Virgin Media 2008 Annual Report Download - page 37

to digital technology will increase spectrum efficiency, thereby releasing capacity for new services, our
current capacity limitations may affect our ability to carry new channels as they are developed. As such,
our digital television offering may not be as competitive, which could result in an increase in customer
churn and a decrease in revenue.
Risks Relating to Our Financial Indebtedness and Structure
We continue to face amortization pressures under our senior credit facility notwithstanding the recent
amendments to our facility agreement, and we may not be able to refinance our debt obligations or may be
able to refinance only on terms that will increase our cost of borrowing.
Significant principal payments under our senior credit facility are due in 2010 and 2011. Under the
recent amendment to our senior credit facility, the substantial portion of our scheduled repayments due
in 2010 and 2011 will be deferred to 2012 if we make certain prepayments totaling £187 million no
later than August 10, 2009 (assuming we exercise an extension option at a cost of £1.5 million). We
anticipate using cash flow from operations and, if required, amounts undrawn on our revolving credit
facility to satisfy the prepayment condition. If we were unable to meet the prepayment condition, then
we would need to secure additional funding such as raising additional debt or equity, refinancing our
existing facility, selling assets or using other means to service our amortization obligations. If we satisfy
the prepayment condition, amortization payments of £204.3 million and £288.4 million will remain in
2010 and 2011, respectively. We expect to be able to address these payments through cash flow from
operations and, if required, amounts then undrawn on our revolving credit facility. However, if we were
unable to do so, then we would need to secure additional funding. We may not be able to obtain
financing or sell assets, at all or on favorable terms, or we may be contractually prevented by the terms
of our senior notes or our senior credit facility from incurring additional indebtedness or selling assets.
Assuming the prepayment condition is satisfied, amortization payments of £3,209.7 million will be
due in 2012. Since we do not expect to generate sufficient cash flow from operations to make the 2012
payments, we expect to address them in advance thereof through a comprehensive refinancing of our
senior debt. Our ability to implement such a refinancing successfully is significantly dependent on
material improvements in the debt markets. Even if the debt markets improve, the size of the amounts
outstanding under our senior credit facility may be too large to be refinanced with senior debt and we
may need to raise additional capital by doing one or more of the following:
• raising additional debt other than senior debt, such as high yield debt, on terms that may
increase our cost of borrowing or result in more onerous terms;
• selling or disposing of some of our assets, possibly on unfavorable terms; or
• issuing equity or equity-related instruments that will dilute the equity ownership interest of
existing stockholders.
We cannot be sure that any of, or any combination of, the above actions would be available or
sufficient to fund our debt obligations or that we will be able to refinance our debt obligations on
favorable terms.
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 £6.3 billion as of December 31, 2008. 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;
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