Virgin Media 2010 Annual Report Download - page 37

• foregoing business opportunities, including the introduction of new products and services, acquisitions
and joint ventures.
We cannot be sure that any of, or a combination of, the above actions would be sufficient to fund our debt
service obligations, particularly in times of turbulent capital markets.
The covenants under our debt agreements place certain limitations on our ability to finance future operations
and how we manage our business.
The agreements that govern our indebtedness contain financial maintenance tests and restrictive covenants
that restrict our ability to incur additional debt and 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:
• 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.
We are also required to, among other things, comply with certain financial ratios.
Although these limitations are subject to significant exceptions and qualifications, if we breach any of these
covenants, or are unable to comply with the required financial ratios, we may be in default under our debt
instruments. A significant portion of our indebtedness may then become immediately due and payable, and we
may not have sufficient assets to repay amounts due thereunder.
These restrictions could also 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 applicable
under our current indebtedness.
We are a holding company dependent upon cash flow from subsidiaries to meet our obligations.
Virgin Media Inc. and a number of its subsidiaries are holding companies with no independent operations or
significant assets other than investments in their 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 indebtedness limit the payment of dividends, loan
repayments and other distributions to or from these companies under many circumstances. Various agreements
governing our debt 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.
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