Time Warner Cable 2011 Annual Report Download - page 100

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TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 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.
11. DERIVATIVE FINANCIAL INSTRUMENTS
The fair values of the assets and liabilities associated with the Company’s derivative financial instruments recorded in
the consolidated balance sheet as of December 31, 2011 and 2010 were as follows (in millions):
Assets Liabilities
December 31, December 31,
2011 2010 2011 2010
Interest rate swaps(a) ........................................ $ 297 $ 176 $—$—
Cross-currency swaps(b) ..................................... — — 67 —
Equity award reimbursement obligation(b) ....................... — — 22 20
Other ................................................... — 1 — —
Total .................................................... $ 297 $ 177 $ 89 $ 20
(a) The fair value of the asset associated with interest rate swaps is recorded in other current assets and other assets in the consolidated balance sheet based
on the maturity date of the hedged debt. Of the total asset recorded as of December 31, 2011, $14 million is recorded in other current assets in the
consolidated balance sheet.
(b) The fair value of the liabilities associated with cross-currency swaps and equity award reimbursement obligation is recorded in other liabilities and other
current liabilities, respectively, in the consolidated balance sheet.
Fair Value Hedges
The Company uses interest rate swaps to manage interest rate risk by effectively converting fixed-rate debt into
variable-rate debt. Under such contracts, the Company is entitled to receive semi-annual interest payments at fixed rates and
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