Virgin Media 2006 Annual Report Download - page 42

The inability to transfer cash among entities within their respective consolidated groups may mean that even though they may
have sufficient resources to meet their obligations, they may not be permitted to make the necessary transfers from one entity in their
restricted group to another entity in their restricted group in order to make payments to the entity owing the obligations.
We are subject to currency and interest rate risks.
We are subject to currency exchange rate risks because substantially all of our revenues and operating expenses are paid in U.K.
pounds sterling, but we pay interest and principal obligations with respect to a portion of our indebtedness in U.S. dollars and euros.
To the extent that the pound declines in value against the U.S. dollar and the euro, the effective cost of servicing our U.S. dollar and
euro−denominated debt will be higher. Changes in the exchange rate result in foreign currency gains or losses.
We are also subject to interest rate risks. Before taking into account the impact of current hedging arrangements, as of
December 31, 2006, we would have had interest determined on a variable basis on £5,025 million, or 82%, of our long term debt. An
increase in interest rates of 1% would increase unhedged gross interest expense by £50.3 million per year.
To manage these foreign exchange and interest rate risks, we have entered into a number of derivative instruments, including
interest rate swaps, cross−currency swaps and foreign currency forward rate contracts. We are required by our lenders under our
senior credit facility to fix the interest rate (whether through coupon or through derivatives) on not less than two thirds of the total debt
represented by our senior credit facility and high yield notes, for a period of not less than three years from March 3, 2006.
Accordingly, after giving effect to these hedges, an increase in interest rates of 1% would increase our gross interest expense by £18.2
million per year.
We may not have sufficient financial resources to repay our debt upon a change of control.
We may, under some circumstances involving a change of control, be obligated to repay our outstanding indebtedness. The
company or any possible acquiror may not have available financial resources necessary to repay that indebtedness in those
circumstances.
If we or any possible acquiror cannot repay our outstanding indebtedness in the event of a change of control of the company (if
such repayment is required), the failure to do so would constitute an event of default under the agreements under which that
indebtedness was incurred and could result in a cross default under other indebtedness that does not have similar provisions.
Risks Relating to Our Common Stock
The market price of our common stock is subject to volatility, as well as to trends in the telecommunications industry in general,
which will continue.
The current market price of our common stock may not be indicative of prices that will prevail in the trading markets in the
future. Stock prices in the telecommunications sector have historically been highly volatile, and the market price of our common stock
could be subject to wide fluctuations in response to numerous factors, many of which will be beyond our control. These factors
include actual or anticipated variations in our operational results and cash flow, our earnings releases and our competitors’ earnings
releases, announcements of technological innovations, changes in financial estimates by securities analysts, trading volume, rumors of
private equity interest in our company, market conditions in the industry and the general state of the securities markets and the market
for telecommunications stocks, changes in capital markets that affect the perceived availability of capital to communications
companies, governmental legislation or regulation, currency and exchange rate fluctuations, as well as general
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Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007