Virgin Media 2010 Annual Report Download - page 10

Launch of TiVo
In December 2010, we launched TiVo set-top boxes (with associated software, including middleware),
following a strategic partnership with TiVo Inc., or TiVo, in 2009 to develop a next generation set-top box which
provides converged television and broadband internet capabilities. Under the agreement with TiVo, TiVo will
become the exclusive provider of user interface software for our next generation set-top boxes and we will
become the exclusive distributor of TiVo services and technology in the U.K. This is a “next generation”
entertainment set-top box which brings together television, on-demand and web services through a single set-top
box and unique content discovery and personalization tools. The Virgin Media TV powered by TiVo service is
being rolled out to customers during 2011.
Financing
On January 19, 2010, we issued approximately £1.5 billion equivalent aggregate principal amount of senior
secured notes. The notes were issued by our wholly owned subsidiary Virgin Media Secured Finance PLC in two
tranches: $1.0 billion of 6.5% senior secured notes due 2018 and £875 million of 7.0% senior secured notes due
2018. The net proceeds from the issuance of these senior secured notes were used to prepay a portion of the
outstanding loans under our old senior credit facility. The senior secured notes rank pari passu with our senior
credit facility and, subject to certain exceptions, share in the same guarantees and security as granted in favor of
our senior credit facility.
On March 16, 2010, we entered into a senior credit facility with lenders under which the lenders agreed to
make available to certain subsidiaries of the Company a term loan A facility, or Tranche A, and a revolving
credit facility, or the RCF. On April 12, 2010, a term loan B facility, or Tranche B, was added to the senior credit
facility by way of an accession deed between Virgin Media Investment Holdings Limited and Deutsche Bank
AG, London Branch. Tranche B has been syndicated to a group of lenders. On April 19, 2010, we drew down an
aggregate principal amount of £1,675 million under the senior credit facility and applied the proceeds towards
the repayment in full of all amounts outstanding under our old senior credit facility dated March 3, 2006 (as
amended and restated from time to time) as at the draw down date. On February 15, 2011, we further amended
our senior credit facility to increase operational flexibility.
For more information about our Senior Secured Notes and Senior Facilities Agreement, see “Management’s
Discussion and Analysis of Results of Operations and Financial Condition—Liquidity and Capital Resources—
Senior Secured Notes.”
Capital Structure Optimization
On July 28, 2010, we announced our intention to undertake a range of capital structure optimization actions.
This capital structure optimization program is expected to include the application of, in aggregate, up to
£700 million, in part towards repurchases of up to £375 million of our common stock until August 2011 and in
part towards transactions relating to our debt and convertible debt, including related derivative transactions and
the conversion hedges described below. On the same date, we launched a $194 million (or £122.5 million)
accelerated stock repurchase program as part of our capital structure optimization plan. This accelerated stock
repurchase program was completed on August 27, 2010.
On October 27, 2010, we executed conversion hedges with several hedge counterparties relating to our $1.0
billion aggregate principal amount of 6.50% convertible senior notes due 2016, issued pursuant to an indenture
dated as of April 16, 2008. These transactions relate to 90% of the aggregate principal amount of the convertible
senior notes and are intended to offset a portion of the dilutive effects that would potentially be associated with
conversion of the convertible senior notes at maturity, by raising the stock price at which we could incur
economic dilution from $19.22 per share, the initial conversion price of the convertible senior notes, to $35.00
per share.
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