Virgin Media 2007 Annual Report Download - page 40

Our current leverage is substantial, which may have an adverse effect on our available cash flow, our ability
to obtain additional financing if necessary in the future, our flexibility in reacting to competitive and
technological changes and our operations.
We had consolidated total long-term debt of £6.0 billion as of December 31, 2007. This high
degree of leverage could have important consequences, including the following:
• a substantial portion of the cash flow from operations will have to be dedicated to the payment
of interest and principal on existing indebtedness, thereby reducing the funds available for other
purposes;
• the ability to obtain additional financing in the future for working capital, capital expenditures,
product development, acquisitions or general corporate purposes may be impaired;
• 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 2007 of £463.5 million and for 2006 of £570.9 million
(2006 is on a pro forma basis for the acquisition of Telewest and Virgin Mobile). 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 covenants under our debt agreements limit our ability to operate our business.
The agreements that govern our indebtedness contain financial maintenance tests and restrictive
covenants that limit the discretion of our management over various business matters. For example, the
financial maintenance tests include liquidity, coverage and leverage ratios, and the restrictive covenants
impact 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.
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