-related debt issuance costs recognized as expense in 2008 primarily relate to the reduction of the commitments
under the 2008 Bridge Facility as a result of the Company’s public debt issuance in June 2008.
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TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)