Time Warner Cable 2010 Annual Report Download - page 103

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that was recognized as expense due to the reduction of commitments under such facility as a result of the Company’s
public debt issuances in June 2008 and November 2008.
Maturities
Annual maturities of debt total $0 in 2011, $2.101 billion in 2012, $1.501 billion in 2013, $1.750 billion in 2014,
$500 million in 2015 and $17.151 billion thereafter.
Interest Rate Risk
The Company is exposed to the market risk of adverse changes in interest rates. To manage the volatility relating to
these exposures, the Company’s policy is to maintain a mix of fixed-rate and variable-rate debt by entering into various
interest rate derivative transactions as described in Note 11. Using interest rate swaps, the Company agrees to exchange, at
specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon
notional principal amount.
The following table summarizes the terms of the Company’s existing fixed to variable interest rate swaps as of
December 31, 2010 and 2009:
2010 2009
Maturities.......................................................... 2012-2017 2012-2015
Notional amount (in millions) ........................................... $ 6,250 $ 5,250
Average pay rate (variable based on LIBOR plus variable margins) ............... 4.33% 4.03%
Average receive rate (fixed) ............................................ 6.47% 6.24%
Estimated fair value of asset (liability), net (in millions) ....................... $ 176 $ (12)
The notional amounts of interest rate instruments, as presented in the above table, are used to measure interest to be
paid or received and do not represent the amount of exposure to credit loss. Interest rate swaps represent an integral part of
the Company’s interest rate risk management program and resulted in a decrease in interest expense, net, of $117 million
in 2010 and $30 million in 2009.
10. MANDATORILY REDEEMABLE PREFERRED EQUITY MEMBERSHIP UNITS
In connection with the financing of the acquisition of substantially all of the cable assets of Adelphia
Communications Corporation in 2006, TW NY Cable LLC (“TW NY Cable”), a subsidiary of TWC, 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 the respective holders’ 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
91
TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)