Virgin Media 2006 Annual Report Download - page 41

• our flexibility in reacting to competitive technological and other changes may be limited;
• the substantial degree of leverage could make us more vulnerable in the event of a downturn in general economic conditions or
adverse developments in our business; and
• we may be exposed to risks inherent in interest rate and foreign exchange rate fluctuations.
We have incurred losses in the past and may not be profitable in the future.
We had losses from continuing operations for 2006 of £570.9 million and for 2005 of £420.5 million (both on a pro forma basis).
We cannot be certain that we will achieve or sustain profitability in the future. Failure to achieve profitability could diminish our
ability to sustain operations, meet financial covenants, obtain additional required funds and make required payments on present or
future indebtedness.
The restrictive covenants under our debt agreements may limit our ability to operate our business.
The agreements that govern our indebtedness contain restrictive covenants that limit the discretion of our management over
various business matters. For example, these covenants restrict our ability to:
• incur or guarantee additional indebtedness;
• pay dividends or make other distributions, or redeem or repurchase equity interests or subordinated obligations;
• make investments;
• sell assets, including the capital stock of subsidiaries;
• enter into sale and leaseback transactions and certain vendor financing arrangements;
• create liens;
• enter into agreements that restrict some of our subsidiaries’ ability to pay dividends, transfer assets or make intercompany
loans;
• merge or consolidate or transfer all or substantially all of our assets; and
• enter into transactions with affiliates.
These restrictions could materially adversely affect our ability to finance future operations or capital needs or to engage in other
business activities that may be in our best interests. We may also incur other indebtedness in the future that may contain financial or
other covenants more restrictive than those that will be applicable under our current indebtedness.
We are a holding company dependent upon cash flow from subsidiaries to meet our obligations.
We and a number of our subsidiaries are holding companies with no independent operations or significant assets other than
investments in our subsidiaries. Each of these holding companies depends upon the receipt of sufficient funds from its subsidiaries to
meet its obligations.
The terms of our senior credit facility and other debt securities limit the payment of dividends, loan repayments and other
distributions to or from these companies under many circumstances. Various agreements governing the debt that may be issued by our
subsidiaries from time to time may restrict and, in some cases, may also prohibit the ability of these subsidiaries to move cash within
their restricted group. Applicable tax laws may also subject such payments to further taxation.
Applicable law may also limit the amounts that some of our subsidiaries will be permitted to pay as dividends or distributions on
their equity interests, or even prevent such payments.
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Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007