UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2011
or
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No. 000-50886
VIRGIN MEDIA INC.
(Exact name of registrant as specified in its charter)
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
(Additional Registrant)
VIRGIN MEDIA INVESTMENTS LIMITED
(Additional Registrant)
Delaware | 59-3778247 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
909 Third Avenue, Suite 2863 New York, New York |
10022 | |
(Address of principal executive offices) | (Zip Code) |
(212) 906-8440
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | x | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
As of May 2, 2011, there were 317,267,843 shares of the registrants common stock, par value $0.01 per share, issued and outstanding.
The Additional Registrants meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this report with the reduced disclosure format. See Note Concerning the Additional Registrants in this Form 10-Q.
VIRGIN MEDIA INC.
FORM 10-Q
QUARTER ENDED MARCH 31, 2011
In this quarterly report on Form 10-Q, unless we have indicated otherwise, or the context otherwise requires, references to Virgin Media, the Company, we, us, our and similar terms refer to the consolidated business of Virgin Media Inc. and its subsidiaries (including Virgin Media Investment Holdings Limited, or VMIH, Virgin Media Investments Limited, or VMIL, and their respective subsidiaries).
2
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Various statements contained in this document constitute forward-looking statements as that term is defined under the Private Securities Litigation Reform Act of 1995. Words like believe, anticipate, should, intend, plan, will, expects, estimates, projects, positioned, strategy, and similar expressions identify these forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements or industry results to be materially different from those contemplated, projected, forecasted, estimated or budgeted, whether expressed or implied, by these forward-looking statements. These factors, among others, include the following:
| the ability to compete with a range of other communications and content providers; |
| the effect of rapid and significant technological changes on our businesses; |
| the effect of a decline in fixed line telephony usage and revenues; |
| the ability to maintain and upgrade our networks in a cost-effective and timely manner; |
| possible losses of revenues or customers due to systems failures; |
| the ability to control unauthorized access to our network; |
| our reliance on third-party suppliers and contractors to provide necessary hardware, software or operational support; |
| our reliance on our use of the Virgin name and logo and any adverse publicity generated by other users of the Virgin name and logo; |
| the ability to manage customer churn; |
| the ability to provide attractive programming at a reasonable cost; |
| general economic conditions; |
| the ability to implement our restructuring plan successfully and realize the anticipated benefits; |
| currency and interest rate fluctuations; |
| our reliance on third parties to distribute our mobile telephony products; |
| the functionality or market acceptance of new products; |
| tax risks; |
| our reliance on Everything Everywhere to carry our mobile voice and non-voice services; |
| the ability to effectively manage complaints, litigation and adverse publicity; |
| our ability to retain key personnel; |
| changes in laws, regulations or governmental policy; |
| capacity limits on our network; |
| the ability to fund debt service obligations and refinance our debt obligations; |
| the ability to comply with restrictive covenants in our indebtedness agreements; and |
3
| Virgin Medias dependence on cash flow from subsidiaries. |
These and other factors are discussed in more detail under Risk Factors and elsewhere in our annual report on Form 10-K for the year ended December 31, 2010, or the 2010 Annual Report, as filed with the U.S. Securities and Exchange Commission, or SEC, on February 22, 2011. We assume no obligation to update our forward-looking statements to reflect actual results, changes in assumptions or changes in factors affecting these statements.
Note Concerning the Additional Registrants
VMIH is a wholly owned subsidiary of Virgin Media Finance PLC, or Virgin Media Finance, and a wholly owned indirect subsidiary of Virgin Media Inc. VMIH is a guarantor of the unsecured senior notes issued by Virgin Media Finance. VMIH is also a guarantor of the senior secured notes issued by Virgin Media Secured Finance PLC. VMIH carries on the same business as Virgin Media, and is the principal borrower under Virgin Medias senior credit facility.
VMIL is a wholly owned subsidiary of VMIH and a wholly owned indirect subsidiary of Virgin Media Inc. VMIL is also a guarantor of the unsecured senior notes issued by Virgin Media Finance and the senior secured notes issued by Virgin Media Secured Finance PLC. VMIL carries on the same business as Virgin Media.
As the guarantees granted by VMIH and VMIL are not deemed to be unconditional, separate financial statements for these wholly owned indirect subsidiaries of Virgin Media Inc. have been included in this quarterly report pursuant to the rules and regulations of the SEC. Unless otherwise indicated, the discussion contained in this report applies to Virgin Media as well as VMIH and VMIL. Both VMIH and VMIL are incorporated in England and Wales, with their respective registered offices at Media House, Bartley Wood Business Park, Bartley Way, Hook, Hampshire, RG27 9UP. Neither VMIH nor VMIL is an accelerated filer.
Financial Information and Currency of Financial Statements
All of the financial statements included in this quarterly report have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The reporting currency of our consolidated financial statements is U.K. pounds sterling.
4
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except par value)
March 31, 2011 |
December 31, 2010 |
|||||||
(Unaudited) | ||||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
£ | 482.7 | £ | 479.5 | ||||
Restricted cash |
2.2 | 2.2 | ||||||
Accounts receivabletrade, less allowances for doubtful accounts of £7.2 (2011) and £6.4 (2010) |
407.9 | 431.2 | ||||||
Inventory for resale |
21.8 | 26.4 | ||||||
Derivative financial instruments |
1.0 | 0.8 | ||||||
Prepaid expenses and other current assets |
72.8 | 89.0 | ||||||
Total current assets |
988.4 | 1,029.1 | ||||||
Fixed assets, net |
4,714.5 | 4,763.1 | ||||||
Goodwill and other indefinite-lived assets |
2,017.5 | 2,017.5 | ||||||
Intangible assets, net |
84.3 | 118.4 | ||||||
Equity investments |
350.5 | 359.2 | ||||||
Derivative financial instruments |
333.9 | 394.6 | ||||||
Deferred financing costs, net of accumulated amortization of £46.5 (2011) and £23.8 (2010) |
89.3 | 98.6 | ||||||
Other assets |
49.9 | 52.7 | ||||||
Total assets |
£ | 8,628.3 | £ | 8,833.2 | ||||
Liabilities and shareholders equity |
||||||||
Current liabilities |
||||||||
Accounts payable |
£ | 222.8 | £ | 295.9 | ||||
Accrued expenses and other current liabilities |
374.9 | 391.5 | ||||||
Derivative financial instruments |
19.4 | 13.3 | ||||||
Restructuring liabilities |
55.8 | 57.6 | ||||||
VAT and employee taxes payable |
122.5 | 88.6 | ||||||
Interest payable |
118.6 | 126.5 | ||||||
Deferred revenue |
298.3 | 301.7 | ||||||
Current portion of long term debt |
420.7 | 222.1 | ||||||
Total current liabilities |
1,633.0 | 1,497.2 | ||||||
Long term debt, net of current portion |
5,596.2 | 5,798.3 | ||||||
Derivative financial instruments |
63.8 | 62.0 | ||||||
Deferred revenue and other long term liabilities |
205.2 | 207.9 | ||||||
Deferred income taxes |
| 3.2 | ||||||
Total liabilities |
7,498.2 | 7,568.6 | ||||||
Commitments and contingent liabilities |
||||||||
Shareholders equity |
||||||||
Common stock$0.01 par value; authorized 1,000.0 (2011 and 2010) shares; issued and outstanding 317.4 (2011) and 322.0 (2010) shares |
1.8 | 1.8 | ||||||
Additional paid-in capital |
4,288.6 | 4,375.2 | ||||||
Accumulated other comprehensive income |
68.5 | 86.5 | ||||||
Accumulated deficit |
(3,228.8 | ) | (3,198.9 | ) | ||||
Total shareholders equity |
1,130.1 | 1,264.6 | ||||||
Total liabilities and shareholders equity |
£ | 8,628.3 | £ | 8,833.2 | ||||
See accompanying notes.
5
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) (in millions, except per share data)
Three months ended March 31, |
||||||||
2011 | 2010 | |||||||
(Adjusted) | ||||||||
Revenue |
£ | 982.3 | £ | 929.4 | ||||
Costs and expenses |
||||||||
Operating costs (exclusive of depreciation shown separately below) |
411.1 | 376.8 | ||||||
Selling, general and administrative expenses |
195.1 | 203.0 | ||||||
Restructuring and other charges |
2.6 | 0.4 | ||||||
Depreciation |
228.8 | 242.5 | ||||||
Amortization |
34.1 | 37.1 | ||||||
871.7 | 859.8 | |||||||
Operating income |
110.6 | 69.6 | ||||||
Other income (expense) |
||||||||
Interest expense |
(114.6 | ) | (123.3 | ) | ||||
Loss on extinguishment of debt |
(18.1 | ) | (32.9 | ) | ||||
Share of income from equity investments |
8.2 | 7.6 | ||||||
Gain (loss) on derivative instruments |
28.0 | (21.0 | ) | |||||
Foreign currency gains (losses) |
7.9 | (67.4 | ) | |||||
Interest income and other, net |
1.7 | 1.1 | ||||||
Income (loss) from continuing operations before income taxes |
23.7 | (166.3 | ) | |||||
Income tax (expense) benefit |
(19.2 | ) | 3.0 | |||||
Income (loss) from continuing operations |
4.5 | (163.3 | ) | |||||
(Loss) income from discontinued operations, net of tax |
(1.2 | ) | 2.9 | |||||
Net income (loss) |
£ | 3.3 | £ | (160.4 | ) | |||
Basic and diluted income (loss) from continuing operations per common share |
£ | 0.01 | £ | (0.50 | ) | |||
Basic and diluted (loss) income from discontinued operations per common share |
£ | (0.00 | ) | £ | 0.01 | |||
Basic and diluted net income (loss) per common share |
£ | 0.01 | £ | (0.49 | ) | |||
Dividends per share (in U.S. dollars) |
$ | 0.04 | $ | 0.04 | ||||
See accompanying notes.
6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in millions)
Three months ended March 31, |
||||||||
2011 | 2010 | |||||||
(Adjusted) | ||||||||
Operating activities: |
||||||||
Net income (loss) |
£ | 3.3 | £ | (160.4 | ) | |||
Loss (income) from discontinued operations |
1.2 | (2.9 | ) | |||||
Income (loss) from continuing operations |
4.5 | (163.3 | ) | |||||
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
262.9 | 279.5 | ||||||
Non-cash interest |
2.4 | 10.9 | ||||||
Non-cash compensation |
7.0 | 7.3 | ||||||
Loss on extinguishment of debt |
18.1 | 32.8 | ||||||
Income from equity accounted investments, net of dividends received |
(1.7 | ) | (4.1 | ) | ||||
Unrealized (gains) losses on derivative instruments |
(30.1 | ) | 46.5 | |||||
Foreign currency (gains) losses |
(6.7 | ) | 34.2 | |||||
Income taxes |
20.9 | (0.6 | ) | |||||
Other |
(0.1 | ) | 0.4 | |||||
Changes in operating assets and liabilities, net of effect from business disposals: |
(5.6 | ) | (41.4 | ) | ||||
Net cash provided by operating activities |
271.6 | 202.2 | ||||||
Investing activities: |
||||||||
Purchase of fixed and intangible assets |
(163.3 | ) | (181.5 | ) | ||||
Proceeds from sale of fixed assets |
0.7 | 1.2 | ||||||
Principal repayments on loans to equity investments |
8.4 | 1.2 | ||||||
Other |
0.2 | (0.2 | ) | |||||
Net cash used in investing activities |
(154.0 | ) | (179.3 | ) | ||||
Financing activities: |
||||||||
New borrowings, net of financing fees |
937.7 | 1,447.8 | ||||||
Repurchase of common stock |
(120.0 | ) | | |||||
Proceeds from employee stock option exercises |
1.4 | 5.6 | ||||||
Principal payments on long term debt, including redemption premiums, and capital leases |
(915.5 | ) | (1,464.9 | ) | ||||
Dividends paid |
(8.0 | ) | (8.8 | ) | ||||
Net cash used in financing activities |
(104.4 | ) | (20.3 | ) | ||||
Cash flow from discontinued operations: |
||||||||
Net cash used in operating activities |
(6.5 | ) | (15.0 | ) | ||||
Net cash used in discontinued operations |
(6.5 | ) | (15.0 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents |
(3.5 | ) | 2.6 | |||||
Increase (decrease) in cash and cash equivalents |
3.2 | (9.8 | ) | |||||
Cash and cash equivalents, beginning of period |
479.5 | 430.5 | ||||||
Cash and cash equivalents, end of period |
£ | 482.7 | £ | 420.7 | ||||
Supplemental disclosure of cash flow information |
||||||||
Cash paid during the period for interest exclusive of amounts capitalized |
£ | 112.4 | £ | 109.0 |
See accompanying notes.
7
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, for interim financial information and with the rules and regulations of the Securities and Exchange Commission, or SEC. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. For further information, refer to the consolidated financial statements and notes thereto included in Virgin Media Inc.s annual report on Form 10-K for the year ended December 31, 2010, as filed with the SEC on February 22, 2011, or the 2010 Annual Report.
On June 4, 2010, we announced the sale to BSkyB of our television channel business known as Virgin Media TV. Virgin Media TVs operations, which were disposed of during 2010, comprised our former Content segment. We determined that as of June 30, 2010 the planned sale met the requirements for Virgin Media TV to be reflected as discontinued operations in the prior period and, accordingly we adjusted the consolidated statements of operations and cash flows for the three months ended March 31, 2010.
Note 2Recently Adopted Accounting Pronouncements
On January 1, 2011 we adopted new accounting guidance issued by the FASB for revenue arrangements with multiple-elements. We adopted this guidance on a prospective basis applicable for transactions originating or materially modified after the date of adoption. This guidance changed the criteria for separating units of accounting in multiple-element arrangements and the way in which an entity is required to allocate revenue to these units of accounting.
Prior to the adoption of this guidance and with the exception of mobile revenue transactions, bundled revenue arrangements in our consumer and business segments generally did not contain separate units of accounting. Subsequent to the adoption of this guidance, these bundled revenue arrangements generally have the following units of accounting: an up-front installation element and an ongoing service provision element. Both prior and subsequent to the adoption of this guidance, mobile revenue transactions involving bundled equipment and service revenue have separate units of accounting.
Revenue is allocated to each unit of accounting based on a selling price hierarchy. The selling price for a deliverable is based on its vendor-specific objective evidence (VSOE) if available, third party evidence (TPE) if VSOE is not available, or estimated selling price (ESP) if neither VSOE nor TPE is available. Currently, we do not sell installation services or ongoing rental separately on a regular basis and therefore we do not have the evidence to support VSOE for these deliverables. We use evidence of the amounts that third parties charge for similar or identical services, when available, to establish selling price. In some cases, when we are unable to establish VSOE or TPE, we use our best estimate of selling price. Our objective in determining the best estimate of selling price is to establish the price at which we would transact a sale if the deliverable were sold regularly on a stand-alone basis. We consider all reasonably available information including both market data and conditions, as well as entity specific factors. In addition we consider all factors contemplated in negotiating the arrangement with the customer and our own normal pricing practices. These considerations include competitor pricing, customization of the product, profit objectives and cost structures.
Once we have established the selling price of each deliverable, we allocate total arrangement consideration by applying the relative selling price methodology. Prior to the adoption of this guidance, where the fair value of the delivered element could not be determined reliably but the fair value of the undelivered element could be determined reliably, the fair value of the undelivered element was deducted from total consideration and the net amount was allocated to the delivered element based on the residual value method. This methodology is no longer permitted under the new guidance and we now allocate revenue for all multiple-element arrangements based on the relative selling price methodology. We recognize revenue on each deliverable in accordance with our policies for product and service revenue recognition.
8
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 2Recently Adopted Accounting Pronouncements (continued)
The adoption of this guidance is not expected to have a material impact on our consolidated financial statements for the year ended December 31, 2011. This is principally due to the fact that although prior to the adoption of this guidance we were unable to meet the criteria to separate the units of accounting for our residential customer arrangements, the Cable Television Topic of the FASB ASC required us to recognize initial hookup revenues to the extent we had incurred direct selling costs. The impact of the adoption of this guidance may be material in future years if we make material changes to product or service offerings, pricing structures, the components of bundled arrangements or if we enter into material new arrangements in our Business segment.
Note 3Long Term Debt
On February 15, 2011, we amended our senior credit facility to increase operational flexibility including, among other things, changing the required level of total net leverage ratio, increasing financial indebtedness baskets, and eliminating certain restrictions on the use of proceeds of secured indebtedness. This amendment did not have an impact on the amount of debt included on our consolidated balance sheet as of March 31, 2011 but did serve to modify the amortization schedule by extending £192.5 million of our June 30, 2014 scheduled amortization payment to June 30, 2015.
On March 3, 2011, our wholly owned subsidiary, Virgin Media Secured Finance PLC issued $500 million aggregate principal amount of 5.25% senior secured notes due 2021 and £650 million aggregate principal amount of 5.50% senior secured notes due 2021. Interest is payable on January 15 and July 15 each year, beginning on July 15, 2011. The senior secured notes due 2021 rank pari passu with and, subject to certain exceptions, share in the same guarantees and security which have been granted in favor of our senior credit facility and senior secured notes due 2018.
In March 2011, we used the net proceeds from our senior secured notes due 2021 to prepay £532.5 million of the Tranche A outstanding under our senior credit facility, thus eliminating scheduled amortization in 2011 through 2014, and £367.5 million of the Tranche B outstanding under our senior credit facility that were scheduled for payment in 2015, with the remainder being used for general corporate purposes.
If the trading price of our common stock exceeds 120% of the conversion price of the convertible notes for 20 out of the last 30 trading days of a calendar quarter, holders of the convertible notes may elect to convert their convertible notes during the following quarter. This condition was achieved in the three months ended March 31, 2011. If conversions of this nature occur, we may deliver cash, common stock, or a combination of both, at our election, to settle our obligations. We have classified this debt as long-term debt in the condensed consolidated balance sheet as of March 31, 2011 because we determined, in accordance with the Derivatives and Hedging Topic of the FASB ASC, that we have the ability to settle the obligations in equity in all circumstances, except in the case of a fundamental change (as defined in the indenture governing the convertible senior notes). This condition must be fulfilled on 20 of the last 30 trading days of each calendar quarter. If the condition is not met during that time period, the notes will not be convertible in the following quarter.
The carrying amount of the $550 million 9.125% senior notes due 2016 is classified as a current liability in the condensed consolidated balance sheet as of March 31, 2011 due to our intention to call the notes within the next twelve months using cash on hand.
9
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 3Long Term Debt (continued)
Long term debt repayments, excluding capital leases, as of March 31, 2011, were due as follows (in millions):
Period ending March 31: |
||||
2012 |
£ | 344.1 | ||
2013 |
0.3 | |||
2014 |
| |||
2015 |
| |||
2016 |
775.0 | |||
Thereafter |
4,815.5 | |||
Total debt payments |
£ | 5,934.9 | ||
On October 27, 2010, we entered into capped call option transactions, or conversion hedges, with certain counterparties relating to our $1.0 billion 6.50% convertible senior notes due 2016. The conversion hedges are intended to offset a portion of the dilutive effects that could potentially be associated with conversion of the convertible senior notes at maturity and provide us with the option to receive the number of shares of our common stock (or in certain circumstances cash) with a value equal to the excess of (a) the value owed by us (up to the cap price of $35.00 per share) to convertible senior note investors pursuant to the terms of the notes on conversion of up to 90% of the notes over (b) the aggregate face amount of such converted notes upon maturity of the convertible senior notes. The conversion hedges also provide various mechanisms for settlement in our common stock and/or cash in certain circumstances, based primarily on the settlement method elected for the notes. These conversion hedges have an initial strike price of $19.22 per share of our stock, which is the conversion price provided under the terms of our convertible senior notes, and a cap price of $35.00 per share of our stock. We paid £205.4 million in respect of the conversion hedges during 2010. The cost of these transactions was not deductible for U.S. federal income tax purposes, and the proceeds, if any, received upon exercise of the options will not be taxable for U.S. federal income tax purposes.
The conversion hedges do not qualify for equity classification under the authoritative guidance as there are potential circumstances in which cash settlement may be required at the discretion of the counterparties. As such, the fair value of the conversion hedges, which was approximately £197.4 million as of March 31, 2011, has been included as a non-current derivative financial asset in the condensed consolidated balance sheets. Refer to Note 4 for additional discussion of the fair value measurement of the conversion hedges.
Note 4Fair Value Measurements
U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The inputs used to measure fair value are classified into the following hierarchy:
Level 1 |
Unadjusted quoted prices in active markets for identical assets or liabilities | |
Level 2 |
Unadjusted quoted prices in active markets for similar assets or liabilities, or | |
Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or | ||
Inputs other than quoted prices that are observable for the asset or liability | ||
Level 3 |
Unobservable inputs for the asset or liability |
We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
10
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 4Fair Value Measurements (continued)
The table below presents our assets and liabilities measured at fair value as at March 31, 2011, aggregated by the level in the fair value hierarchy within which those measurements fall (in millions):
Balance at March 31, 2011 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets |
||||||||||||||||
Derivative financial instruments, excluding conversion hedges |
£ | | £ | 137.5 | £ | | £ | 137.5 | ||||||||
Conversion hedges |
| | 197.4 | 197.4 | ||||||||||||
Total |
£ | | £ | 137.5 | £ | 197.4 | £ | 334.9 | ||||||||
Liabilities |
||||||||||||||||
Derivative financial instruments |
£ | | £ | 83.2 | £ | | £ | 83.2 | ||||||||
Total |
£ | | £ | 83.2 | £ | | £ | 83.2 | ||||||||
In estimating the fair value of our financial assets and liabilities, we used the following methods and assumptions:
Derivative financial instruments: As a result of our financing activities, we are exposed to market risks from changes in interest and foreign currency exchange rates, which may adversely affect our operating results and financial position. When deemed appropriate, we minimize our risks from interest and foreign currency exchange rate fluctuations through the use of derivative financial instruments. The foreign currency forward rate contracts, interest rate swaps and cross-currency interest rate swaps are valued using internal models based on observable inputs, counterparty valuations, or market transactions in either the listed or over-the-counter markets, adjusted for non-performance risk. As such, these derivative instruments are classified within level 2 in the fair value hierarchy. The fair values of our derivative financial instruments are disclosed in note 5.
11
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 4Fair Value Measurements (continued)
Valuation of conversion hedges: Because the conversion hedges do not qualify for equity classification, the fair values have been included as a non-current derivative financial asset in the consolidated balance sheet. The conversion hedges may only be exercised by us upon maturity of the convertible senior notes. The fair value of these instruments was estimated to be £197.4 million as of March 31, 2011, using the Black-Scholes Merton valuation technique. In accordance with the authoritative guidance, fair value represents an estimate of the exit price that would be received upon disposal of the conversion hedges as of the balance sheet date. The fair values of the conversion hedges are primarily impacted by our stock price but are also impacted by the duration of the options, the strike price ($19.22 per share) of the instrument, the cap price ($35 per share) of the instrument, expected volatility of our stock price, the dividend yield on our stock, exchange rates, and counterparty non-performance risk. The table below presents the estimated impact on the March 31, 2011 fair value of a hypothetical 20% increase and decrease in our stock price, holding all other inputs constant (in millions):
March 31, 2011 |
||||
Estimated fair value of conversion hedges as reported |
£ | 197.4 | ||
Estimated fair value of conversion hedges assuming a 20% increase in our stock price |
£ | 223.3 | ||
Estimated fair value of conversion hedges assuming a 20% decrease in our stock price |
£ | 152.2 | ||
Changes in fair values of the conversion hedges are reported as gains (losses) on derivative instruments in the consolidated statement of operations.
We have determined that the overall valuation of the conversion hedges falls within level 3 of the fair value hierarchy as the assumption for the expected volatility of our stock price over the term of the options is based on an unobservable input and is deemed to be significant to the determination of fair value. Non-performance risk is based on quoted credit default spreads for counterparties to the contracts. The inclusion of counterparty non-performance risk resulted in a decrease to the fair values of the conversion hedges of £16.5 million as of March 31, 2011.
The following table presents a reconciliation of the beginning and ending balances of the conversion hedges (in millions):
Three months ended March 31, 2011 |
||||
Balance at January 1 |
£ | 191.9 | ||
Unrealized gain included in gain (loss) on derivative instruments |
10.2 | |||
Unrealized currency translation adjustment included in other comprehensive income |
(4.7 | ) | ||
Balance at March 31 |
£ | 197.4 | ||
12
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 4Fair Value Measurements (continued)
Long term debt: In the following table the fair value of our senior credit facility is based upon quoted trading prices in inactive markets for this debt, which incorporates non-performance risk. The fair values of our other debt in the following table are based on the quoted market prices in active markets and incorporate non-performance risk.
The carrying amounts and fair values of our long term debt are as follows (in millions):
March 31, 2011 | December 31, 2010 | |||||||||||||||
Carrying Amount |
Fair Value |
Carrying Amount |
Fair Value |
|||||||||||||
Senior credit facility |
£ | 775.0 | £ | 773.8 | £ | 1,675.0 | £ | 1,672.5 | ||||||||
9.125% U.S. dollar senior notes due 2016 |
343.8 | 370.0 | 352.6 | 380.3 | ||||||||||||
6.50% U.S. dollar convertible senior notes due 2016 |
525.4 | 1,079.0 | 535.4 | 1,050.8 | ||||||||||||
9.50% U.S. dollar senior notes due 2016 |
823.0 | 975.8 | 843.2 | 990.5 | ||||||||||||
9.50% euro senior notes due 2016 |
152.9 | 181.9 | 148.5 | 182.1 | ||||||||||||
8.375% U.S. dollar senior notes due 2019 |
369.5 | 426.2 | 378.8 | 421.5 | ||||||||||||
8.875% sterling senior notes due 2019 |
344.9 | 390.7 | 344.8 | 397.7 | ||||||||||||
6.50% U.S. dollar senior secured notes due 2018 |
616.8 | 689.3 | 632.3 | 677.5 | ||||||||||||
7.00% sterling senior secured notes due 2018 |
863.4 | 943.9 | 863.1 | 925.3 | ||||||||||||
5.25% U.S. dollar senior secured notes due 2021 |
307.2 | 314.6 | | | ||||||||||||
5.50% sterling senior secured notes due 2021 |
640.9 | 632.1 | | |
Note 5Derivative Financial Instruments and Hedging Activities
Strategies and Objectives for Holding Derivative Instruments
Our results are materially impacted by changes in interest rates and foreign currency exchange rates. In an effort to manage these risks, we periodically enter into various derivative instruments including interest rate swaps, cross-currency interest rate swaps and foreign exchange forward rate contracts. We are required to recognize all derivative instruments as either assets or liabilities at fair value on our consolidated balance sheets, and to recognize certain changes in the fair value of derivative instruments in our consolidated statements of operations.
We have entered into cross-currency interest rate swaps and foreign currency forward rate contracts to manage interest rate and foreign exchange rate currency exposures with respect to our U.S. dollar ($) and euro () denominated debt obligations. Additionally, we have entered into interest rate swaps to manage interest rate exposures resulting from variable and fixed rates of interest we pay on our U.K. pound sterling (£) denominated debt obligations. We have also entered into U.S. dollar and South African rand forward rate contracts to manage our foreign exchange rate currency exposures related to certain committed and forecasted purchases.
Whenever it is practical to do so, we designate a derivative contract as either a cash flow or fair value hedge for accounting purposes. These derivatives are referred to as Accounting Hedges below. When a derivative contract is not designated as an Accounting Hedge, the derivative will be treated as an economic hedge with mark-to-market movements and realized gains or losses recognized through gains (losses) on derivative instruments in the statements of operations. These derivatives are referred to as Economic Hedges below. We do not enter into derivatives for speculative trading purposes.
13
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 5Derivative Financial Instruments and Hedging Activities (continued)
In respect to Accounting Hedges, we believe our hedge contracts will be highly effective during their term in offsetting changes in cash flow or fair value attributable to the hedged risk. If we determine it is probable that forecasted transactions to which a hedge contract relates will not occur, we discontinue hedge accounting prospectively and reclassify any amounts accumulated in other comprehensive income to the statement of operations. We perform, at least quarterly, both a prospective and retrospective assessment of the effectiveness of our hedge contracts, including assessing the possibility of counterparty default. If we determine that a derivative is no longer expected to be highly effective, we discontinue hedge accounting prospectively and recognize subsequent changes in the fair value of the derivative in gains (losses) on derivative instruments in the statement of operations. As a result of our effectiveness assessment at March 31, 2011, we believe our derivative contracts that are designated and qualify for hedge accounting will continue to be highly effective in offsetting changes in cash flow or fair value attributable to the hedged risk.
The foreign currency forward rate contracts, interest rate swaps and cross-currency interest rate swaps are valued using internal models based on observable inputs, counterparty valuations, or market transactions in either the listed or over-the-counter markets, adjusted for non-performance risk. Non-performance is based on quoted credit default spreads for counterparties to the contracts and swaps. These derivative instruments are classified within level 2 in the fair value hierarchy. Derivative instruments which are subject to master netting arrangements are not offset and we have not provided, nor do we require, cash collateral with any counterparty.
Refer to note 4 for a discussion of the conversion hedges.
14
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 5Derivative Financial Instruments and Hedging Activities (continued)
The fair values of our derivative instruments recorded on our condensed consolidated balance sheets were as follows (in millions):
March 31, 2011 |
December 31, 2010 |
|||||||
Included within current assets: |
||||||||
Accounting Hedge |
||||||||
Foreign currency forward rate contracts |
£ | 0.5 | £ | | ||||
Economic Hedge |
||||||||
Foreign currency forward rate contracts |
0.5 | 0.8 | ||||||
£ | 1.0 | £ | 0.8 | |||||
Included within non-current assets: |
||||||||
Accounting Hedge |
||||||||
Interest rate swaps |
£ | 3.3 | £ | 8.0 | ||||
Cross-currency interest rate swaps |
8.9 | 137.9 | ||||||
Economic Hedge |
||||||||
Interest rate swaps |
9.6 | 3.9 | ||||||
Cross-currency interest rate swaps |
114.7 | 52.9 | ||||||
Conversion hedges |
197.4 | 191.9 | ||||||
£ | 333.9 | £ | 394.6 | |||||
Included within current liabilities: |
||||||||
Economic Hedge |
||||||||
Foreign currency forward rate contracts |
£ | 0.1 | £ | | ||||
Cross-currency interest rate swaps |
19.3 | 13.3 | ||||||
£ | 19.4 | £ | 13.3 | |||||
Included within non-current liabilities: |
||||||||
Accounting Hedge |
||||||||
Interest rate swaps |
£ | 4.1 | £ | | ||||
Cross-currency interest rate swaps |
13.6 | 10.3 | ||||||
Economic Hedge |
||||||||
Interest rate swaps |
27.0 | 32.2 | ||||||
Cross-currency interest rate swaps |
19.1 | 19.5 | ||||||
£ | 63.8 | £ | 62.0 | |||||
15
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 5Derivative Financial Instruments and Hedging Activities (continued)
Cross-Currency Interest Rate SwapsHedging the Interest Payments of Senior Notes and Senior Secured Notes
As of March 31, 2011, we had outstanding cross-currency interest rate swaps to mitigate the interest and foreign exchange rate risks relating to the pound sterling value of interest and principal payments on the U.S. dollar and euro denominated senior notes and senior secured notes.
The terms of our outstanding cross-currency interest rate swaps at March 31, 2011, were as follows:
Hedged item/Maturity date |
Hedge type | Notional amount due from counterparty |
Notional amount due to counterparty |
Weighted average interest rate due from counterparty |
Weighted average interest rate due to counterparty | |||||||||||
(in millions) | (in millions) | |||||||||||||||
$550m senior notes due 2016 |
||||||||||||||||
August 2016 |
Economic | $ | 550.0 | £ | 301.2 | 9.13% | 8.54% | |||||||||
$1,350m senior notes due 2016 |
||||||||||||||||
August 2016 |
Accounting | 1,350.0 | 835.5 | 9.50% | 9.98% | |||||||||||
$1,000m convertible senior notes due 2016 |
||||||||||||||||
November 2016 |
Economic | 1,000.0 | 505.6 | 6.50% | 6.95% | |||||||||||
$600m senior notes due 2019 |
||||||||||||||||
October 2019 |
Accounting | 264.3 | 159.8 | 8.38% | 9.03% | |||||||||||
October 2011 |
Economic | 335.7 | 228.0 | 8.38% | 9.23% | |||||||||||
October 2011 to October 2019 |
Accounting | 335.7 | 203.0 | 8.38% | 9.00% | |||||||||||
$1,000m senior secured notes due 2018 |
||||||||||||||||
January 2018 |
Accounting | 1,000.0 | 615.4 | 6.50% | 7.01% | |||||||||||
$500m senior secured notes due 2021 |
||||||||||||||||
January 2021 |
Accounting | 500.0 | 308.9 | 5.25% | LIBOR + 1.94% | |||||||||||
$ | 5,335.7 | £ | 3,157.4 | |||||||||||||
180m senior notes due 2016 |
||||||||||||||||
August 2016 |
Accounting | | 180.0 | £ | 158.6 | 9.50% | 10.18% | |||||||||
| 180.0 | £ | 158.6 | |||||||||||||
Other |
||||||||||||||||
December 2012 |
Economic | | 56.7 | £ | 40.3 | 3 month EURIBOR + 2.38% |
3 month LIBOR + 2.69% | |||||||||
December 2013 |
Economic | 43.3 | 30.8 | 3 month EURIBOR + 2.88% |
3 month LIBOR + 3.26% | |||||||||||
| 100.0 | £ | 71.1 | |||||||||||||
December 2012 |
Economic | £ | 38.8 | | 56.7 | 3 month LIBOR + 2.40% |
3 month EURIBOR + 2.38% | |||||||||
December 2013 |
Economic | 29.7 | 43.3 | 3 month LIBOR + 2.90% |
3 month EURIBOR + 2.88% | |||||||||||
£ | 68.5 | | 100.0 | |||||||||||||
16
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 5Derivative Financial Instruments and Hedging Activities (continued)
All of our cross-currency interest rate swaps include exchanges of the notional amounts at the start and end of the contract except for the contract maturing in November 2016 hedging the $1,000 million convertible senior notes due 2016.
Interest Rate SwapsHedging of Interest Rate Sensitive Obligations
As of March 31, 2011, we had outstanding interest rate swap agreements to manage the exposure to variability in future cash flows on the interest payments associated with our senior credit facility, which accrue at variable rates based on LIBOR. We have also entered into interest rate swap agreements to manage our exposure to changes in the fair value of our debt obligations due to interest rate fluctuations. The interest rate swaps allow us to receive or pay interest based on three month LIBOR in exchange for payments of interest at fixed rates.
The terms of our outstanding interest rate swap contracts at March 31, 2011 were as follows:
Hedged item/Maturity date |
Hedge type | Notional amount |
Weighted average interest rate due from counterparty |
Weighted average interest rate due to counterparty |
||||||||||||
(in millions) | ||||||||||||||||
Senior credit facility |
||||||||||||||||
July 2012 to December 2015 |
Accounting | £ | 200.0 | 6 month LIBOR | 2.91% | |||||||||||
July 2012 to December 2015 |
Economic | 200.0 | 6 month LIBOR | 2.87% | ||||||||||||
July 2012 to December 2015 |
Economic | 200.0 | 6 month LIBOR | 2.79% | ||||||||||||
£650m senior secured notes due 2021 |
Accounting | £ | 650.0 | 5.50% | LIBOR + 1.84% | |||||||||||
Other |
||||||||||||||||
March 2013 |
Economic | £ | 300.0 | 3 month LIBOR | 3.28% | |||||||||||
October 2013 |
Economic | 300.0 | 1.86% | 3 month LIBOR | ||||||||||||
September 2012 |
Economic | 600.0 | 3 month LIBOR | 3.09% | ||||||||||||
September 2012 |
Economic | 600.0 | 1.07% | 3 month LIBOR |
Foreign Currency Forward Rate ContractsHedging Committed and Forecasted Transactions
As of March 31, 2011, we had outstanding foreign currency forward rate contracts to purchase U.S. dollars and South African rand to hedge committed and forecasted purchases. The terms of our outstanding foreign currency forward rate contracts at March 31, 2011 were as follows:
Hedged item/Maturity date |
Hedge type | Notional amount due from counterparty |
Notional amount due to counterparty |
Weighted average exchange rate |
||||||||||||
(in millions) | (in millions) | |||||||||||||||
Committed and forecasted purchases |
||||||||||||||||
April 2011 |
Accounting | ZAR 18.0 | £ | 1.6 | 10.9679 | |||||||||||
May 2011 to December 2011 |
Accounting | $ | 26.8 | £ | 16.6 | 1.6176 | ||||||||||
April 2011 to December 2011 |
Economic | $ | 78.2 | £ | 48.5 | 1.6127 |
17
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 5Derivative Financial Instruments and Hedging Activities (continued)
Cash Flow Hedges
For derivative instruments that are designated and qualify as cash flow accounting hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings. In our consolidated statement of cash flows, we recognize the cash flows resulting from derivative contracts that are treated as Accounting Hedges in the same category where the cash flows from the underlying exposure are recognized. All other cash flows from derivative contracts are recognized as operating activities in the condensed consolidated statement of cash flows.
Gains or losses representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized as gains or losses on derivative instruments in the condensed consolidated statement of operations in the period in which they occur. During the three months ended March 31, 2011, we recognized no gain or loss relating to ineffectiveness on our cash flow hedges.
The following table presents the effective amount of gain or (loss) recognized in other comprehensive income (loss) and amounts reclassified to earnings during the three months ended March 31, 2011 (in millions):
Total | Interest rate swaps |
Cross- currency interest rate swaps |
Forward foreign exchange contracts |
Tax Effect | ||||||||||||||||
Balance at December 31, 2010 |
£ | (9.2 | ) | £ | 8.0 | £ | 16.6 | £ | 0.1 | £ | (33.9 | ) | ||||||||
Amounts recognized in other comprehensive income |
(57.0 | ) | 2.9 | (60.3 | ) | 0.4 | | |||||||||||||
Amounts reclassified as a result of cash flow hedge discontinuance |
(7.8 | ) | (7.6 | ) | (23.5 | ) | | 23.3 | ||||||||||||
Amounts reclassified to earnings impacting: |
||||||||||||||||||||
Foreign exchange losses |
45.4 | | 45.4 | | | |||||||||||||||
Interest expense |
1.3 | | 1.3 | | | |||||||||||||||
Balance at March 31, 2011 |
£ | (27.3 | ) | £ | 3.3 | £ | (20.5 | ) | £ | 0.5 | £ | (10.6 | ) | |||||||
We reclassified gains of £31.1 million accumulated in other comprehensive income to gain (loss) on derivatives in the condensed consolidated statement of operations for the three months ended March 31, 2011 because we discontinued hedge accounting for the cross-currency interest rate swaps associated with the $550 million 9.125% senior notes due 2016 and two of the interest rate swaps associated with the senior credit facility. As a result of the recognition of these gains in the consolidated statement of operations, we reclassified tax expense of £23.3 million from other comprehensive income to income from continuing operations.
Assuming no change in interest rates or foreign exchange rates for the next twelve months, the amount of pre-tax losses that would be reclassified from other comprehensive income (loss) to earnings would be nil and £5.8m relating to interest rate swaps and cross-currency interest rate swaps, and pre-tax gains of £0.5m relating to forward foreign exchange contracts, respectively.
18
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 5Derivative Financial Instruments and Hedging Activities (continued)
Fair Value Hedges
For derivative instruments that are designated and qualify as fair value accounting hedges, the effective portion of the gain or loss on the derivative is reported in earnings along with offsetting fair value movements impacting the hedged debt obligations. In our consolidated statement of cash flows, we recognize the cash flows resulting from derivative contracts that are treated as Accounting Hedges in the same category where the cash flows from the underlying exposure are recognized. All other cash flows from derivative contracts are recognized as operating activities in the consolidated statement of cash flows.
Gains or losses representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized as gains or losses on derivative instruments in the statement of operations in the period in which they occur. During the three months ended March 31, 2011, we recognized a loss totaling £1.8 million relating to ineffectiveness of fair value hedges.
Note 6Restructuring and Other Charges
The following table summarizes our historical restructuring accruals, which is comprised of historic restructuring accruals prior to 2006 and the restructuring accruals resulting from the acquisitions made by us during 2006, and the accruals for our restructuring plan announced in 2008 (in millions):
Historical Restructuring Accruals |
2008 Restructuring Accruals |
|||||||||||||||
Lease Exit Costs |
Involuntary Employee Termination and Related Costs |
Lease and Contract Exit Costs |
Total | |||||||||||||
Balance, December 31, 2010 |
£ | 35.8 | £ | 1.1 | £ | 20.7 | £ | 57.6 | ||||||||
Charged to expense |
1.1 | 2.3 | 0.5 | 3.9 | ||||||||||||
Revisions |
| (0.3 | ) | (1.0 | ) | (1.3 | ) | |||||||||
Utilized |
(2.2 | ) | (1.3 | ) | (0.9 | ) | (4.4 | ) | ||||||||
Balance, March 31, 2011 |
£ | 34.7 | £ | 1.8 | £ | 19.3 | £ | 55.8 | ||||||||
In connection with our 2008 restructuring program, in total we expect to incur operating expenditures of between £150 million to £170 million and capital expenditures of between £50 million to £60 million.
19
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 7Shareholders Equity and Share Based Compensation
During 2010, we announced our intention to undertake a range of capital structure optimization actions, including 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. During the first quarter, we increased the capital structure optimization program to permit full redemption of the $550 million 9.125% senior notes due 2016 on or before August 15, 2011. This program may be effected through open market, privately negotiated, and/or derivative transactions, and may be implemented through arrangements with one or more brokers. Any shares of common stock acquired in connection with this program will be held in treasury or cancelled. See note 4 for a discussion of the conversion hedges related to our convertible senior notes, which were entered into as part of this program.
During the three months ended March 31, 2011, we repurchased 7.2 million shares of common stock in connection with this program, at an average purchase price per share of $27.10 ($194.4 million in aggregate), through open market repurchases. The shares of common stock acquired in connection with this program were cancelled. No shares of common stock were repurchased in the three months ended March 31, 2010.
Total share based compensation expense included in selling, general and administrative expenses in the statements of operations was £7.0 million and £7.3 million for the three months ended March 31, 2011 and 2010, respectively.
Note 8Income (Loss) Per Common Share
Basic net income (loss) per common share attributable to Virgin Media Inc. is computed by dividing the net income (loss) for the three months ended March 31, 2011 and 2010 by the weighted average number of shares outstanding during the respective periods. Diluted net income per common share is computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method for options, sharesave options, shares of restricted stock held in escrow, restricted stock units and warrants, and the if-converted method for shares potentially issuable under our convertible senior notes.
The weighted average number of shares outstanding for the three months ended March 31, 2011 and 2010 is computed as follows (in millions):
Three months ended March 31, |
||||||||
2011 | 2010 | |||||||
Number of shares outstanding at start of period |
321.3 | 329.4 | ||||||
Issue of common stock (average number outstanding during the period) |
0.9 | 0.3 | ||||||
Purchase of treasury shares |
(1.7 | ) | | |||||
Weighted average number of shares outstanding |
320.5 | 329.7 | ||||||
20
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 8Income (Loss) Per Common Share (continued)
The following table sets forth the components of basic and diluted income (loss) per common share (in millions):
Three months ended March 31, |
||||||||
2011 | 2010 | |||||||
Numerator for basic and diluted income (loss) per common share from continuing operations |
£ | 4.5 | £ | (163.3 | ) | |||
Weighted average number of shares: |
||||||||
Denominator for basic income (loss) per common share |
320.5 | 329.7 | ||||||
Effect of dilutive securities: |
||||||||
Share based awards to employees |
6.5 | | ||||||
Denominator for diluted income (loss) per common share |
327.0 | 329.7 | ||||||
The following table sets forth the number of potential common shares excluded from the calculation of the denominator for diluted income (loss) per common shares (in millions):
Three months ended March 31, |
||||||||
2011 | 2010 | |||||||
Stock options |
2.1 | 10.5 | ||||||
Sharesave options |
| 0.4 | ||||||
Restricted stock held in escrow |
0.6 | 0.7 | ||||||
Restricted stock units |
4.5 | 5.2 | ||||||
Warrants |
| 25.8 | ||||||
Shares issuable under convertible senior notes |
52.0 | 52.0 |
Each of these instruments are excluded from the calculation of diluted net income per common share in periods in which there is a loss, because the inclusion of potential common shares would have an anti-dilutive effect.
In the three months ended March 31, 2011, certain share based awards to employees have been excluded from the calculation of the diluted weighted average number of shares because their exercise prices exceeded our average share price during the calculation period.
In the three months ended March 31, 2011, certain restricted stock held in escrow and certain restricted stock units have been excluded from the calculation of the diluted weighted average number of shares because these shares are contingently issuable based on the achievement of performance and/or market conditions that have not been achieved as of March 31, 2011.
In the three months ended March 31, 2011, the common shares issuable under our convertible notes have been excluded from the calculation of the diluted weighted average number of shares because the effect of their inclusion would be anti-dilutive calculated based on the application of the if-converted method, which assumes that interest charges applicable to the convertible notes, net of the income tax effect, are added to income (loss) for the period and that the common shares issuable upon conversion of the convertible notes are added to the number of weighted average shares outstanding.
21
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 8Income (Loss) Per Common Share (continued)
Stock Option Grants
All options granted under our stock incentive plans have a ten year term and vest and become fully exercisable within five years of continued employment. We have historically issued new shares upon exercise of the options. For performance-based option grants, the performance objectives are based upon quantitative and qualitative objectives, including earnings and stock price performance, amongst others. These objectives may be absolute or relative to prior performance or to the performance of other entities, indices or benchmarks and may be expressed in terms of progression within a specific range.
Sharesave Option Grants
All options granted under the Virgin Media Inc. Sharesave Plan enable eligible employees to purchase shares of our common stock at a discount. Employees are invited to take out savings contracts that last for three years. At the end of the contract, employees use the proceeds of these savings to exercise the options granted under the plan. We intend to issue new shares upon exercise of the options.
Restricted Stock Grants
The shares of restricted stock granted under our stock incentive plans have a term of up to three and a half years and vest based on time or performance, subject to continued employment. For performance-based restricted stock grants, the performance objectives are based upon quantitative and qualitative objectives, including earnings, operational performance and achievement of strategic goals, amongst others, and vest after a one to three year period. These objectives may be absolute or relative to prior performance or to the performance of other entities, indices or benchmarks and may be expressed in terms of progression within a specific range.
Restricted Stock Unit Grants
The restricted stock units granted under our stock incentive plans have a term of up to three and a half years and vest based on performance, subject to continued employment. These targets may be absolute or relative to prior performance or to the performance of other entities, indices or benchmarks and may be expressed in terms of progression within a specific range. The final number of restricted stock units vesting will be settled in either common stock or an amount of cash equivalent to the fair market value at the date of vesting.
Convertible Senior Notes
Holders of our U.S. dollar denominated 6.50% convertible senior notes due 2016 may tender their notes for conversion at any time on or after August 15, 2016 through to the second scheduled trading date preceding the maturity date. Prior to August 15, 2016, holders may convert their notes, at their option, only under the following circumstances: (i) in any quarter, if the closing sale price of Virgin Media Inc.s common stock during at least 20 of the last 30 trading days of the prior quarter was more than 120% of the applicable conversion price per share of common stock on the last day of such prior quarter; (ii) if, for five consecutive trading days, the trading price per $1,000 principal amount of notes was less than 98% of the product of the closing price of our common stock and the then applicable conversion rate; (iii) if a specified corporate event occurs, such as a merger, recapitalization, reclassification, binding share exchange or conveyance of all, or substantially all, of Virgin Media Inc.s assets; (iv) the declaration by Virgin Media Inc. of the distribution of certain rights, warrants, assets or debt securities to all, or substantially all, holders of Virgin Media Inc.s common stock; or (v) if Virgin Media Inc. undergoes a fundamental change (as defined in the indenture governing the convertible senior notes), such as a change in control, merger, consolidation, dissolution or delisting.
The initial conversion rate is equal to 52.0291 shares of Virgin Media Inc.s common stock per $1,000 of convertible senior notes, which represents an initial conversion price of approximately $19.22 per share of common stock. The conversion rate is subject to adjustment for stock splits, stock dividends or distributions, the issuance of certain rights or warrants, certain cash dividends or distributions or stock repurchases where the price exceeds market values.
22
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 9Comprehensive Income (Loss)
Comprehensive income (loss) comprises (in millions):
Three months ended March 31, |
||||||||
2011 | 2010 | |||||||
Net income (loss) for period |
£ | 3.3 | £ | (160.4 | ) | |||
Currency translation adjustment |
0.1 | 7.7 | ||||||
Net unrealized (losses) gains on derivatives, net of tax |
(57.0 | ) | 95.8 | |||||
Reclassification of derivative losses (gains) to net income, net of tax |
38.9 | (98.4 | ) | |||||
Comprehensive loss |
£ | (14.7 | ) | £ | (155.3 | ) | ||
The components of accumulated other comprehensive income, net of taxes, were as follows (in millions):
March 31, 2011 |
December 31, 2010 |
|||||||
Foreign currency translation |
£ | 162.7 | £ | 162.6 | ||||
Pension liability adjustment |
(66.9 | ) | (66.9 | ) | ||||
Net unrealized losses on derivatives |
(27.3 | ) | (9.2 | ) | ||||
£ | 68.5 | £ | 86.5 | |||||
Note 10Contingent Liabilities
We are involved in lawsuits, claims, investigations and proceedings, consisting of intellectual property, commercial, employee and employee benefits which arise in the ordinary course of our business. In accordance with the Contingencies Topic of the FASB ASC, we recognize a provision for a liability when management believes that it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We believe we have adequate provisions for any such matters. We review these provisions at least quarterly and adjust these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Additionally, when we believe it is at least reasonably possible that a liability has been incurred in excess of any recorded liabilities we provide an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. While litigation is inherently unpredictable, we believe that we have valid defenses with respect to legal matters pending against us. Nevertheless, for legal matters in which we have assessed the likelihood that a liability has been incurred as less than reasonably possible, it is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies, or because of the diversion of managements attention and the creation of significant expenses.
Our revenue generating activities are subject to Value Added Tax, or VAT. The U.K. tax authorities have challenged our VAT treatment of certain of these activities. As a result, we have estimated contingent losses totaling £74.6 million as of March 31, 2011 that are not accrued for, as we deem them to be reasonably possible, but not probable of resulting in a liability. Any challenge of the VAT treatment of these activities could be subject to court proceedings before a potential settlement would be required. We currently expect an initial hearing on these matters to take place in late 2011 or early 2012.
23
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 11Industry Segments
Our reporting segments are based on our method of internal reporting along with the criteria used by our chief executive officer, who is our chief operating decision maker (CODM), to evaluate segment performance, the availability of separate financial information and overall materiality considerations. We have two reporting segments, Consumer and Business, as described below.
Our Consumer segment is our primary segment, consisting of the distribution of television programming, broadband and fixed line telephone services to residential customers on our cable network, the provision of broadband and fixed line telephone services to residential customers outside of our cable network, and the provision of mobile telephony and mobile broadband to residential customers.
Our Business segment comprises our operations carried out through Virgin Media Business which provides voice, data and internet solutions to businesses, public sector organizations and service providers in the U.K.
Segment contribution, which is operating income before network operating costs, corporate costs, depreciation, amortization, goodwill and intangible asset impairments and restructuring and other charges, is managements measure of segment profit. Segment contribution excludes the impact of certain costs and expenses that are not directly attributable to the reporting segments, such as the costs of operating the network, corporate costs and depreciation and amortization. Restructuring and other charges, and goodwill and intangible asset impairments are excluded from segment contribution as management believes they are not characteristic of our underlying business operations. Assets are reviewed on a consolidated basis and are not allocated to segments for management reporting since the primary asset of the business is the cable network infrastructure, which is shared by our Consumer and Business segments.
Segment information for the three month period ended March 31, 2011 and 2010 was as follows (in millions):
Three months ended March 31, 2011 |
Three months ended March 31, 2010 |
|||||||||||||||||||||||
Consumer | Business | Total | Consumer | Business | Total | |||||||||||||||||||
Revenue |
£ | 823.2 | £ | 159.1 | £ | 982.3 | £ | 789.5 | £ | 139.9 | £ | 929.4 | ||||||||||||
Segment contribution |
£ | 485.0 | £ | 92.6 | £ | 577.6 | £ | 480.5 | £ | 76.1 | £ | 556.6 |
24
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 11Industry Segments (continued)
The reconciliation of total segment contribution to consolidated operating income and net income (loss) is as follows (in millions):
Three months ended March 31, |
||||||||
2011 | 2010 | |||||||
Total segment contribution |
£ | 577.6 | £ | 556.6 | ||||
Other operating and corporate costs |
201.5 | 207.0 | ||||||
Restructuring and other charges |
2.6 | 0.4 | ||||||
Depreciation |
228.8 | 242.5 | ||||||
Amortization |
34.1 | 37.1 | ||||||
Consolidated operating income |
110.6 | 69.6 | ||||||
Other income (expense) |
||||||||
Interest expense |
(114.6 | ) | (123.3 | ) | ||||
Loss on extinguishment of debt |
(18.1 | ) | (32.9 | ) | ||||
Share of income from equity investments |
8.2 | 7.6 | ||||||
Gain (loss) on derivative instruments |
28.0 | (21.0 | ) | |||||
Foreign currency gain (loss) |
7.9 | (67.4 | ) | |||||
Interest income and other, net |
1.7 | 1.1 | ||||||
Income tax (expense) benefit |
(19.2 | ) | 3.0 | |||||
Income (loss) from continuing operations |
4.5 | (163.3 | ) | |||||
(Loss) income from discontinued operations, net of tax |
(1.2 | ) | 2.9 | |||||
Net income (loss) |
£ | 3.3 | £ | (160.4 | ) | |||
25
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 12Condensed Consolidating Financial InformationSenior Notes
We present the following condensed consolidating financial information as of March 31, 2011 and December 31, 2010 and for the three months ended March 31, 2011 and 2010 as required by Rule 3-10(d) of Regulation S-X.
Virgin Media Finance is the issuer of the following senior notes:
| $550 million aggregate principal amount of 9.125% senior notes due 2016 |
| $1,350 million aggregate principal amount of 9.50% senior notes due 2016 |
| 180 million aggregate principal amount of 9.50% senior notes due 2016 |
| $600 million aggregate principal amount of 8.375% senior notes due 2019 |
| £350 million aggregate principal amount of 8.875% senior notes due 2019 |
Virgin Media Inc. and certain of its subsidiaries, namely Virgin Media Group LLC, Virgin Media Holdings Inc., Virgin Media (UK) Group, Inc. and Virgin Media Communications Limited, have guaranteed the senior notes on a senior basis. Each of Virgin Media Investment Holdings Limited, or VMIH, and Virgin Media Investments Limited, or VMIL, are conditional guarantors and have guaranteed the senior notes on a senior subordinated basis.
March 31, 2011 | ||||||||||||||||||||||||||||||||
Balance sheets |
Company | Virgin Media Finance |
Other guarantors |
VMIH | VMIL | All other subsidiaries |
Adjustments | Total | ||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||
Cash and cash equivalents |
£ | 45.6 | £ | 1.0 | £ | | £ | 0.5 | £ | | £ | 435.6 | £ | | £ | 482.7 | ||||||||||||||||
Restricted cash |
| | | | | 2.2 | | 2.2 | ||||||||||||||||||||||||
Other current assets |
0.3 | | | 8.5 | | 494.7 | | 503.5 | ||||||||||||||||||||||||
Total current assets |
45.9 | 1.0 | | 9.0 | | 932.5 | | 988.4 | ||||||||||||||||||||||||
Fixed assets, net |
| | | | | 4,714.5 | | 4,714.5 | ||||||||||||||||||||||||
Goodwill and Intangible assets, net |
| | (15.0 | ) | | | 2,116.8 | | 2,101.8 | |||||||||||||||||||||||
Investments in, and loans to, parent and subsidiary companies |
1,421.1 | 493.4 | (1,026.1 | ) | 1,367.2 | 1,833.0 | (3,640.3 | ) | (97.8 | ) | 350.5 | |||||||||||||||||||||
Other assets, net |
205.9 | | | 150.1 | | 117.1 | | 473.1 | ||||||||||||||||||||||||
Total assets |
£ | 1,672.9 | £ | 494.4 | £ | (1,041.1 | ) | £ | 1,526.3 | £ | 1,833.0 | £ | 4,240.6 | £ | (97.8 | ) | £ | 8,628.3 | ||||||||||||||
Current liabilities |
£ | 17.5 | £ | 390.0 | £ | 12.8 | £ | 115.3 | £ | | £ | 1,960.6 | £ | (863.2 | ) | £ | 1,633.0 | |||||||||||||||
Long-term debt, net of current portion |
525.3 | 1,690.2 | | | | 3,380.7 | | 5,596.2 | ||||||||||||||||||||||||
Other long-term liabilities |
| | | 44.6 | | 224.4 | | 269.0 | ||||||||||||||||||||||||
Shareholders equity (deficit) |
1,130.1 | (1,585.8 | ) | (1,053.9 | ) | 1,366.4 | 1,833.0 | (1,325.1 | ) | 765.4 | 1,130.1 | |||||||||||||||||||||
Total liabilities and shareholders equity (deficit) |
£ | 1,672.9 | £ | 494.4 | £ | (1,041.1 | ) | £ | 1,526.3 | £ | 1,833.0 | £ | 4,240.6 | £ | (97.8 | ) | £ | 8,628.3 | ||||||||||||||
26
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 12Condensed Consolidating Financial InformationSenior Notes (continued)
December 31, 2010 | ||||||||||||||||||||||||||||||||
Balance sheets |
Company | Virgin Media Finance |
Other guarantors |
VMIH | VMIL | All other subsidiaries |
Adjustments | Total | ||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||
Cash and cash equivalents |
£ | 101.3 | £ | 1.8 | £ | 0.4 | £ | 4.5 | £ | | £ | 371.5 | £ | | £ | 479.5 | ||||||||||||||||
Restricted cash |
| | | | | 2.2 | | 2.2 | ||||||||||||||||||||||||
Other current assets |
0.4 | | | 8.7 | | 538.3 | | 547.4 | ||||||||||||||||||||||||
Total current assets |
101.7 | 1.8 | 0.4 | 13.2 | | 912.0 | | 1,029.1 | ||||||||||||||||||||||||
Fixed assets, net |
| | | | | 4,763.1 | | 4,763.1 | ||||||||||||||||||||||||
Goodwill and Intangible assets, net |
| | (15.0 | ) | | | 2,150.9 | | 2,135.9 | |||||||||||||||||||||||
Investments in, and loans to, parent and subsidiary companies |
1,506.5 | 586.0 | (988.0 | ) | 1,288.9 | 1,764.4 | (3,790.6 | ) | (8.0 | ) | 359.2 | |||||||||||||||||||||
Other assets, net |
201.1 | | | 275.8 | | 69.0 | | 545.9 | ||||||||||||||||||||||||
Total assets |
£ | 1,809.3 | £ | 587.8 | £ | (1,002.6 | ) | £ | 1,577.9 | £ | 1,764.4 | £ | 4,104.4 | £ | (8.0 | ) | £ | 8,833.2 | ||||||||||||||
Current liabilities |
£ | 9.3 | £ | 64.2 | £ | 17.2 | £ | 127.1 | £ | | £ | 2,091.2 | £ | (811.8 | ) | £ | 1,497.2 | |||||||||||||||
Long-term debt, net of current portion |
535.4 | 2,068.1 | | | | 3,194.8 | | 5,798.3 | ||||||||||||||||||||||||
Other long-term liabilities |
| | (0.1 | ) | 42.5 | | 230.7 | | 273.1 | |||||||||||||||||||||||
Shareholders equity (deficit) |
1,264.6 | (1,544.5 | ) | (1,019.7 | ) | 1,408.3 | 1,764.4 | (1,412.3 | ) | 803.8 | 1,264.6 | |||||||||||||||||||||
Total liabilities and shareholders equity (deficit) |
£ | 1,809.3 | £ | 587.8 | £ | (1,002.6 | ) | £ | 1,577.9 | £ | 1,764.4 | £ | 4,104.4 | £ | (8.0 | ) | £ | 8,833.2 | ||||||||||||||
27
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 12Condensed Consolidating Financial InformationSenior Notes (continued)
Three months ended March 31, 2011 | ||||||||||||||||||||||||||||||||
Statements of operations |
Company | Virgin Media Finance |
Other guarantors |
VMIH | VMIL | All other subsidiaries |
Adjustments | Total | ||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||
Revenue |
£ | | £ | | £ | | £ | | £ | | £ | 982.3 | £ | | £ | 982.3 | ||||||||||||||||
Operating costs |
| | | | | (411.1 | ) | | (411.1 | ) | ||||||||||||||||||||||
Selling, general and administrative expenses |
(3.8 | ) | | | | | (191.3 | ) | | (195.1 | ) | |||||||||||||||||||||
Restructuring and other charges |
| | | | | (2.6 | ) | | (2.6 | ) | ||||||||||||||||||||||
Depreciation and amortization |
| | | | | (262.9 | ) | | (262.9 | ) | ||||||||||||||||||||||
Operating income (loss) |
(3.8 | ) | | | | | 114.4 | | 110.6 | |||||||||||||||||||||||
Interest expense |
(14.7 | ) | (48.5 | ) | (12.5 | ) | (99.9 | ) | | (256.0 | ) | 317.0 | (114.6 | ) | ||||||||||||||||||
Loss on extinguishment of debt |
| | | (18.1 | ) | | | | (18.1 | ) | ||||||||||||||||||||||
Share of income from equity investments |
| | | | | 8.2 | | 8.2 | ||||||||||||||||||||||||
Gain on derivative instruments |
10.3 | | | 17.7 | | | | 28.0 | ||||||||||||||||||||||||
Foreign currency gains |
0.2 | | 0.8 | 1.3 | | 5.6 | | 7.9 | ||||||||||||||||||||||||
Interest income and other, net |
2.8 | 49.1 | 13.6 | 41.1 | | 212.1 | (317.0 | ) | 1.7 | |||||||||||||||||||||||
Income tax (expense) benefit |
| | | (23.3 | ) | | 4.1 | | (19.2 | ) | ||||||||||||||||||||||
Income (loss) from continuing operations |
(5.2 | ) | 0.6 | 1.9 | (81.2 | ) | | 88.4 | | 4.5 | ||||||||||||||||||||||
Loss on discontinued operations, net of tax |
| | | | | (1.2 | ) | | (1.2 | ) | ||||||||||||||||||||||
Equity in net income (loss) of subsidiaries |
8.5 | (0.5 | ) | 6.6 | 80.7 | 109.8 | | (205.1 | ) | | ||||||||||||||||||||||
Net income (loss) |
£ | 3.3 | £ | 0.1 | £ | 8.5 | £ | (0.5 | ) | £ | 109.8 | £ | 87.2 | £ | (205.1 | ) | £ | 3.3 | ||||||||||||||
28
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 12Condensed Consolidating Financial InformationSenior Notes (continued)
Three months ended March 31, 2010 | ||||||||||||||||||||||||||||||||
Statements of operations |
Company | Virgin Media Finance |
Other guarantors |
VMIH | VMIL | All other subsidiaries |
Adjustments | Total | ||||||||||||||||||||||||
(Adjusted) (in millions) | ||||||||||||||||||||||||||||||||
Revenue |
£ | | £ | | £ | | £ | | £ | | £ | 929.4 | £ | | £ | 929.4 | ||||||||||||||||
Operating costs |
| | | | | (376.8 | ) | | (376.8 | ) | ||||||||||||||||||||||
Selling, general and administrative expenses |
(4.6 | ) | | | | | (198.4 | ) | | (203.0 | ) | |||||||||||||||||||||
Restructuring and other charges |
| | | | | (0.4 | ) | | (0.4 | ) | ||||||||||||||||||||||
Depreciation and amortization |
| | | | | (279.6 | ) | | (279.6 | ) | ||||||||||||||||||||||
Operating income (loss) |
(4.6 | ) | | | | | 74.2 | | 69.6 | |||||||||||||||||||||||
Interest expense |
(14.4 | ) | (58.6 | ) | (28.2 | ) | (108.7 | ) | | (198.1 | ) | 284.7 | (123.3 | ) | ||||||||||||||||||
Loss on extinguishment of debt |
| | | (16.4 | ) | | (16.5 | ) | | (32.9 | ) | |||||||||||||||||||||
Share of income from equity investments |
| | | | | 7.6 | | 7.6 | ||||||||||||||||||||||||
Loss on derivative instruments |
| | | (19.1 | ) | | (1.9 | ) | | (21.0 | ) | |||||||||||||||||||||
Foreign currency losses |
(0.2 | ) | | (4.4 | ) | (36.3 | ) | | (26.5 | ) | | (67.4 | ) | |||||||||||||||||||
Interest income and other, net |
10.3 | 56.8 | 29.4 | 28.3 | | 161.0 | (284.7 | ) | 1.1 | |||||||||||||||||||||||
Income tax benefit (expense) |
| | (0.2 | ) | 3.6 | | (0.4 | ) | | 3.0 | ||||||||||||||||||||||
Loss from continuing operations |
(8.9 | ) | (1.8 | ) | (3.4 | ) | (148.6 | ) | | (0.6 | ) | | (163.3 | ) | ||||||||||||||||||
Income on discontinued operations, net of tax |
| | | | | 2.9 | | 2.9 | ||||||||||||||||||||||||
Equity in net (loss) income of subsidiaries |
(151.5 | ) | (151.7 | ) | (148.1 | ) | (3.1 | ) | (3.4 | ) | | 457.8 | | |||||||||||||||||||
Net (loss) income |
£ | (160.4 | ) | £ | (153.5 | ) | £ | (151.5 | ) | £ | (151.7 | ) | £ | (3.4 | ) | £ | 2.3 | £ | 457.8 | £ | (160.4 | ) | ||||||||||
29
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 12Condensed Consolidating Financial InformationSenior Notes (continued)
Three months ended March 31, 2011 | ||||||||||||||||||||||||||||||||
Statements of cash flows |
Company | Virgin Media Finance |
Other guarantors |
VMIH | VMIL | All other subsidiaries |
Adjustments | Total | ||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||
Net cash provided by (used in) operating activities |
£ | (2.3 | ) | £ | (34.4 | ) | £ | (0.1 | ) | £ | (66.2 | ) | £ | | £ | 374.6 | £ | | £ | 271.6 | ||||||||||||
Investing activities: |
||||||||||||||||||||||||||||||||
Purchase of fixed and intangible assets |
| | | | | (163.3 | ) | | (163.3 | ) | ||||||||||||||||||||||
Proceeds from sale of fixed assets |
| | | | | 0.7 | | 0.7 | ||||||||||||||||||||||||
Principal repayments on loans to equity investments |
| | | | | 8.4 | | 8.4 | ||||||||||||||||||||||||
Principal drawdowns (repayments) on loans to group companies |
76.7 | 33.6 | (0.3 | ) | 66.6 | | (176.6 | ) | | | ||||||||||||||||||||||
Other |
| | | | | 0.2 | | 0.2 | ||||||||||||||||||||||||
Net cash (used in) provided by investing activities |
76.7 | 33.6 | (0.3 | ) | 66.6 | | (330.6 | ) | | (154.0 | ) | |||||||||||||||||||||
Financing activities: |
||||||||||||||||||||||||||||||||
New borrowings, net of financing fees |
| | | (4.4 | ) | | 942.1 | | 937.7 | |||||||||||||||||||||||
Common stock repurchases |
(120.0 | ) | | | | | | | (120.0 | ) | ||||||||||||||||||||||
Proceeds from employee stock option exercises |
1.4 | | | | | | | 1.4 | ||||||||||||||||||||||||
Principal payments on long term debt and capital leases |
| | | | | (915.5 | ) | | (915.5 | ) | ||||||||||||||||||||||
Dividends paid |
(8.0 | ) | | | | | | | (8.0 | ) | ||||||||||||||||||||||
Net cash (used in) provided by financing activities |
(126.6 | ) | | | (4.4 | ) | | 26.6 | | (104.4 | ) | |||||||||||||||||||||
Cash flow from discontinued operations: |
||||||||||||||||||||||||||||||||
Net cash used in operating activities |
| | | | | (6.5 | ) | | (6.5 | ) | ||||||||||||||||||||||
Net cash used in discontinued operations |
| | | | | (6.5 | ) | | (6.5 | ) | ||||||||||||||||||||||
Effect of exchange rates on cash and cash equivalents |
(3.5 | ) | | | | | | | (3.5 | ) | ||||||||||||||||||||||
Increase (decrease) in cash and cash equivalents |
(55.7 | ) | (0.8 | ) | (0.4 | ) | (4.0 | ) | | 64.1 | | 3.2 | ||||||||||||||||||||
Cash and cash equivalents at beginning of period |
101.3 | 1.8 | 0.4 | 4.5 | | 371.5 | | 479.5 | ||||||||||||||||||||||||
Cash and cash equivalents at end of period |
£ | 45.6 | £ | 1.0 | £ | | £ | 0.5 | £ | | £ | 435.6 | £ | | £ | 482.7 | ||||||||||||||||
30
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 12Condensed Consolidating Financial InformationSenior Notes (continued)
Three months ended March 31, 2010 | ||||||||||||||||||||||||||||||||
Statements of cash flows |
Company | Virgin Media Finance |
Other guarantors |
VMIH | VMIL | All other subsidiaries |
Adjustments | Total | ||||||||||||||||||||||||
(Adjusted)(in millions) | ||||||||||||||||||||||||||||||||
Net cash provided by (used in) operating activities |
£ | (6.4 | ) | £ | (0.1 | ) | £ | 3.6 | £ | 79.5 | £ | | £ | 125.6 | £ | | £ | 202.2 | ||||||||||||||
Investing activities: |
||||||||||||||||||||||||||||||||
Purchase of fixed and intangible assets |
| | | | | (181.5 | ) | | (181.5 | ) | ||||||||||||||||||||||
Proceeds from sale of fixed assets |
| | | | | 1.2 | | 1.2 | ||||||||||||||||||||||||
Principal repayments on loans to equity investments |
| | | | | 1.2 | | 1.2 | ||||||||||||||||||||||||
Principal drawdowns (repayments) on loans to group companies |
10.0 | | (3.1 | ) | (973.2 | ) | | 966.3 | | | ||||||||||||||||||||||
Other |
| | | | | (0.2 | ) | | (0.2 | ) | ||||||||||||||||||||||
Net cash (used in) provided by investing activities |
10.0 | | (3.1 | ) | (973.2 | ) | | 787.0 | | (179.3 | ) | |||||||||||||||||||||
Financing activities: |
||||||||||||||||||||||||||||||||
New borrowings, net of financing fees |
| | | 1,447.8 | | | | 1,447.8 | ||||||||||||||||||||||||
Proceeds from employee stock option exercises |
5.6 | | | | | | | 5.6 | ||||||||||||||||||||||||
Principal payments on long term debt and capital leases |
| | | (501.8 | ) | | (963.1 | ) | | (1,464.9 | ) | |||||||||||||||||||||
Dividends paid |
(8.8 | ) | | | | | | | (8.8 | ) | ||||||||||||||||||||||
Net cash (used in) provided by financing activities |
(3.2 | ) | | | 946.0 | | (963.1 | ) | | (20.3 | ) | |||||||||||||||||||||
Cash flow from discontinued operations: |
||||||||||||||||||||||||||||||||
Net cash used in operating activities |
| | | | | (15.0 | ) | | (15.0 | ) | ||||||||||||||||||||||
Net cash used in discontinued operations |
| | | | | (15.0 | ) | | (15.0 | ) | ||||||||||||||||||||||
Effect of exchange rates on cash and cash equivalents |
2.6 | | | | | | | 2.6 | ||||||||||||||||||||||||
(Decrease) increase in cash and cash equivalents |
3.0 | (0.1 | ) | 0.5 | 52.3 | | (65.5 | ) | | (9.8 | ) | |||||||||||||||||||||
Cash and cash equivalents at beginning of period |
12.4 | 1.9 | 0.3 | 292.9 | | 123.0 | | 430.5 | ||||||||||||||||||||||||
Cash and cash equivalents at end of period |
£ | 15.4 | £ | 1.8 | £ | 0.8 | £ | 345.2 | £ | | £ | 57.5 | £ | | £ | 420.7 | ||||||||||||||||
31
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 13Condensed Consolidating Financial InformationSenior Secured Notes
We present the following condensed consolidating financial information as of March 31, 2011 and December 31, 2010 and for the three months ended March 31, 2011 and 2010 as required by Rule 3-10(d) of Regulation S-X. Virgin Media Secured Finance PLC is the issuer of the following senior secured notes:
| £875 million aggregate principal amount of 7.00% senior notes due 2018 |
| $1,000 million aggregate principal amount of 6.50% senior notes due 2018 |
| £650 million aggregate principal amount of 5.50% senior notes due 2021 |
| $500 million aggregate principal amount of 5.25% senior notes due 2021 |
March 31, 2011 | ||||||||||||||||||||||||
Balance sheets |
Company | Virgin Media Secured Finance |
Guarantors | Non- Guarantors |
Adjustments | Total | ||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Cash and cash equivalents |
£ | 45.6 | £ | | £ | 416.1 | £ | 21.0 | £ | | £ | 482.7 | ||||||||||||
Restricted cash |
| | 1.3 | 0.9 | | 2.2 | ||||||||||||||||||
Other current assets |
0.3 | | 483.2 | 20.0 | | 503.5 | ||||||||||||||||||
Total current assets |
45.9 | | 900.6 | 41.9 | | 988.4 | ||||||||||||||||||
Fixed assets, net |
| | 4,049.0 | 665.5 | | 4,714.5 | ||||||||||||||||||
Goodwill and intangible assets, net |
| | 1,947.3 | 154.5 | | 2,101.8 | ||||||||||||||||||
Investments in, and loans to, parent and subsidiary companies |
1,421.1 | 2,429.1 | (1,552.2 | ) | 1,287.4 | (3,234.9 | ) | 350.5 | ||||||||||||||||
Other assets, net |
205.9 | 30.8 | 235.0 | 1.4 | | 473.1 | ||||||||||||||||||
Total assets |
£ | 1,672.9 | £ | 2,459.9 | £ | 5,579.7 | £ | 2,150.7 | £ | (3,234.9 | ) | £ | 8,628.3 | |||||||||||
Current liabilities |
£ | 17.5 | £ | 33.9 | £ | 1,766.8 | £ | 677.9 | £ | (863.1 | ) | £ | 1,633.0 | |||||||||||
Long term debt, net of current portion |
525.3 | 2,428.3 | 2,642.6 | | | 5,596.2 | ||||||||||||||||||
Other long term liabilities |
| | 187.6 | 81.4 | | 269.0 | ||||||||||||||||||
Shareholders equity (deficit) |
1,130.1 | (2.3 | ) | 982.7 | 1,391.4 | (2,371.8 | ) | 1,130.1 | ||||||||||||||||
Total liabilities and shareholders equity |
£ | 1,672.9 | £ | 2,459.9 | £ | 5,579.7 | £ | 2,150.7 | £ | (3,234.9 | ) | £ | 8,628.3 | |||||||||||
32
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 13Condensed Consolidating Financial InformationSenior Secured Notes (continued)
December 31, 2010 | ||||||||||||||||||||||||
Balance sheets |
Company | Virgin Media Secured Finance |
Guarantors | Non- Guarantors |
Adjustments | Total | ||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Cash and cash equivalents |
£ | 101.3 | £ | | £ | 356.9 | £ | 21.3 | £ | | £ | 479.5 | ||||||||||||
Restricted cash |
| | 1.3 | 0.9 | | 2.2 | ||||||||||||||||||
Other current assets |
0.4 | | 524.7 | 22.3 | | 547.4 | ||||||||||||||||||
Total current assets |
101.7 | | 882.9 | 44.5 | | 1,029.1 | ||||||||||||||||||
Fixed assets, net |
| | 4,070.8 | 692.3 | | 4,763.1 | ||||||||||||||||||
Goodwill and intangible assets, net |
| | 1,978.9 | 157.0 | | 2,135.9 | ||||||||||||||||||
Investments in, and loans to, parent and subsidiary companies |
1,506.5 | 1,501.1 | (646.9 | ) | 1,228.4 | (3,229.9 | ) | 359.2 | ||||||||||||||||
Other assets, net |
201.1 | | 343.3 | 1.5 | | 545.9 | ||||||||||||||||||
Total assets |
£ | 1,809.3 | £ | 1,501.1 | £ | 6,629.0 | £ | 2,123.7 | £ | (3,229.9 | ) | £ | 8,833.2 | |||||||||||
Current liabilities |
£ | 9.3 | £ | 4.6 | £ | 1,667.0 | £ | 628.0 | £ | (811.7 | ) | £ | 1,497.2 | |||||||||||
Long term debt, net of current portion |
535.4 | 1,495.4 | 3,767.5 | | | 5,798.3 | ||||||||||||||||||
Other long term liabilities |
| | 188.9 | 84.2 | | 273.1 | ||||||||||||||||||
Shareholders equity |
1,264.6 | 1.1 | 1,005.6 | 1,411.5 | (2,418.2 | ) | 1,264.6 | |||||||||||||||||
Total liabilities and shareholders equity |
£ | 1,809.3 | £ | 1,501.1 | £ | 6,629.0 | £ | 2,123.7 | £ | (3,229.9 | ) | £ | 8,833.2 | |||||||||||
33
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 13Condensed Consolidating Financial InformationSenior Secured Notes (continued)
Three months ended March 31, 2011 | ||||||||||||||||||||||||
Statements of operations |
Company | Virgin Media Secured Finance |
Guarantors | Non- Guarantors |
Adjustments | Total | ||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Revenue |
£ | | £ | | £ | 868.6 | £ | 113.7 | £ | | £ | 982.3 | ||||||||||||
Operating costs |
| | (343.8 | ) | (67.3 | ) | | (411.1 | ) | |||||||||||||||
Selling, general and administrative expenses |
(3.8 | ) | | (165.2 | ) | (26.1 | ) | | (195.1 | ) | ||||||||||||||
Restructuring and other charges |
| | (2.4 | ) | (0.2 | ) | | (2.6 | ) | |||||||||||||||
Depreciation and amortization |
| | (232.1 | ) | (30.8 | ) | | (262.9 | ) | |||||||||||||||
Operating income (loss) |
(3.8 | ) | | 125.1 | (10.7 | ) | | 110.6 | ||||||||||||||||
Interest expense |
(14.7 | ) | (34.0 | ) | (263.8 | ) | (119.1 | ) | 317.0 | (114.6 | ) | |||||||||||||
Loss on extinguishment of debt |
| | (18.1 | ) | | | (18.1 | ) | ||||||||||||||||
Share of income from equity investments |
| | | 8.2 | | 8.2 | ||||||||||||||||||
Gains on derivative instruments |
10.3 | | 17.7 | | | 28.0 | ||||||||||||||||||
Foreign currency gains (losses) |
0.2 | | (13.4 | ) | 21.1 | | 7.9 | |||||||||||||||||
Interest and other income, net |
2.8 | 30.6 | 173.6 | 111.7 | (317.0 | ) | 1.7 | |||||||||||||||||
Income tax expense |
| | (19.1 | ) | (0.1 | ) | | (19.2 | ) | |||||||||||||||
Income (loss) from continuing operations |
(5.2 | ) | (3.4 | ) | 2.0 | 11.1 | | 4.5 | ||||||||||||||||
Loss on discontinued operations, net of tax |
| | | (1.2 | ) | | (1.2 | ) | ||||||||||||||||
Equity in net income (loss) of subsidiaries |
8.5 | | 16.4 | (1.4 | ) | (23.5 | ) | | ||||||||||||||||
Net income (loss) |
£ | 3.3 | £ | (3.4 | ) | £ | 18.4 | £ | 8.5 | £ | (23.5 | ) | £ | 3.3 | ||||||||||
34
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 13Condensed Consolidating Financial InformationSenior Secured Notes (continued)
Three months ended March 31, 2010 | ||||||||||||||||||||||||
Statements of operations |
Company | Virgin Media Secured Finance |
Guarantors | Non- Guarantors |
Adjustments | Total | ||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Revenue |
£ | | £ | | £ | 822.9 | £ | 106.5 | £ | | £ | 929.4 | ||||||||||||
Operating costs |
| | (307.9 | ) | (68.9 | ) | | (376.8 | ) | |||||||||||||||
Selling, general and administrative expenses |
(4.6 | ) | | (174.5 | ) | (23.9 | ) | | (203.0 | ) | ||||||||||||||
Restructuring and other charges |
| | (0.4 | ) | | | (0.4 | ) | ||||||||||||||||
Depreciation and amortization |
| | (248.7 | ) | (30.9 | ) | | (279.6 | ) | |||||||||||||||
Operating income (loss) |
(4.6 | ) | | 91.4 | (17.2 | ) | | 69.6 | ||||||||||||||||
Interest expense |
(14.4 | ) | (21.1 | ) | (244.8 | ) | (127.7 | ) | 284.7 | (123.3 | ) | |||||||||||||
Loss on extinguishment of debt |
| | (32.9 | ) | | | (32.9 | ) | ||||||||||||||||
Share of income from equity investments |
| | | 7.6 | | 7.6 | ||||||||||||||||||
Losses on derivative instruments |
| | (21.0 | ) | | | (21.0 | ) | ||||||||||||||||
Foreign currency losses |
(0.2 | ) | | (37.7 | ) | (29.5 | ) | | (67.4 | ) | ||||||||||||||
Interest and other income, net |
10.3 | 21.4 | 140.2 | 113.9 | (284.7 | ) | 1.1 | |||||||||||||||||
Income tax benefit (expense) |
| | 4.3 | (1.3 | ) | | 3.0 | |||||||||||||||||
(Loss) income from continuing operations |
(8.9 | ) | 0.3 | (100.5 | ) | (54.2 | ) | | (163.3 | ) | ||||||||||||||
Income (loss) on discontinued operations, net of tax |
| | | 2.9 | | 2.9 | ||||||||||||||||||
Equity in net (loss) income of subsidiaries |
(151.5 | ) | | (46.2 | ) | (100.2 | ) | 297.9 | | |||||||||||||||
Net (loss) income |
£ | (160.4 | ) | £ | 0.3 | £ | (146.7 | ) | £ | (151.5 | ) | £ | 297.9 | £ | (160.4 | ) | ||||||||
35
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 13Condensed Consolidating Financial InformationSenior Secured Notes (continued)
Three months ended March 31, 2011 | ||||||||||||||||||||||||
Statements of cash flows |
Company | Virgin Media Secured Finance |
Guarantors | Non- Guarantors |
Adjustments | Total | ||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Net cash provided by (used in) operating activities |
£ | (2.3 | ) | £ | (0.3 | ) | £ | 178.6 | £ | 95.6 | £ | | £ | 271.6 | ||||||||||
Investing activities: |
||||||||||||||||||||||||
Purchase of fixed and intangible assets |
| | (155.2 | ) | (8.1 | ) | | (163.3 | ) | |||||||||||||||
Proceeds from sale of fixed assets |
| | 0.7 | | | 0.7 | ||||||||||||||||||
Principal repayments on loans to equity investments |
| | | 8.4 | | 8.4 | ||||||||||||||||||
Principal drawdowns (repayments) on loans to group companies |
76.7 | (941.8 | ) | 955.0 | (89.9 | ) | | | ||||||||||||||||
Other |
| | | 0.2 | | 0.2 | ||||||||||||||||||
Net cash (used in) provided by investing activities |
76.7 | (941.8 | ) | 800.5 | (89.4 | ) | | (154.0 | ) | |||||||||||||||
Financing activities: |
||||||||||||||||||||||||
New borrowings, net of financing fees |
| 942.1 | (4.4 | ) | | | 937.7 | |||||||||||||||||
Common stock repurchases |
(120.0 | ) | | | | | (120.0 | ) | ||||||||||||||||
Proceeds from employee stock option exercises |
1.4 | | | | | 1.4 | ||||||||||||||||||
Principal payments on long term debt and capital leases |
| | (915.5 | ) | | | (915.5 | ) | ||||||||||||||||
Dividends paid |
(8.0 | ) | | | | | (8.0 | ) | ||||||||||||||||
Net cash (used in) provided by financing activities |
(126.6 | ) | 942.1 | (919.9 | ) | | | (104.4 | ) | |||||||||||||||
Cash flow from discontinued operations: |
||||||||||||||||||||||||
Net cash used in operating activities |
| | | (6.5 | ) | | (6.5 | ) | ||||||||||||||||
Net cash used in discontinued operations |
| | | (6.5 | ) | | (6.5 | ) | ||||||||||||||||
Effect of exchange rates on cash and cash equivalents |
(3.5 | ) | | | | | (3.5 | ) | ||||||||||||||||
Increase (decrease) in cash and cash equivalents |
(55.7 | ) | | 59.2 | (0.3 | ) | | 3.2 | ||||||||||||||||
Cash and cash equivalents at beginning of period |
101.3 | | 356.9 | 21.3 | | 479.5 | ||||||||||||||||||
Cash and cash equivalents at end of period |
£ | 45.6 | £ | | £ | 416.1 | £ | 21.0 | £ | | £ | 482.7 | ||||||||||||
36
VIRGIN MEDIA INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 13Condensed Consolidating Financial InformationSenior Secured Notes (continued)
Three months ended March 31, 2010 | ||||||||||||||||||||||||
Statements of cash flows |
Company | Virgin Media Secured Finance |
Guarantors | Non- Guarantors |
Adjustments | Total | ||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Net cash provided by (used in) operating activities |
£ | (6.4 | ) | £ | | £ | 167.8 | £ | 40.8 | £ | | £ | 202.2 | |||||||||||
Investing activities: |
||||||||||||||||||||||||
Purchase of fixed and intangible assets |
| | (171.4 | ) | (10.1 | ) | | (181.5 | ) | |||||||||||||||
Proceeds from sale of fixed assets |
| | 1.2 | | | 1.2 | ||||||||||||||||||
Principal repayments on loans to equity investments |
| | | 1.2 | | 1.2 | ||||||||||||||||||
Principal drawdowns (repayments) on loans to group companies |
10.0 | (1,468.0 | ) | 1,397.8 | 60.2 | | | |||||||||||||||||
Other |
| | | (0.2 | ) | | (0.2 | ) | ||||||||||||||||
Net cash (used in) provided by investing activities |
10.0 | (1,468.0 | ) | 1,227.6 | 51.1 | | (179.3 | ) | ||||||||||||||||
Financing activities: |
||||||||||||||||||||||||
New borrowings, net of financing fees |
| 1,468.0 | (20.2 | ) | | | 1,447.8 | |||||||||||||||||
Proceeds from employee stock option exercises |
5.6 | | | | | 5.6 | ||||||||||||||||||
Principal payments on long term debt and capital leases |
| | (1,373.1 | ) | (91.8 | ) | | (1,464.9 | ) | |||||||||||||||
Dividends paid |
(8.8 | ) | | | | | (8.8 | ) | ||||||||||||||||
Net cash (used in) provided by financing activities |
(3.2 | ) | 1,468.0 | (1,393.3 | ) | (91.8 | ) | | (20.3 | ) | ||||||||||||||
Cash flow from discontinued operations: |
||||||||||||||||||||||||
Net cash used in operating activities |
| | | (15.0 | ) | | (15.0 | ) | ||||||||||||||||
Net cash used in discontinued operations |
| | | (15.0 | ) | | (15.0 | ) | ||||||||||||||||
Effect of exchange rates on cash and cash equivalents |
2.6 | | | | | 2.6 | ||||||||||||||||||
(Decrease) increase in cash and cash equivalents |
3.0 | | 2.1 | (14.9 | ) | | (9.8 | ) | ||||||||||||||||
Cash and cash equivalents at beginning of period |
12.4 | | 387.4 | 30.7 | | 430.5 | ||||||||||||||||||
Cash and cash equivalents at end of period |
£ | 15.4 | £ | | £ | 389.5 | £ | 15.8 | £ | | £ | 420.7 | ||||||||||||
37
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
March 31, 2011 |
December 31, 2010 |
|||||||
(Unaudited) | ||||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
£ | 436.0 | £ | 376.0 | ||||
Restricted cash |
2.2 | 2.2 | ||||||
Accounts receivabletrade, less allowances for doubtful accounts of £7.2 (2011) and £6.4 (2010) |
407.9 | 431.2 | ||||||
Inventory for resale |
21.8 | 26.4 | ||||||
Derivative financial instruments |
1.0 | 0.8 | ||||||
Prepaid expenses and other current assets |
72.5 | 88.6 | ||||||
Total current assets |
941.4 | 925.2 | ||||||
Fixed assets, net |
4,605.0 | 4,651.0 | ||||||
Goodwill and other indefinite-lived assets |
2,026.6 | 2,026.6 | ||||||
Intangible assets, net |
84.3 | 118.4 | ||||||
Equity investments |
350.5 | 359.2 | ||||||
Derivative financial instruments |
136.5 | 202.7 | ||||||
Deferred financing costs, net of accumulated amortization of £42.1 (2011) and £19.6 (2010) |
80.7 | 89.4 | ||||||
Other assets |
49.9 | 52.7 | ||||||
Due from group companies |
769.6 | 751.1 | ||||||
Total assets |
£ | 9,044.5 | £ | 9,176.3 | ||||
Liabilities and shareholders equity |
||||||||
Current liabilities |
||||||||
Accounts payable |
£ | 222.7 | £ | 296.1 | ||||
Accrued expenses and other current liabilities |
373.9 | 376.3 | ||||||
Derivative financial instruments |
19.4 | 13.3 | ||||||
Restructuring liabilities |
54.6 | 56.4 | ||||||
VAT and employee taxes payable |
117.6 | 83.6 | ||||||
Interest payable |
58.3 | 59.1 | ||||||
Interest payable to group companies |
136.2 | 147.2 | ||||||
Deferred revenue |
298.3 | 300.1 | ||||||
Current portion of long term debt |
76.9 | 222.1 | ||||||
Total current liabilities |
1,357.9 | 1,554.2 | ||||||
Long term debt, net of current portion |
3,380.5 | 3,195.0 | ||||||
Long term debt due to group companies |
2,648.2 | 2,746.4 | ||||||
Derivative financial instruments |
63.8 | 62.0 | ||||||
Deferred revenue and other long term liabilities |
204.4 | 207.2 | ||||||
Deferred income taxes |
| 3.2 | ||||||
Total liabilities |
7,654.8 | 7,768.0 | ||||||
Commitments and contingent liabilities |
||||||||
Shareholders equity |
||||||||
Common stock£0.001 par value; authorized 1,000,000 ordinary shares (2011 and 2010); issued and outstanding 224,552 ordinary shares (2011 and 2010) |
| | ||||||
Additional paid-in capital |
4,371.3 | 4,371.3 | ||||||
Accumulated other comprehensive income |
(94.3 | ) | (76.2 | ) | ||||
Accumulated deficit |
(2,887.3 | ) | (2,886.8 | ) | ||||
Total shareholders equity |
1,389.7 | 1,408.3 | ||||||
Total liabilities and shareholders equity |
£ | 9,044.5 | £ | 9,176.3 | ||||
See accompanying notes
38
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) (in millions)
Three months ended March 31, |
||||||||
2011 | 2010 | |||||||
(Adjusted) | ||||||||
Revenue |
£ | 957.3 | £ | 903.7 | ||||
Costs and expenses |
||||||||
Operating costs (exclusive of depreciation shown separately below) |
401.6 | 366.3 | ||||||
Selling, general and administrative expenses |
184.9 | 191.6 | ||||||
Restructuring and other charges |
2.5 | 0.4 | ||||||
Depreciation |
223.3 | 237.0 | ||||||
Amortization |
34.1 | 37.1 | ||||||
846.4 | 832.4 | |||||||
Operating income |
110.9 | 71.3 | ||||||
Other income (expense) |
||||||||
Interest expense |
(53.5 | ) | (54.6 | ) | ||||
Interest expense to group companies |
(55.7 | ) | (68.6 | ) | ||||
Loss on extinguishment of debt |
(18.1 | ) | (32.9 | ) | ||||
Share of income from equity investments |
8.2 | 7.6 | ||||||
Gain (loss) on derivative instruments |
17.7 | (21.0 | ) | |||||
Foreign currency gains (losses) |
6.6 | (62.9 | ) | |||||
Interest income and other, net |
1.6 | 1.4 | ||||||
Interest income from group companies |
2.2 | 1.9 | ||||||
Income (loss) from continuing operations before income taxes |
19.9 | (157.8 | ) | |||||
Income tax (expense) benefit |
(19.2 | ) | 3.2 | |||||
Income (loss) from continuing operations |
0.7 | (154.6 | ) | |||||
(Loss) income from discontinued operations, net of tax |
(1.2 | ) | 2.9 | |||||
Net loss |
£ | (0.5 | ) | £ | (151.7 | ) | ||
See accompanying notes.
39
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in millions)
Three months ended March 31, |
||||||||
2011 | 2010 | |||||||
(Adjusted) | ||||||||
Operating activities: |
||||||||
Net loss |
£ | (0.5 | ) | £ | (151.7 | ) | ||
Loss (income) from discontinued operations |
1.2 | (2.9 | ) | |||||
Income (loss) from continuing operations |
0.7 | (154.6 | ) | |||||
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
257.4 | 274.1 | ||||||
Non-cash interest |
(0.7 | ) | 29.9 | |||||
Non-cash compensation |
6.5 | 6.7 | ||||||
Loss on extinguishment of debt |
18.1 | 32.8 | ||||||
Income from equity accounted investments, net of dividends received |
(1.7 | ) | (4.1 | ) | ||||
Unrealized (gains) losses on derivative instruments |
(19.9 | ) | 46.5 | |||||
Unrealized foreign currency (gains) losses |
(6.3 | ) | 36.0 | |||||
Income taxes |
20.9 | (0.7 | ) | |||||
Other |
(0.1 | ) | 0.4 | |||||
Changes in operating assets and liabilities, net of effect from business disposals: |
9.4 | (25.4 | ) | |||||
Net cash provided by operating activities |
284.3 | 241.6 | ||||||
Investing activities: |
||||||||
Purchase of fixed and intangible assets |
(160.5 | ) | (179.3 | ) | ||||
Proceeds from sale of fixed assets |
0.7 | 1.2 | ||||||
Principal repayments on loans to equity investments |
8.4 | 1.2 | ||||||
Investments and loans from parent and subsidiary companies |
(88.8 | ) | (45.6 | ) | ||||
Other |
0.2 | (0.2 | ) | |||||
Net cash used in investing activities |
(240.0 | ) | (222.7 | ) | ||||
Financing activities: |
||||||||
New borrowings, net of financing fees |
937.7 | 1,447.8 | ||||||
Principal payments on long term debt, including redemption premiums, and capital leases |
(915.5 | ) | (1,464.9 | ) | ||||
Net cash used in financing activities |
22.2 | (17.1 | ) | |||||
Cash flow from discontinued operations: |
||||||||
Net cash used in operating activities |
(6.5 | ) | (15.0 | ) | ||||
Net cash used in discontinued operations |
(6.5 | ) | (15.0 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents |
| | ||||||
Increase (decrease) in cash and cash equivalents |
60.0 | (13.2 | ) | |||||
Cash and cash equivalents, beginning of period |
376.0 | 415.9 | ||||||
Cash and cash equivalents, end of period |
£ | 436.0 | £ | 402.7 | ||||
See accompanying notes
40
VIRGIN MEDIA INVESTMENTS LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except par value)
March 31, 2011 |
December 31, 2010 |
|||||||
(Unaudited) | ||||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
£ | 436.0 | £ | 376.0 | ||||
Restricted cash |
2.2 | 2.2 | ||||||
Accounts receivabletrade, less allowances for doubtful accounts of £7.2 (2011) and £6.4 (2010) |
407.9 | 431.2 | ||||||
Inventory for resale |
21.8 | 26.4 | ||||||
Derivative financial instruments |
1.0 | 0.8 | ||||||
Prepaid expenses and other current assets |
72.5 | 88.6 | ||||||
Total current assets |
941.4 | 925.2 | ||||||
Fixed assets, net |
4,605.0 | 4,651.0 | ||||||
Goodwill and other indefinite-lived assets |
2,026.6 | 2,026.6 | ||||||
Intangible assets, net |
84.3 | 118.4 | ||||||
Equity investments |
350.5 | 359.2 | ||||||
Derivative financial instruments |
136.5 | 202.7 | ||||||
Deferred financing costs, net of accumulated amortization of £42.1 (2011) and £19.6 (2010) |
80.7 | 89.4 | ||||||
Other assets |
49.9 | 52.7 | ||||||
Due from group companies |
769.6 | 751.1 | ||||||
Total assets |
£ | 9,044.5 | £ | 9,176.3 | ||||
Liabilities and shareholders equity |
||||||||
Current liabilities |
||||||||
Accounts payable |
£ | 222.7 | £ | 296.1 | ||||
Accrued expenses and other current liabilities |
373.9 | 376.3 | ||||||
Derivative financial instruments |
19.4 | 13.3 | ||||||
Restructuring liabilities |
54.6 | 56.4 | ||||||
VAT and employee taxes payable |
117.6 | 83.6 | ||||||
Interest payable |
12.5 | 18.0 | ||||||
Interest payable to group companies |
182.0 | 188.3 | ||||||
Deferred revenue |
298.3 | 300.1 | ||||||
Current portion of long term debt |
76.9 | 222.1 | ||||||
Total current liabilities |
1,357.9 | 1,554.2 | ||||||
Long term debt, net of current portion |
258.8 | 353.7 | ||||||
Long term debt due to group companies |
5,769.9 | 5,587.7 | ||||||
Derivative financial instruments |
63.8 | 62.0 | ||||||
Deferred revenue and other long term liabilities |
204.4 | 207.2 | ||||||
Deferred income taxes |
| 3.2 | ||||||
Total liabilities |
7,654.8 | 7,768.0 | ||||||
Commitments and contingent liabilities |
||||||||
Shareholders equity |
||||||||
Common stock£1.0 par value; issued and outstanding 2.5 (2011 and 2010) ordinary shares |
2.5 | 2.5 | ||||||
Additional paid-in capital |
4,368.8 | 4,368.8 | ||||||
Accumulated other comprehensive income |
(94.3 | ) | (76.2 | ) | ||||
Accumulated deficit |
(2,887.3 | ) | (2,886.8 | ) | ||||
Total shareholders equity |
1,389.7 | 1,408.3 | ||||||
Total liabilities and shareholders equity |
£ | 9,044.5 | £ | 9,176.3 | ||||
See accompanying notes
41
VIRGIN MEDIA INVESTMENTS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) (in millions)
Three months ended March 31, |
||||||||
2011 | 2010 | |||||||
(Adjusted) | ||||||||
Revenue |
£ | 957.3 | £ | 903.7 | ||||
Costs and expenses |
||||||||
Operating costs (exclusive of depreciation shown separately below) |
401.6 | 366.3 | ||||||
Selling, general and administrative expenses |
184.9 | 191.6 | ||||||
Restructuring and other charges |
2.5 | 0.4 | ||||||
Depreciation |
223.3 | 237.0 | ||||||
Amortization |
34.1 | 37.1 | ||||||
846.4 | 832.4 | |||||||
Operating income |
110.9 | 71.3 | ||||||
Other income (expense) |
||||||||
Interest expense |
(3.9 | ) | (9.2 | ) | ||||
Interest expense to group companies |
(105.3 | ) | (114.0 | ) | ||||
Loss on extinguishment of debt |
(18.1 | ) | (32.9 | ) | ||||
Share of income from equity investments |
8.2 | 7.6 | ||||||
Gain (loss) on derivative instruments |
17.7 | (21.0 | ) | |||||
Foreign currency gains (losses) |
6.6 | (62.9 | ) | |||||
Interest income and other, net |
1.6 | 1.4 | ||||||
Interest income from group companies |
2.2 | 1.9 | ||||||
Income (loss) from continuing operations before income taxes |
19.9 | (157.8 | ) | |||||
Income tax (expense) benefit |
(19.2 | ) | 3.2 | |||||
Income (loss) from continuing operations |
0.7 | (154.6 | ) | |||||
(Loss) income from discontinued operations, net of tax |
(1.2 | ) | 2.9 | |||||
Net loss |
£ | (0.5 | ) | £ | (151.7 | ) | ||
See accompanying notes.
42
VIRGIN MEDIA INVESTMENTS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in millions)
Three months ended March 31, |
||||||||
2011 | 2010 | |||||||
(Adjusted) | ||||||||
Operating activities: |
||||||||
Net loss |
£ | (0.5 | ) | £ | (151.7 | ) | ||
Loss (income) from discontinued operations |
1.2 | (2.9 | ) | |||||
Income (loss) from continuing operations |
0.7 | (154.6 | ) | |||||
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
257.4 | 274.1 | ||||||
Non-cash interest |
(0.7 | ) | 29.9 | |||||
Non-cash compensation |
6.5 | 6.7 | ||||||
Loss on extinguishment of debt |
18.1 | 32.8 | ||||||
Income from equity accounted investments, net of dividends received |
(1.7 | ) | (4.1 | ) | ||||
Unrealized (gains) losses on derivative instruments |
(19.9 | ) | 46.5 | |||||
Unrealized foreign currency (gains) losses |
(6.3 | ) | 36.0 | |||||
Income taxes |
20.9 | (0.7 | ) | |||||
Other |
(0.1 | ) | 0.4 | |||||
Changes in operating assets and liabilities, net of effect from business disposals: |
9.4 | (25.4 | ) | |||||
Net cash provided by operating activities |
284.3 | 241.6 | ||||||
Investing activities: |
||||||||
Purchase of fixed and intangible assets |
(160.5 | ) | (179.3 | ) | ||||
Proceeds from sale of fixed assets |
0.7 | 1.2 | ||||||
Principal repayments on loans to equity investments |
8.4 | 1.2 | ||||||
Investments and loans from parent and subsidiary companies |
60.2 | 920.8 | ||||||
Other |
0.2 | (0.2 | ) | |||||
Net cash used in investing activities |
(91.0 | ) | 743.7 | |||||
Financing activities: |
||||||||
New borrowings, net of financing fees |
(13.8 | ) | (20.2 | ) | ||||
Principal payments on long term debt, including redemption premiums, and capital leases |
(113.0 | ) | (963.3 | ) | ||||
Net cash used in financing activities |
(126.8 | ) | (983.5 | ) | ||||
Cash flow from discontinued operations: |
||||||||
Net cash used in operating activities |
(6.5 | ) | (15.0 | ) | ||||
Net cash used in discontinued operations |
(6.5 | ) | (15.0 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents |
| | ||||||
Increase (decrease) in cash and cash equivalents |
60.0 | (13.2 | ) | |||||
Cash and cash equivalents, beginning of period |
376.0 | 415.9 | ||||||
Cash and cash equivalents, end of period |
£ | 436.0 | £ | 402.7 | ||||
See accompanying notes.
43
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
VIRGIN MEDIA INVESTMENTS LIMITED
COMBINED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1Basis of Presentation
These combined notes accompany and form an integral part of the separate condensed consolidated financial statements of Virgin Media Investment Holdings Limited and its subsidiaries, or VMIH, and Virgin Media Investments Limited and its subsidiaries, or VMIL. VMIH and VMIL are indirect, wholly owned subsidiaries of Virgin Media Inc. VMIL is a direct, wholly owned subsidiary of VMIH.
Under the terms of the indentures governing the senior notes issued by Virgin Media Finance PLC and the indentures governing the senior secured notes issued by Virgin Media Secured Finance PLC, VMIL was required to grant guarantees that are identical to the guarantees granted by VMIH under the same indentures. Under the terms of the intercreditor deed governing the senior credit facility, VMIL was required to grant a guarantee identical to the guarantee granted by VMIH under the same deed. VMIH is fully dependent on the cash flows of the operating subsidiaries of VMIL to service these debt obligations. As a result, debt obligations, cash required to service debt obligations, derivative financial instruments, and any effects on the consolidated results of operations and cash flows related to the senior notes, senior secured notes and senior credit facility have been reflected in the separate condensed consolidated financial statements of VMIL. As such, the amounts included in the financial statements of VMIL do not necessarily represent items to which VMIL has legal title.
As used in these notes, the terms we, our, or companies refer to VMIH and VMIL and, except as otherwise noted, the information in these combined notes relates to both of the companies.
The accompanying separate unaudited condensed consolidated financial statements of each of the companies have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, for interim financial information and with the rules and regulations of the Securities and Exchange Commission, or SEC. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. For further information, refer to the consolidated financial statements and notes thereto included in Virgin Media Inc.s annual report on Form 10-K for the year ended December 31, 2010, as filed with the SEC on February 22, 2011, or the 2010 Annual Report.
On June 4, 2010, we announced the sale to BSkyB of our television channel business known as Virgin Media TV. Virgin Media TVs operations, which were disposed of during 2010, comprised our former Content segment. We determined that as of June 30, 2010 the planned sale met the requirements for Virgin Media TV to be reflected as discontinued operations in the prior periods and, accordingly we adjusted the consolidated statements of operations and cash flows for the three months ended March 31, 2010.
44
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
VIRGIN MEDIA INVESTMENTS LIMITED
COMBINED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 2Recently Adopted Accounting Pronouncements
On January 1, 2011 we adopted new accounting guidance issued by the FASB for revenue arrangements with multiple-elements. We adopted this guidance on a prospective basis applicable for transactions originating or materially modified after the date of adoption. This guidance changed the criteria for separating units of accounting in multiple-element arrangements and the way in which an entity is required to allocate revenue to these units of accounting.
Prior to the adoption of this guidance and with the exception of mobile revenue transactions, bundled revenue arrangements in our consumer and business segments generally did not contain separate units of accounting. Subsequent to the adoption of this guidance, these bundled revenue arrangements generally have the following units of accounting: an up-front installation element and an ongoing service provision element. Both prior and subsequent to the adoption of this guidance, mobile revenue transactions involving bundled equipment and service revenue have separate units of accounting.
Revenue is allocated to each unit of accounting based on a selling price hierarchy. The selling price for a deliverable is based on its vendor-specific objective evidence (VSOE) if available, third party evidence (TPE) if VSOE is not available, or estimated selling price (ESP) if neither VSOE nor TPE is available. Currently, we do not sell installation services or ongoing rental separately on a regular basis and therefore we do not have the evidence to support VSOE for these deliverables. We use evidence of the amounts that third parties charge for similar or identical services, when available, to establish selling price. In some cases, when we are unable to establish VSOE or TPE, we use our best estimate of selling price. Our objective in determining the best estimate of selling price is to establish the price at which we would transact a sale if the deliverable were sold regularly on a stand-alone basis. We consider all reasonably available information including both market data and conditions, as well as entity specific factors. In addition we consider all factors contemplated in negotiating the arrangement with the customer and our own normal pricing practices. These considerations include competitor pricing, customization of the product, profit objectives and cost structures.
Once we have established the selling price of each deliverable, we allocate total arrangement consideration by applying the relative selling price methodology. Prior to the adoption of this guidance, where the fair value of the delivered element could not be determined reliably but the fair value of the undelivered element could be determined reliably, the fair value of the undelivered element was deducted from total consideration and the net amount was allocated to the delivered component based on the residual value method. This methodology is no longer permitted under the new guidance and we now allocate revenue for all multiple-element arrangements based on the relative selling price methodology. We recognize revenue on each deliverable in accordance with our policies for product and service revenue recognition.
The adoption of this guidance is not expected to have a material impact on our consolidated financial statements for the year ended December 31, 2011. This is principally due to the fact that although prior to the adoption of this guidance we were unable to meet the criteria to separate the units of accounting for our residential customer arrangements, the Cable Television Topic of the FASB ASC required us to recognize initial hookup revenues to the extent we had incurred direct selling costs. The impact of the adoption of this guidance may be material in future years if we make material changes to product or service offerings, pricing structures, the components of bundled arrangements or if we enter into material new arrangements in our Business segment.
45
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
VIRGIN MEDIA INVESTMENTS LIMITED
COMBINED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 3Long Term Debt
Long term debt reflects our obligations under the terms of the indentures governing the senior notes and senior secured notes as well as the intercreditor deed governing the senior credit facility. As such, these amounts include debt owed directly to third parties by affiliated entities not consolidated by us which have been classified as amounts due to group companies.
On February 15, 2011, we amended our senior credit facility to increase operational flexibility including, among other things, changing the required level of total net leverage ratio, increasing financial indebtedness baskets, and eliminating certain restrictions on the use of proceeds of secured indebtedness. This amendment did not have an impact on the amount of debt included on our consolidated balance sheet as of March 31, 2011 but did serve to modify the amortization schedule by extending £192.5 million of our June 30, 2014 scheduled amortization payment to June 30, 2015.
On March 3, 2011, Virgin Media Secured Finance PLC, a wholly owned subsidiary of VMIH, issued $500 million aggregate principal amount of 5.25% senior secured notes due 2021 and £650 million aggregate principal amount of 5.50% senior secured notes due 2021. Interest is payable on January 15 and July 15 each year, beginning on July 15, 2011. The senior secured notes due 2021 rank pari passu with our senior credit facility and senior secured notes due 2018 and, subject to certain exceptions, share in the same guarantees and security which have been granted in favor of our senior credit facility and senior secured notes due 2018.
In March 2011, we used the net proceeds from our senior secured notes due 2021 to prepay £532.5 million of the Tranche A outstanding under our senior credit facility, thus eliminating scheduled amortization in 2011 through 2014, and £367.5 million of the Tranche B outstanding under our senior credit facility that were scheduled for payment in 2015, with the remainder being used for general corporate purposes.
The carrying amount of the $550 million 9.125% senior notes due 2016 is classified as a current liability in the condensed consolidated balance sheet as of March 31, 2011 due to our intention to call the notes within the next twelve months using cash on hand.
Long term debt repayments, excluding capital leases, as of March 31, 2011, were due as follows (in millions):
Period ending March 31: |
||||
2012 |
£ | 0.3 | ||
2013 |
62.8 | |||
2014 |
| |||
2015 |
| |||
2016 |
775.0 | |||
Thereafter |
6,145.4 | |||
Total debt payments |
£ | 6,983.5 | ||
46
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
VIRGIN MEDIA INVESTMENTS LIMITED
COMBINED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 4Fair Value Measurements
U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The inputs used to measure fair value are classified into the following hierarchy:
Level 1 |
Unadjusted quoted prices in active markets for identical assets or liabilities | |
Level 2 |
Unadjusted quoted prices in active markets for similar assets or liabilities, or | |
Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or | ||
Inputs other than quoted prices that are observable for the asset or liability | ||
Level 3 |
Unobservable inputs for the asset or liability |
We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
In estimating the fair value of our financial assets and liabilities, we used the following methods and assumptions:
Derivative financial instruments: As a result of our financing activities, we are exposed to market risks from changes in interest and foreign currency exchange rates, which may adversely affect our operating results and financial position. When deemed appropriate, we minimize our risks from interest and foreign currency exchange rate fluctuations through the use of derivative financial instruments. The foreign currency forward rate contracts, interest rate swaps and cross-currency interest rate swaps are valued using internal models based on observable inputs, counterparty valuations, or market transactions in either the listed or over-the-counter markets, adjusted for non-performance risk. As such, these derivative instruments are classified within level 2 in the fair value hierarchy. The fair values of our derivative financial instruments are disclosed in note 5.
47
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
VIRGIN MEDIA INVESTMENTS LIMITED
COMBINED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 4Fair Value Measurements (continued)
Long term debt: In the following table the fair value of our senior credit facility is based upon quoted trading prices in inactive markets for this debt, which incorporates non-performance risk. The fair values of our other debt in the following table are based on the quoted market prices in active markets and incorporate non-performance risk.
The carrying amounts and fair values of our long term debt are as follows (in millions):
March 31, 2011 |
December 31, 2010 |
|||||||||||||||
Carrying Amount |
Fair Value |
Carrying Amount |
Fair Value |
|||||||||||||
Senior credit facility |
£ | 775.0 | £ | 773.8 | £ | 1,675.0 | £ | 1,675.5 | ||||||||
9.125% U.S. dollar senior notes due 2016 |
343.8 | 370.0 | 352.6 | 380.3 | ||||||||||||
6.50% U.S. dollar senior notes due 2016 |
111.1 | 228.2 | 176.7 | 346.8 | ||||||||||||
9.50% U.S. dollar senior notes due 2016 |
823.0 | 975.8 | 843.2 | 990.5 | ||||||||||||
9.50% euro senior notes due 2016 |
152.9 | 181.9 | 148.5 | 182.1 | ||||||||||||
8.375% U.S. dollar senior notes due 2019 |
369.5 | 426.2 | 378.8 | 421.5 | ||||||||||||
8.875% sterling senior notes due 2019 |
344.9 | 390.7 | 344.8 | 397.7 | ||||||||||||
6.50% U.S. dollar senior secured notes due 2018 |
616.8 | 689.3 | 632.3 | 677.5 | ||||||||||||
7.00% sterling senior secured notes due 2018 |
863.4 | 943.9 | 863.1 | 925.3 | ||||||||||||
5.25% U.S. dollar senior secured notes due 2021 |
307.2 | 314.6 | | | ||||||||||||
5.50% sterling senior secured notes due 2021 |
640.9 | 632.1 | | | ||||||||||||
Floating rate senior loan note due 2012 |
62.5 | 62.5 | 64.1 | 64.1 | ||||||||||||
Other notes due to affiliates |
440.5 | 440.5 | 437.7 | 437.7 |
48
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
VIRGIN MEDIA INVESTMENTS LIMITED
COMBINED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 5Derivative Financial Instruments and Hedging Activities
Strategies and Objectives for Holding Derivative Instruments
Our results are materially impacted by changes in interest rates and foreign currency exchange rates. In an effort to manage these risks, we periodically enter into various derivative instruments including interest rate swaps, cross-currency interest rate swaps and foreign exchange forward rate contracts. We are required to recognize all derivative instruments as either assets or liabilities at fair value on our consolidated balance sheets, and to recognize certain changes in the fair value of derivative instruments in our consolidated statements of operations.
We have entered into cross-currency interest rate swaps and foreign currency forward rate contracts to manage interest rate and foreign exchange rate currency exposures with respect to our U.S. dollar ($) and euro () denominated debt obligations. Additionally, we have entered into interest rate swaps to manage interest rate exposures resulting from variable and fixed rates of interest we pay on our U.K. pound sterling (£) denominated debt obligations. We have also entered into U.S. dollar and South African rand forward rate contracts to manage our foreign exchange rate currency exposures related to certain committed and forecasted purchases.
Whenever it is practical to do so, we designate a derivative contract as either a cash flow or fair value hedge for accounting purposes. These derivatives are referred to as Accounting Hedges below. When a derivative contract is not designated as an Accounting Hedge, the derivative will be treated as an economic hedge with mark-to-market movements and realized gains or losses recognized through gains (losses) on derivative instruments in the statements of operations. These derivatives are referred to as Economic Hedges below. We do not enter into derivatives for speculative trading purposes.
In respect to Accounting Hedges, we believe our hedge contracts will be highly effective during their term in offsetting changes in cash flow or fair value attributable to the hedged risk. If we determine it is probable that forecasted transactions to which a hedge contract relates will not occur, we discontinue hedge accounting prospectively and reclassify any amounts accumulated in other comprehensive income to the statement of operations. We perform, at least quarterly, both a prospective and retrospective assessment of the effectiveness of our hedge contracts, including assessing the possibility of counterparty default. If we determine that a derivative is no longer expected to be highly effective, we discontinue hedge accounting prospectively and recognize subsequent changes in the fair value of the derivative in gains (losses) on derivative instruments in the statement of operations. As a result of our effectiveness assessment at March 31, 2011, we believe our derivative contracts that are designated and qualify for hedge accounting will continue to be highly effective in offsetting changes in cash flow or fair value attributable to the hedged risk.
The foreign currency forward rate contracts, interest rate swaps and cross-currency interest rate swaps are valued using internal models based on observable inputs, counterparty valuations, or market transactions in either the listed or over-the-counter markets, adjusted for non-performance risk. Non-performance is based on quoted credit default spreads for counterparties to the contracts and swaps. These derivative instruments are classified within level 2 in the fair value hierarchy. Derivative instruments which are subject to master netting arrangements are not offset and we have not provided, nor do we require, cash collateral with any counterparty.
49
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
VIRGIN MEDIA INVESTMENTS LIMITED
COMBINED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 5Derivative Financial Instruments and Hedging Activities (continued)
The fair values of these derivative instruments recorded on our condensed consolidated balance sheets were as follows (in millions):
March 31, 2011 |
December 31, 2010 |
|||||||
Included within current assets: |
||||||||
Accounting Hedge |
||||||||
Foreign currency forward rate contracts |
£ | 0.5 | £ | | ||||
Economic Hedge |
||||||||
Foreign currency forward rate contracts |
0.5 | 0.8 | ||||||
£ | 1.0 | £ | 0.8 | |||||
Included within non-current assets: |
||||||||
Accounting Hedge |
||||||||
Interest rate swaps |
£ | 3.3 | £ | 8.0 | ||||
Cross-currency interest rate swaps |
8.9 | 137.9 | ||||||
Economic Hedge |
||||||||
Interest rate swaps |
9.6 | 3.9 | ||||||
Cross-currency interest rate swaps |
114.7 | 52.9 | ||||||
£ | 136.5 | £ | 202.7 | |||||
Included within current liabilities: |
||||||||
Accounting Hedge |
||||||||
Interest rate swaps |
£ | 0.1 | £ | | ||||
Economic Hedge |
||||||||
Cross-currency interest rate swaps |
19.3 | 13.3 | ||||||
£ | 19.4 | £ | 13.3 | |||||
Included within non-current liabilities: |
||||||||
Accounting Hedge |
||||||||
Interest rate swaps |
£ | 4.1 | £ | | ||||
Cross-currency interest rate swaps |
13.6 | 10.3 | ||||||
Economic Hedge |
||||||||
Interest rate swaps |
27.0 | 32.2 | ||||||
Cross-currency interest rate swaps |
19.1 | 19.5 | ||||||
£ | 63.8 | £ | 62.0 | |||||
50
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
VIRGIN MEDIA INVESTMENTS LIMITED
COMBINED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 5Derivative Financial Instruments and Hedging Activities (continued)
Cross-Currency Interest Rate SwapsHedging the Interest Payments of Senior Notes and Senior Secured Notes
As of March 31, 2011, we had outstanding cross-currency interest rate swaps to mitigate the interest and foreign exchange rate risks relating to the pound sterling value of interest and principal payments on the U.S. dollar and euro denominated senior notes and senior secured notes.
The terms of our outstanding cross-currency interest rate swaps at March 31, 2011 were as follows:
Hedged item/Maturity date |
Hedge type | Notional amount due from counterparty |
Notional amount due to counterparty |
Weighted average interest rate due from counterparty |
Weighted average interest rate due to counterparty | |||||||||||
(in millions) | (in millions) | |||||||||||||||
$550m senior notes due 2016 |
||||||||||||||||
August 2016 |
Economic | $ | 550.0 | £ | 301.2 | 9.13% | 8.54% | |||||||||
$1,350m senior notes due 2016 |
||||||||||||||||
August 2016 |
Accounting | 1,350.0 | 835.5 | 9.50% | 9.98% | |||||||||||
$1,000m senior notes due 2016 |
||||||||||||||||
November 2016 |
Economic | 1,000.0 | 505.6 | 6.50% | 6.95% | |||||||||||
$600m senior notes due 2019 |
||||||||||||||||
October 2019 |
Accounting | 264.3 | 159.8 | 8.38% | 9.03% | |||||||||||
October 2011 |
Economic | 335.7 | 228.0 | 8.38% | 9.23% | |||||||||||
October 2011 to October 2019 |
Accounting | 335.7 | 203.0 | 8.38% | 9.00% | |||||||||||
$1,000m senior secured notes due 2018 |
||||||||||||||||
January 2018 |
Accounting | 1,000.0 | 615.4 | 6.50% | 7.01% | |||||||||||
$500m senior secured notes due 2021 |
||||||||||||||||
January 2021 |
Accounting | 500.0 | 308.9 | 5.25% | LIBOR + 1.94% | |||||||||||
$ | 5,335.7 | £ | 3,157.4 | |||||||||||||
180m senior notes due 2016 |
||||||||||||||||
August 2016 |
Accounting | | 180.0 | £ | 158.6 | 9.50% | 10.18% | |||||||||
| 180.0 | £ | 158.6 | |||||||||||||
Other |
||||||||||||||||
December 2012 |
Economic | | 56.7 | £ | 40.3 | 3 month EURIBOR + 2.38% |
3 month LIBOR + 2.69% | |||||||||
December 2013 |
Economic | 43.3 | 30.8 | 3 month EURIBOR + 2.88% |
3 month LIBOR + 3.26% | |||||||||||
| 100.0 | £ | 71.1 | |||||||||||||
December 2012 |
Economic | £ | 38.8 | | 56.7 | 3 month LIBOR + 2.40% |
3 month EURIBOR + 2.38% | |||||||||
December 2013 |
Economic | 29.7 | 43.3 | 3 month LIBOR + 2.90% |
3 month EURIBOR + 2.88% | |||||||||||
£ | 68.5 | | 100.0 | |||||||||||||
All of our cross-currency interest rate swaps include exchanges of the notional amounts at the start and end of the contract except for the contract maturing in November 2016 hedging the $1,000 million senior notes due 2016.
51
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
VIRGIN MEDIA INVESTMENTS LIMITED
COMBINED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 5Derivative Financial Instruments and Hedging Activities (continued)
Interest Rate SwapsHedging of Interest Rate Sensitive Obligations
As of March 31, 2011, we had outstanding interest rate swap agreements to manage the exposure to variability in future cash flows on the interest payments associated with our senior credit facility, which accrue at variable rates based on LIBOR. We have also entered into interest rate swap agreements to manage our exposure to changes in the fair value of our debt obligations due to interest rate fluctuations. The interest rate swaps allow us to receive or pay interest based on three month LIBOR in exchange for payments of interest at fixed rates.
The terms of our outstanding interest rate swap contracts at March 31, 2011 were as follows:
Hedged item/Maturity date |
Hedge type | Notional amount |
Weighted average interest rate due from counterparty |
Weighted average interest rate due to counterparty | ||||||||
(in millions) | ||||||||||||
Senior credit facility |
||||||||||||
July 2012 to December 2015 |
Accounting | £ | 200.0 | 6 month LIBOR | 2.91% | |||||||
July 2012 to December 2015 |
Economic | 200.0 | 6 month LIBOR | 2.87% | ||||||||
July 2012 to December 2015 |
Economic | 200.0 | 6 month LIBOR | 2.79% | ||||||||
£650m senior secured notes due 2021 |
||||||||||||
January 2021 |
Accounting | £ | 650.0 | 5.50% | LIBOR + 1.84% | |||||||
Other |
||||||||||||
March 2013 |
Economic | £ | 300.0 | 3 month LIBOR | 3.28% | |||||||
October 2013 |
Economic | 300.0 | 1.86% | 3 month LIBOR | ||||||||
September 2012 |
Economic | 600.0 | 3 month LIBOR | 3.09% | ||||||||
September 2012 |
Economic | 600.0 | 1.07% | 3 month LIBOR |
Foreign Currency Forward Rate ContractsHedging Committed and Forecasted Transactions
As of March 31, 2011, we had outstanding foreign currency forward rate contracts to purchase U.S. dollars and South African rand to hedge committed and forecasted purchases. The terms of our outstanding foreign currency forward rate contracts at March 31, 2011 were as follows:
Hedged item/Maturity date |
Hedge type | Notional amount due from counterparty |
Notional amount due to counterparty |
Weighted average exchange rate |
||||||||||||
(in millions) | (in millions) | |||||||||||||||
Committed and forecasted purchases |
||||||||||||||||
April 2011 |
Accounting | ZAR 18.0 | £ | 1.6 | 10.9679 | |||||||||||
May 2011 to December 2011 |
Accounting | $ | 26.8 | £ | 16.6 | 1.6176 | ||||||||||
April 2011 to December 2011 |
Economic | $ | 78.2 | £ | 48.5 | 1.6127 |
52
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
VIRGIN MEDIA INVESTMENTS LIMITED
COMBINED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 5Derivative Financial Instruments and Hedging Activities (continued)
Cash Flow Hedges
For derivative instruments that are designated and qualify as cash flow accounting hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings. In our consolidated statement of cash flows, we recognize the cash flows resulting from derivative contracts that are treated as Accounting Hedges in the same category where the cash flows from the underlying exposure are recognized. All other cash flows from derivative contracts are recognized as operating activities in the condensed consolidated statement of cash flows.
Gains or losses representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized as gains or losses on derivative instruments in the condensed consolidated statement of operations in the period in which they occur. During the three months ended March 31, 2011, we recognized no gain or loss relating to ineffectiveness on our cash flow hedges.
The following table presents the effective amount of gain or (loss) recognized in other comprehensive income (loss) and amounts reclassified to earnings during the three months ended March 31, 2011 (in millions):
Total | Interest rate swaps |
Cross- currency interest rate swaps |
Forward foreign exchange contracts |
Tax Effect |
||||||||||||||||
Balance at December 31, 2010 |
£ | (9.2 | ) | £ | 8.0 | £ | 16.6 | £ | 0.1 | £ | (33.9 | ) | ||||||||
Amounts recognized in other comprehensive income |
(57.0 | ) | 2.9 | (60.3 | ) | 0.4 | | |||||||||||||
Amounts reclassified as a result of cash flow hedge discontinuance |
(7.8 | ) | (7.6 | ) | (23.5 | ) | | 23.3 | ||||||||||||
Amounts reclassified to earnings impacting: |
||||||||||||||||||||
Foreign exchange losses |
45.4 | | 45.4 | | | |||||||||||||||
Interest expense |
1.3 | | 1.3 | | | |||||||||||||||
Balance at March 31, 2011 |
£ | (27.3 | ) | £ | 3.3 | £ | (20.5 | ) | £ | 0.5 | £ | (10.6 | ) | |||||||
We reclassified gains of £31.1 million accumulated in other comprehensive income to gain (loss) on derivatives in the condensed consolidated statement of operations for the three months ended March 31, 2011 because we discontinued hedge accounting for the cross-currency interest rate swaps associated with the $550 million 9.125% senior notes due 2016 and two of the interest rate swaps associated with the senior credit facility. As a result of the recognition of these gains in the consolidated statement of operations, we reclassified tax expense of £23.3 million from other comprehensive income to income from continuing operations.
Assuming no change in interest rates or foreign exchange rates for the next twelve months, the amount of pre-tax gains that would be reclassified from other comprehensive income (loss) to earnings would be nil and £5.8m relating to interest rate swaps and cross-currency interest rate swaps, and pre-tax gains of £0.5m relating to forward foreign exchange contracts, respectively.
53
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
VIRGIN MEDIA INVESTMENTS LIMITED
COMBINED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 5Derivative Financial Instruments and Hedging Activities (continued)
Fair Value Hedges
For derivative instruments that are designated and qualify as fair value accounting hedges, the effective portion of the gain or loss on the derivative is reported in earnings along with offsetting fair value movements impacting the hedged debt obligation. In our consolidated statement of cash flows, we recognize the cash flows resulting from derivative contracts that are treated as Accounting Hedges in the same category where the cash flows from the underlying exposure are recognized. All other cash flows from derivative contracts are recognized as operating activities in the consolidated statement of cash flows.
Gains or losses representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized as gains or losses on derivative instruments in the statement of operations in the period in which they occur. During the three months ended March 31, 2011, we recognized a loss totaling £1.8 million relating to ineffectiveness of fair value hedges.
Note 6Restructuring and Other Charges
The following table summarizes our historical restructuring accruals, which is comprised of historic restructuring accruals prior to 2006 and the restructuring accruals resulting from the acquisitions made by us during 2006, and the accruals for our restructuring plan announced in 2008 (in millions):
Historical Restructuring Accruals |
2008 Restructuring Accruals |
|||||||||||||||
Lease Exit Costs |
Involuntary Employee Termination and Related Costs |
Lease and Contract Exit Costs |
Total | |||||||||||||
Balance, December 31, 2010 |
£ | 35.2 | £ | 1.1 | £ | 20.1 | £ | 56.4 | ||||||||
Charged to expense |
1.1 | 2.2 | 0.5 | 3.8 | ||||||||||||
Revisions |
| (0.3 | ) | (1.0 | ) | (1.3 | ) | |||||||||
Utilized |
(2.2 | ) | (1.3 | ) | (0.8 | ) | (4.3 | ) | ||||||||
Balance, March 31, 2011 |
£ | 34.1 | £ | 1.7 | £ | 18.8 | £ | 54.6 | ||||||||
In connection with our 2008 restructuring program, we expect to incur operating expenditures of between £150 million to £170 million and capital expenditures of between £50 million to £60 million.
Note 7Share Based Compensation
Stock Option Plans
We are indirect, wholly owned subsidiaries of Virgin Media Inc. Accordingly, we have no stock-based compensation plans. As at March 31, 2011, certain of our employees participated in the stock-based compensation plans of Virgin Media, as described in Virgin Medias 2010 Annual Report.
54
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
VIRGIN MEDIA INVESTMENTS LIMITED
COMBINED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 8Comprehensive Income (Loss)
Comprehensive income (loss) comprises (in millions):
Three months ended March 31, |
||||||||
2011 | 2010 | |||||||
Net loss for period |
£ | (0.5 | ) | £ | (151.7 | ) | ||
Currency translation adjustment |
| 0.1 | ||||||
Net unrealized (losses) gains on derivatives, net of tax |
(57.0 | ) | 95.8 | |||||
Reclassification of derivative losses (gains) to net income, net of tax |
38.9 | (98.4 | ) | |||||
Comprehensive loss |
£ | (18.6 | ) | £ | (154.2 | ) | ||
The components of accumulated other comprehensive loss, net of taxes, were as follows (in millions):
March 31, 2011 |
December 31, 2010 |
|||||||
Foreign currency translation |
£ | (0.1 | ) | £ | (0.1 | ) | ||
Pension liability adjustment |
(66.9 | ) | (66.9 | ) | ||||
Net unrealized losses on derivatives |
(27.3 | ) | (9.2 | ) | ||||
£ | (94.3 | ) | £ | (76.2 | ) | |||
Note 9Related Party Transactions
Virgin Media Inc. and its consolidated subsidiaries
We are wholly owned subsidiaries of Virgin Media Inc. We charge Virgin Media Inc. and certain of its group companies for operating costs and selling, general and administrative expenses incurred by us on their behalf. The following information summarizes our significant related party transactions with Virgin Media Inc. and its group companies (in millions):
Three months ended March 31, |
||||||||
2011 | 2010 | |||||||
Operating costs |
£ | 9.5 | £ | 10.5 | ||||
Selling, general and administrative expenses |
10.2 | 11.4 | ||||||
£ | 19.7 | £ | 21.9 | |||||
The above recharges are recorded in operating costs and selling, general and administrative expenses and offset the respective costs incurred.
55
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
VIRGIN MEDIA INVESTMENTS LIMITED
COMBINED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 10Contingent Liabilities
We are involved in lawsuits, claims, investigations and proceedings, consisting of intellectual property, commercial, employee and employee benefits which arise in the ordinary course of our business. In accordance with the Contingencies Topic of the FASB ASC, we recognize a provision for a liability when management believes that it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We believe we have adequate provisions for any such matters. We review these provisions at least quarterly and adjust these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Additionally, when we believe it is at least reasonably possible that a liability has been incurred in excess of any recorded liabilities we provide an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. While litigation is inherently unpredictable, we believe that we have valid defenses with respect to legal matters pending against us. Nevertheless, for legal matters in which we have assessed the likelihood that a liability has been incurred as less than reasonably possible, it is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies, or because of the diversion of managements attention and the creation of significant expenses.
Our revenue generating activities are subject to Value Added Tax, or VAT. The U.K. tax authorities have challenged our VAT treatment of certain of these activities. As a result, we have estimated contingent losses totaling £74.6 million as of March 31, 2011 that are not accrued for, as we deem them to be reasonably possible but not probable of resulting in a liability. Any challenge of the VAT treatment of these activities could be subject to court proceedings before a potential settlement would be required. We currently expect an initial hearing on these matters to take place in late 2011 or early 2012.
56
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
VIRGIN MEDIA INVESTMENTS LIMITED
COMBINED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 11Industry Segments
VMIH and VMIL are not managed separately from Virgin Media and financial information is only prepared and reviewed by the chief operating decision maker (CODM) of Virgin Media, who is also the CODM of VMIH and VMIL, at the consolidated Virgin Media level. Virgin Medias segments are based on its method of internal reporting along with the criteria used by its chief executive officer, who is its CODM, to evaluate segment performance, the availability of separate financial information and overall materiality considerations. Virgin Media has two reporting segments, Consumer and Business, as described below.
Virgin Medias Consumer segment is its primary segment, consisting of the distribution of television programming, broadband and fixed line telephone services to residential customers on its cable network, the provision of broadband and fixed line telephone services to residential customers outside of its cable network, and the provision of mobile telephony and broadband to residential customers.
Virgin Medias Business segment comprises its operations carried out through Virgin Media Business, which provides voice, data and internet solutions to businesses, public sector organizations and service providers in the U.K.
Segment contribution, which is operating income before network operating costs, corporate costs, depreciation, amortization, goodwill and intangible asset impairments and restructuring and other charges, is managements measure of segment profit. Segment contribution excludes the impact of certain costs and expenses that are not directly attributable to the reporting segments, such as the costs of operating the network, corporate costs and depreciation and amortization. Restructuring and other charges, and goodwill and intangible asset impairments are excluded from segment contribution as management believes they are not characteristic of our underlying business operations. Assets are reviewed on a consolidated basis and are not allocated to segments for management reporting since the primary asset of the business is the cable network infrastructure, which is shared by Virgin Medias Consumer and Business segments.
The following segment information is based on the consolidated results of Virgin Media, VMIH and VMIL for the three month periods ended March 31, 2011 and 2010 (in millions):
Revenue | Segment Contribution |
|||||||
Three months ended March 31, 2011 |
||||||||
Consumer |
£ | 823.2 | £ | 485.0 | ||||
Business |
159.1 | 92.6 | ||||||
Subtotal |
982.3 | 577.6 | ||||||
Companies not consolidated in VMIH and VMIL |
(25.0 | ) | ||||||
Total |
£ | 957.3 | ||||||
Three months ended March 31, 2010 |
||||||||
Consumer |
£ | 789.5 | £ | 480.5 | ||||
Business |
139.9 | 76.1 | ||||||
Subtotal |
929.4 | 556.6 | ||||||
Companies not consolidated in VMIH and VMIL |
(25.7 | ) | ||||||
Total |
£ | 903.7 | ||||||
57
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
VIRGIN MEDIA INVESTMENTS LIMITED
COMBINED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 11Industry Segments (continued)
The reconciliation of total segment contribution to consolidated operating income and net loss for VMIH and VMIL is as follows (in millions):
Three
months ended March 31, |
||||||||
2011 | 2010 | |||||||
Total segment contribution |
£ | 577.6 | £ | 556.6 | ||||
Other operating and corporate costs |
201.5 | 207.0 | ||||||
Restructuring and other charges |
2.6 | 0.4 | ||||||
Depreciation |
228.8 | 242.5 | ||||||
Amortization |
34.1 | 37.1 | ||||||
Operating loss of subsidiaries not consolidated in either of the companies |
(0.3 | ) | (1.7 | ) | ||||
Consolidated operating income |
110.9 | 71.3 | ||||||
Other income (expense) |
||||||||
Interest expense (1) |
(109.2 | ) | (123.2 | ) | ||||
Loss on extinguishment of debt |
(18.1 | ) | (32.9 | ) | ||||
Share of income from equity investments |
8.2 | 7.6 | ||||||
Gain (loss) on derivative instruments |
17.7 | (21.0 | ) | |||||
Foreign currency gain (loss) |
6.6 | (62.9 | ) | |||||
Interest income and other, net (2) |
3.8 | 3.3 | ||||||
Income tax (expense) benefit |
(19.2 | ) | 3.2 | |||||
Income (loss) from continuing operations |
0.7 | (154.6 | ) | |||||
(Loss) income from discontinued operations, net of tax |
(1.2 | ) | 2.9 | |||||
Net loss |
£ | (0.5 | ) | £ | (151.7 | ) | ||
(1) | Interest expense represents the total of interest expense and interest expense to group companies. |
(2) | Interest income and other, net represents the total of interest income and other, net and interest income from group companies. |
58
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the condensed consolidated financial statements and related notes that appear elsewhere in this document.
Overview
We are a leading entertainment and communications business, being a quad-play provider of broadband internet, television, mobile telephony and fixed line telephony services that offer a variety of entertainment and communications services to residential and commercial customers throughout the U.K. We are one of the U.K.s largest providers of residential broadband internet, pay television and fixed line telephony services by number of customers. We believe our advanced, deep fiber access network enables us to offer faster and higher quality broadband services than our digital subscriber line, or DSL, competitors. As a result, we provide our customers with a leading next generation broadband service and one of the most advanced television on-demand services available in the U.K. market. We are also one of the U.K.s largest mobile virtual network operators by number of customers. In addition, we provide a complete portfolio of voice, data and internet solutions to businesses, public sector organizations and service providers in the U.K. through Virgin Media Business (formerly ntl:Telewest Business). We also have an interest in the UKTV television channels through our joint ventures with BBC Worldwide.
Our reporting segments are based on our method of internal reporting along with the criteria used by our chief executive officer, who is our chief operating decision maker (CODM), to evaluate segment performance, the availability of separate financial information and overall materiality considerations. We have two reporting segments, Consumer and Business, as described below.
| Consumer: Our Consumer segment includes the distribution of television programming over our cable network and the provision of broadband and fixed line telephone services to residential consumers, both on and off our cable network. Our Consumer segment also includes our mobile telephony and mobile broadband operations, provided through Virgin Mobile. |
| Business: Our Business segment includes the voice and data telecommunication and internet solutions services we provide through Virgin Media Business to businesses, public sector organizations and service providers. |
Our revenue by segment for the three months ended March 31, 2011 and 2010 was as follows (in millions):
Three months ended March 31, | ||||||||||||||||
2011 | 2010 | |||||||||||||||
Consumer Segment |
£ | 823.2 | 83.8 | % | £ | 789.5 | 84.9 | % | ||||||||
Business Segment |
159.1 | 16.2 | 139.9 | 15.1 | ||||||||||||
£ | 982.3 | 100.0 | % | £ | 929.4 | 100.0 | % | |||||||||
For further discussion of our business, please refer to our 2010 Annual Report.
59
Factors Affecting Our Business
A number of factors affect the performance of our business, at both a general and segment level.
General
Factors that affect both of the segments in which we operate are as follows:
General Macroeconomic Factors. General macroeconomic factors in the U.K. have an impact on our business. For example, during an economic slowdown, potential and existing customers may be less willing or able to purchase our products or upgrade their services. We may also experience increased churn and higher bad debt expense.
Currency Movements. We encounter currency exchange rate risks because substantially all of our revenue and operating costs are earned and paid primarily in U.K. pounds sterling, but we pay interest and principal obligations with respect to a portion of our existing indebtedness in U.S. dollars and euros. We have in place hedging programs that seek to mitigate the risk from these exposures. While the objective of these programs is to reduce the volatility of our cash flows and earnings caused by changes in underlying currency exchange rates, not all of our exposures are hedged, and not all of our hedges are designated as such for accounting purposes. Additionally, we do not hedge the principal portion of our convertible senior notes. We also purchase goods and services in U.S. dollars, euros and South African rand, such as customer premise equipment and network maintenance services and a substantial portion of these exposures are not hedged.
Competition. Our ability to acquire and retain customers and increase revenue depends on our competitive strength. There is significant and increasing competition in the market for our consumer services, including broadband and telephone services offered by BT; resellers or local loop unbundlers, such as BSkyB and Talk Talk; alternative internet access services such as DSL; satellite television services offered by BSkyB and by BBC and ITV through Freesat; free-to-air digital terrestrial television offered through Freeview; internet protocol television offered by BT; and mobile telephone, television and data services offered by other mobile network operators, or MNOs, including Everything Everywhere Limited (the joint venture between T-Mobile (UK) and Orange (UK)), O2, Vodafone and 3 UK, and from other mobile virtual network operators, including Tesco Mobile, Lebara, Carphone Warehouse and ASDA. In addition, certain competitors, such as BT, BSkyB and large MNOs, are dominant in markets in which we compete and may use their dominance in those markets to offer bundled services that compete with our product offerings. As a result of increased competition, we have had to, and may be required to continue to, adjust our pricing and offer discounts to new and existing customers in order to attract and retain customers. There is also significant and increasing competition in the market for our business services, including data and voice services offered by BT, Cable & Wireless, virtual network operators and systems integrators. While BT represents the main competitive threat nationally due to its network reach and product portfolio, we also compete with regional providers, such as COLT Telecom, which have a strong network presence within limited geographic areas. Recently we have also faced increasing competition from the launch of business services by MNOs.
Integration and Restructuring Activities. In the fourth quarter of 2008, we commenced the implementation of a restructuring plan aimed at driving further improvements in our operational performance and eliminating inefficiencies in order to create a fully-integrated, customer-focused organization. We anticipate significant cost savings from the plan and that savings will exceed the costs incurred in connection with the plan. These costs will include purchases of fixed assets, lease and contract exit costs, employee termination costs and other restructuring and restructuring-related expenses, some of which will be classified as restructuring costs. During the second quarter of 2010, we identified further savings through the expansion of the program and revised the estimated total costs and extended the completion date through the end of 2012. In total, we expect to incur operating expenditures of between £150 million to £170 million and capital expenditures of between £50 million to £60 million in connection with this plan. Our financial performance may be negatively affected if we are unable to implement our restructuring plan successfully and realize the anticipated benefits.
60
Capital Expenditures. Our business requires substantial capital expenditures on a continuing basis for various purposes, including expanding, maintaining and upgrading our cable network, investing in new customer acquisitions, and offering new services. If we do not continue to invest in our network and in new technologies, our ability to retain and acquire customers may be hindered. Therefore, our liquidity and the availability of cash to fund capital projects are important drivers of our revenue. When our liquidity is restricted, so is our ability to meet our capital expenditure requirements.
Consumer Segment
In our Consumer segment, cable customers account for the majority of our revenue. The number of customers, the number and types of services that each customer uses and the prices we charge for these services drive our revenue. Our profit is driven by the relative margins on the types of services we provide to these customers and by the number of services that we provide to them and, with respect to our fixed and mobile telephone customers, by usage levels of our services. For example, cable broadband internet is more profitable than our television services and, on average, our triple-play customers are more profitable than double-play or single-play customers. Similarly, over the service term our contract mobile customers are more profitable than our prepay mobile customers, and provide a better opportunity for cross-sell of our cable products. We actively promote quad-play services and our packaging of services and our pricing are designed to encourage our customers to use multiple services such as television, fixed and mobile telephone and broadband at a lower price than each stand-alone product on a combined basis. Factors particularly affecting our Consumer segment include average revenue per user, or ARPU, churn, competition, seasonality and distribution.
Cable ARPU. Cable ARPU is a measure we use to evaluate how effectively we are realizing potential revenue from our residential cable customers on our network. We believe that our triple-play cable offering of television, broadband and fixed line telephone services is attractive to our existing cable customer base and generally allows us to increase our cable ARPU by facilitating the sale of multiple services to each customer. Cable ARPU excludes any revenue from our mobile and non-cable customers.
Mobile ARPU. Mobile ARPU is a measure we use to evaluate how effectively we are realizing revenue from our mobile customers. The mix of prepay and contract customers and level of usage have a material impact on Mobile ARPU. The mix of our customer base is changing as we focus on acquiring higher lifetime value contract customers, rather than lower lifetime value prepay customers, particularly through cross-selling to our cable customer base. Consequently, the number of prepay customers is expected to continue to decline in 2011, along with prepay usage.
Churn. Churn is the proportion of customers who stop subscribing to any of our services. An increase in our churn can lead to increased costs and reduced revenue. We continue to focus on improving our customer service and enhancing and expanding our service offerings to existing customers in order to manage our churn rates. Our ability to reduce our churn rates beyond a base level is limited by factors such as competition, the economy and, in respect of our cable business, customers moving outside our network service area, in particular during the summer season. Managing our churn rates is a significant component of our business plan. Our churn rates may increase if our customer service is seen as unsatisfactory, if we are unable to deliver a service without interruption, if we fail to match offerings by our competitors, if we increase our prices, if there is an improvement in the U.K. housing market or if there is a prolonged economic downturn.
Seasonality. Some of our Consumer revenue streams are subject to seasonal factors. For example, telephone usage revenue by residential customers tends to be slightly lower during summer holiday months. In the fourth quarter of each year, our mobile customer acquisition and retention costs typically increase due to the Christmas holiday period. Our Mobile ARPU generally decreases in the first quarter of each year due to the fewer number of days in February and lower usage after the Christmas holiday period. Our churn rates include persons who disconnect their service because of moves, resulting in a seasonal increase in our churn rates during the summer months when higher levels of U.K. house moves occur and students leave their accommodation between academic years. In addition, our revenue and cost of sales tend to be lower in the first quarter of any year as compared to the immediately preceding fourth quarter of the prior year. Historically, there has been lower telephony usage (including mobile, as noted above) in the first quarter and less spending in a first quarter than in a fourth quarter. These factors, taken with a lesser number of days in the first quarter, have historically contributed to this trend. The first quarter of 2011 was no exception to this pattern with lower revenue and corresponding cost of sales than the fourth quarter of 2010.
61
Distribution. We rely, to a large extent, upon third parties to distribute our mobile products and services. If any of these distribution partners were to cease to act as distributors for our products and services, or the commissions or other costs charged by the third parties were to increase, our ability to gain new mobile customers or retain existing customers may be adversely affected. We continue to increase the proportion of our products distributed through our own channels including our retail outlets.
Business Segment
Factors particularly affecting our Business segment include competition, pricing, operational effectiveness and changes in government spending.
Pricing. Competition in the U.K. business telecommunications market continues to be based on value for money, the key components of which are quality, reliability and price. Certain of BTs product pricing is regulated by the U.K. Office of Communications; however, in respect of non-regulated product pricing, the market is increasingly price sensitive, particularly in the current challenging economic conditions.
Operational Effectiveness. The extensive use of optical fiber in our access networks allows us to provide high-speed ethernet services directly to business customers and provide nationwide area networking to these customers via our core networks. Business customers require timely installation services and our ability to meet required timescales and commence providing services may impact our revenues. We regularly rely on third-party suppliers to connect business customers and we have a variety of alternative methods to connect our national telecommunications network to the premises of business customers that are located outside of our cabled areas.
Government Spending. Public sector organizations, in particular local authorities, represent a significant proportion of the customer base in our Business segment. Accordingly, changes to the U.K. governments allocation of funding and spending levels with respect to certain programs have had, and may continue to have, an effect on our Business segment revenue.
Critical Accounting Policies
Our consolidated financial statements, and related financial information are based on the application of U.S. GAAP. GAAP required the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the amount of assets, liabilities, revenues and expenses reported as well as disclosures about contingencies, risks and financial condition. Actual results may differ from these estimates under different assumptions or conditions.
For a discussion of the accounting judgments and estimates that we have identified as critical in the preparation of our consolidated financial statements, please refer to our 2010 Annual Report.
New Accounting Guidance
New accounting rules and disclosures can significantly impact our reported results and the comparability of our financial statements. There are new proposals under development regarding revenue and leasing transactions which, if and when enacted, may have a material impact on our financial reporting.
62
Consolidated Results of Operations
Consolidated Results of Operations for the Three Months Ended March 31, 2011 and 2010
Revenue
For the three months ended March 31, 2011, revenue increased by 5.7% to £982.3 million from £929.4 million for the three months ended March 31, 2010. The amount of revenue recognized in both our Consumer and Business segments increased over both periods as more fully described in our segment discussions below.
Operating Costs
Operating costs for the three months ended March 31, 2011 and 2010 were as follows (in millions):
Three months ended March 31, |
||||||||||||
2011 | 2010 | Increase/ (Decrease) |
||||||||||
Operating costs: |
||||||||||||
Consumer cost of sales |
£ | 263.0 | £ | 233.2 | 12.8 | % | ||||||
Business cost of sales |
51.3 | 44.9 | 14.3 | |||||||||
Network and other operating costs |
96.8 | 98.7 | (1.9 | ) | ||||||||
Total operating costs |
£ | 411.1 | £ | 376.8 | 9.1 | % | ||||||
For the three months ended March 31, 2011, operating costs increased by 9.1% to £411.1 million from £376.8 million during the same period in 2010. This increase was primarily attributable to increased Consumer and Business segment cost of sales as a result of increased revenues in both segments, along with other factors described in greater detail in our segment discussions below. Network and other operating costs decreased primarily due to a reduction in network related facilities costs. As a result of these changes, operating costs as a percentage of revenue increased to 41.9% for the three months ended March 31, 2011 from 40.5% for the three months ended March 31, 2010.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended March 31, 2011 and 2010 were as follows (in millions):
Three months ended March 31, |
||||||||||||
2011 | 2010 | Increase/ (Decrease) |
||||||||||
Selling, general and administrative expenses: |
||||||||||||
Employee and outsourcing costs |
£ | 117.6 | £ | 116.5 | 0.9 | % | ||||||
Marketing costs |
35.2 | 38.7 | (9.0 | ) | ||||||||
Facilities |
14.5 | 17.0 | (14.7 | ) | ||||||||
Other |
27.8 | 30.8 | (9.7 | ) | ||||||||
Total selling, general and administrative expenses |
£ | 195.1 | £ | 203.0 | (3.9 | )% | ||||||
63
For the three months ended March 31, 2011, selling, general and administrative expenses decreased by 3.9% to £195.1 million from £203.0 million for the three months ended March 31, 2010. This decrease was primarily due to lower marketing, facilities and other costs, partially offset by higher employee and outsourcing costs. Marketing costs were lower primarily due to the non-recurring costs of rebranding our Business segment to Virgin Media Business in the first quarter of 2010. Lower facilities costs were mainly due to reduced power costs. Lower other costs were primarily due to lower license fees which ceased in the second quarter of 2010. Higher employee and outsourcing costs were mainly due to salary increases.
Restructuring and Other Charges
Restructuring and other charges were £2.6 million in the three months ended March 31, 2011 which related primarily to involuntary employee termination costs in connection with the restructuring program initiated in the fourth quarter of 2008. Restructuring and other charges of £0.4 million in the three months ended March 31, 2010 related primarily to employee termination costs in connection with the restructuring program initiated in the last quarter of 2008.
Depreciation Expense
For the three months ended March 31, 2011, depreciation expense decreased by 5.6% to £228.8 million from £242.5 million for the three months ended March 31, 2010. The decrease in depreciation expense was primarily a result of fixed assets becoming fully depreciated partially offset by depreciation in respect of new fixed assets.
Amortization Expense
For the three months ended March 31, 2011, amortization expense decreased to £34.1 million from £37.1 million for the three months ended March 31, 2010. The decline in amortization expense was primarily attributable to the cessation of amortization of certain intangible assets that became fully amortized in 2011.
Interest Expense
For the three months ended March 31, 2011, interest expense decreased to £114.6 million from £123.3 million for the three months ended March 31, 2010 due to lower borrowing costs on our debt along with the effect of interest and cross currency rate swaps designated as accounting hedges. We paid cash interest of £112.4 million for the three months ended March 31, 2011 and £109.0 million for the three months ended March 31, 2010. The increase in cash interest payments was primarily due to differences in the timing of interest payments on our senior credit facility and senior notes. The change in the timing of the interest payments on our senior notes is as a result refinancing activity undertaken during the year ended December 31, 2010 and the three months ended March 31, 2011.
Loss on Extinguishment of Debt
The loss on extinguishment of debt of £18.1 million for the three months ended March 31, 2011 related to the write-off of deferred financing costs resulting from the repayments of our senior credit facility from the net proceeds of the senior secured bond issuance on March 3, 2011. The loss on extinguishment of debt of £32.9 million for the three months ended March 31, 2010 related to the write-off of deferred financing costs resulting from repayments of our old senior credit facility.
Share of Income From Equity Investments
For the three months ended March 31, 2011, share of income from equity investments was £8.2 million as compared with income of £7.6 million for the same period in 2010. The share of income from equity investments in the three months ended March 31, 2011 and 2010 was our proportionate share of the income earned by UKTV.
64
Gain (loss) on Derivative Instruments
The gain on derivative instruments of £28.0 million in the three months ended March 31, 2011 was driven by the reclassification of gains of £31.1 million on derivative instruments previously designated as accounting hedges from accumulated other comprehensive income to earnings in conjunction with the discontinuance of hedge accounting on these instruments. The loss on derivative instruments of £21.0 million in the three months ended March 31, 2010 was mainly driven by the reclassification of losses on derivative instruments previously designated as accounting hedges from accumulated other comprehensive income to earnings, partially offset by gains on economic hedges resulting from the pound sterling weakening against the U.S. dollar.
Foreign Currency Gains (Losses)
The foreign currency gains of £7.9 million in the three months ended March 31, 2011 were primarily due to strengthening of the pound sterling relative to the U.S. dollar and related remeasurement gains on our convertible senior notes and U.S. dollar denominated senior notes due 2019. The foreign currency losses of £67.4 million in the three months ended March 31, 2010 were primarily due to the weakening of the pound sterling relative to the U.S. dollar and related remeasurement losses on our convertible senior notes and the U.S. dollar denominated tranches of our old senior credit facility, partially offset by remeasurement gains on our U.S. dollar denominated senior notes due 2019.
Income Tax (Expense) Benefit
For the three months ended March 31, 2011, income tax expense was £19.2 million, as compared with income tax benefit of £3.0 million for the same period in 2010. The income tax expense related primarily to a reclassification of tax effects associated with gains on certain of our hedging instruments from accumulated other comprehensive income. The income tax benefit in the prior period primarily related to consortium tax relief receivable from our joint venture operations.
Net Income (Loss) from Continuing Operations
For the three months ended March 31, 2011, net income from continuing operations was £4.5 million, compared with a net loss of £163.3 million for the same period in 2010, due to the factors discussed above.
Net Income (Loss) from Continuing Operations per Share
Basic and diluted net income from continuing operations per common share for the three months ended March 31, 2011 was £0.01 compared to a loss of £0.50 for the three months ended March 31, 2010. Basic and diluted net income (loss) from continuing operations per share is computed using a weighted average of 320.5 million shares outstanding in the three months ended March 31, 2011 and a weighted average of 329.7 million shares outstanding for the same period in 2010.
Segmental Results of Operations from Continuing Operations for the Three Months Ended March 31, 2011 and 2010
A description of the products and services, as well as financial data, for each segment can be found in note 11 to Virgin Medias condensed consolidated financial statements.
The reportable segments disclosed in this quarterly report on Form 10-Q are based on our management organizational structure as of March 31, 2011. Future changes to this organizational structure may result in changes to the reportable segments disclosed.
Segment contribution, which is operating income before network operating costs, corporate costs, depreciation, amortization, goodwill and intangible asset impairments and restructuring and other charges, is managements measure of segment profit. Segment contribution excludes the impact of certain costs and expenses that are not directly attributable to the reporting segments, such as the costs of operating the network, corporate costs, depreciation and amortization. Restructuring and other charges, and goodwill and intangible asset impairments are excluded from segment contribution as management believes they are not characteristic of our underlying business operations. Assets are reviewed on a consolidated basis and are not allocated to segments for management reporting since the primary asset of the business is the cable network infrastructure which is shared by our Consumer and Business segments.
65
Consumer Segment
The summary combined results of operations of our Consumer segment for the three months ended March 31, 2011 and 2010 were as follows (in millions):
Three months ended March 31, |
||||||||||||
2011 | 2010 | Increase/ (Decrease) |
||||||||||
Revenue |
£ | 823.2 | £ | 789.5 | 4.3 | % | ||||||
Segment contribution |
485.0 | 480.5 | 0.9 |
Revenue
Our Consumer segment revenue for the three months ended March 31, 2011 and 2010 was as follows (in millions):
Three months ended March 31, |
||||||||||||
2011 | 2010 | Increase/ (Decrease) |
||||||||||
Revenue: |
||||||||||||
Cable |
£ | 666.0 | £ | 640.0 | 4.1 | % | ||||||
Mobile (1) |
136.9 | 131.9 | 3.8 | |||||||||
Non-cable |
20.3 | 17.6 | 15.3 | |||||||||
Total revenue |
£ | 823.2 | £ | 789.5 | 4.3 | % | ||||||
(1) | Includes equipment revenue stated net of discounts earned through service usage. |
For the three months ended March 31, 2011, revenue from our Consumer segment customers increased by 4.3% to £823.2 million from revenue of £789.5 million for the three months ended March 31, 2010. This increase was primarily due to an increase in revenue from our cable product offerings and, to a lesser extent, increased revenue from our mobile and non-cable product offerings.
For the three months ended March 31, 2011, cable revenue increased to £666.0 million from £640.0 million for the three months ended March 31, 2010. This increase in cable revenue was primarily due to additional cable customers subscribing to our services, selective price increases and successful up-selling and cross-selling to our existing customer base, partially offset by a continued decline in fixed line telephony usage along with higher price discounting to stimulate customer activity and retention in light of competitive factors in the marketplace.
Cable ARPU increased to £46.16 for the three months ended March 31, 2011 from £45.01 for the three months ended March 31, 2010. The increase in cable ARPU was mainly due to the selective price increases and successful up-selling and cross-selling to existing customers, partially offset by declining telephony usage and price discounting. Our focus on acquiring new bundled customers and on cross-selling to existing customers is demonstrated by cable products per customer increasing to 2.50 at March 31, 2011 from 2.48 at March 31, 2010, and by triple-play penetration growing to 63.4% at March 31, 2011 from 61.9% at March 31, 2010. A triple-play customer is a customer who subscribes to our cable television, broadband and fixed line telephone services.
For the three months ended March 31, 2011, mobile revenue increased to £136.9 million from £131.9 million for the three months ended March 31, 2010. This increase was attributable to an increase in service revenues, mainly driven by increased contract revenue, partially offset by lower revenue from the declining base of prepay mobile subscribers.
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Mobile ARPU increased to £14.70 for the three months ended March 31, 2011 from £13.70 for the three months ended March 31, 2010. The increase was primarily due to the increased proportion of our higher value contract customers relative to the total number of mobile customers, which rose to 42.1% at March 31, 2011 from 33.7% at March 31, 2010, partially offset by lower prepay usage.
Non-cable revenue for the three months ended March 31, 2011 increased to £20.3 million from £17.6 million for the three months ended March 31, 2010. Revenue increased as a result of an increase in the number of customers along with an increase in the number of customers taking both telephone and broadband services, which rose to 62.1% at March 31, 2011 from 54.2% at March 31, 2010, and an increase in line rental revenues.
Consumer Segment Contribution
For the three months ended March 31, 2011, Consumer segment contribution increased to £485.0 million from £480.5 million for the three months ended March 31, 2010. The increase was primarily due to the increase in Consumer revenue, as described above, partially offset by higher Consumer cost of sales primarily due to the higher cost of high definition (HD) content in our TV package as well as higher mobile equipment costs and higher telephony interconnect costs.
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Summary Cable Statistics
Selected statistics for our cable customers for the three months ended March 31, 2011 as well as the four prior quarters are set forth in the table below. We believe that the presentation of these statistics is important in understanding trends in our cable operations. Our net additions, being the net of our customer additions and disconnects, for the three months ended March 31, 2011 was an increase of 20,200 customers. The decrease in net additions compared with the three months ended March 31, 2010 was primarily the result of an increase in customer churn. Customer churn increased to 1.2% in the three months ended March 31, 2011 from 1.1% in the three months ended March 31, 2010 due to competitive and economic factors. The total number of cable products grew to 12,031,000 at March 31, 2011 from 11,817,700 at March 31, 2010, representing a net increase in products of 213,300. Between March 31, 2010 and March 31, 2011, the number of cable customers increased by 58,500.
Three months ended | ||||||||||||||||||||
March 31, 2011 |
December 31, 2010 |
September 2010 |
June 30, 2010 |
March 31, 2010 |
||||||||||||||||
Opening customers |
4,800,100 | 4,783,000 | 4,768,900 | 4,761,800 | 4,723,500 | |||||||||||||||
Customer additions |
191,800 | 206,600 | 236,000 | 188,600 | 193,100 | |||||||||||||||
Customer disconnects (1) |
(171,600 | ) | (189,500 | ) | (221,900 | ) | (181,500 | ) | (154,800 | ) | ||||||||||
Net customer additions |
20,200 | 17,100 | 14,100 | 7,100 | 38,300 | |||||||||||||||
Closing customers |
4,820,300 | 4,800,100 | 4,783,000 | 4,768,900 | 4,761,800 | |||||||||||||||
Cable churn (2) |
1.2 | % | 1.3 | % | 1.6 | % | 1.3 | % | 1.1 | % | ||||||||||
Cable products: |
||||||||||||||||||||
Television |
3,788,900 | 3,778,800 | 3,766,700 | 3,751,900 | 3,729,600 | |||||||||||||||
DTV (included in Television) |
3,772,300 | 3,759,600 | 3,745,900 | 3,728,700 | 3,702,800 | |||||||||||||||
ATV (included in Television) |
16,600 | 19,200 | 20,800 | 23,200 | 26,800 | |||||||||||||||
Telephone |
4,180,900 | 4,161,700 | 4,161,000 | 4,175,300 | 4,178,000 | |||||||||||||||
Broadband |
4,061,200 | 4,011,100 | 3,969,800 | 3,936,000 | 3,910,100 | |||||||||||||||
Total cable products |
12,031,000 | 11,951,600 | 11,897,500 | 11,863,200 | 11,817,700 | |||||||||||||||
Cable products/Customer |
2.50 | x | 2.49 | x | 2.49 | x | 2.49 | x | 2.48 | x | ||||||||||
Triple-play penetration |
63.4 | % | 63.0 | % | 62.7 | % | 62.4 | % | 61.9 | % | ||||||||||
Cable Average Revenue Per User (3) |
£ | 46.16 | £ | 47.51 | £ | 46.38 | £ | 45.88 | £ | 45.01 | ||||||||||
Cable ARPU calculation: |
||||||||||||||||||||
Cable revenue (millions) |
£ | 666.0 | £ | 682.8 | £ | 662.6 | £ | 656.4 | £ | 640.0 | ||||||||||
Average customers |
4,809,000 | 4,790,000 | 4,763,400 | 4,768,800 | 4,739,500 |
(1) | During the second half of 2010, we reviewed our credit and collections reporting processes and aligned the way we measure disconnections with our underlying operational process. As a result, we estimate that reported gross disconnects decreased by 6,300 customers, representing 15,300 products and 4,600 customers, representing 11,000 products, during the third and fourth quarters of 2010, respectively. |
(2) | Cable churn is calculated by taking the total cable customer disconnects during the month (excluding any data cleanse activity) and dividing them by the average number of cable customers during the month. Average monthly churn during a quarter is the average of the three monthly churn calculations within the quarter. |
(3) | The monthly cable average revenue per user, or cable ARPU, is calculated on a quarterly basis by dividing total revenue generated from the provision of telephone, television and internet services to customers who are directly connected to our network in that period together with revenue generated from customers using our virginmedia.com website, by the average number of customers directly connected to our network in that period divided by three. |
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Summary Mobile Statistics
Selected statistics for our mobile customers for the three months ended March 31, 2011 as well as the four prior quarters are set forth in the table below. We believe that the presentation of these statistics is important in understanding trends in our mobile operations. Between March 31, 2010 and March 31, 2011, the number of mobile customers decreased by a net 58,600. Contract customer gains of 232,500 were offset by net losses of 291,100 prepay customers. The growth in contract customers reflects our strategy of using our own sales channels and cross-selling mobile contracts to our cable customers. The decline in prepay customers reflects increased competition in the prepay market and our strategy not to focus heavily on retaining market share in the prepay market due to higher churn, lower ARPU and lower overall lifetime value.
Three months ended | ||||||||||||||||||||
March 31, 2011 |
December 31, 2010 |
September 2010 |
June 30, 2010 |
March 31, 2010 |
||||||||||||||||
Contract mobile customers (1): |
||||||||||||||||||||
Opening contract mobile customers |
1,210,800 | 1,154,700 | 1,097,200 | 1,030,900 | 949,700 | |||||||||||||||
Net contract mobile customer additions (2) |
52,600 | 56,100 | 57,500 | 66,300 | 81,200 | |||||||||||||||
Closing contract mobile customers |
1,263,400 | 1,210,800 | 1,154,700 | 1,097,200 | 1,030,900 | |||||||||||||||
Prepay mobile customers (1): |
||||||||||||||||||||
Opening prepay mobile customers |
1,858,100 | 1,912,300 | 1,976,200 | 2,028,900 | 2,225,000 | |||||||||||||||
Net prepay mobile customer disconnections (2) |
(120,300 | ) | (54,200 | ) | (63,900 | ) | (52,700 | ) | (196,100 | ) | ||||||||||
Closing prepay mobile customers |
1,737,800 | 1,858,100 | 1,912,300 | 1,976,200 | 2,028,900 | |||||||||||||||
Total closing mobile customers: (1) |
3,001,200 | 3,068,900 | 3,067,000 | 3,073,400 | 3,059,800 | |||||||||||||||
Mobile average revenue per user (3) |
£ | 14.70 | £ | 15.16 | £ | 15.01 | £ | 14.36 | £ | 13.70 | ||||||||||
Mobile ARPU calculation: |
||||||||||||||||||||
Mobile service revenue (millions) |
£ | 133.4 | £ | 138.7 | £ | 138.6 | £ | 131.9 | £ | 127.7 | ||||||||||
Average mobile customers |
3,023,800 | 3,050,000 | 3,077,700 | 3,061,800 | 3,106,300 |
(1) | Mobile customer information is for active customers. Prepay customers are defined as active customers if they have made an outbound call or text in the preceding 30 days. Contract customers are defined as active customers if they have entered into a contract for a minimum 30-day period and have not been disconnected. Contract mobile customers represent the number of contracts relating to either a mobile service or a mobile broadband service. |
(2) | Contract net additions in the three months ended June 30, 2010 includes 9,300 customers who have been taking contract services since joining but had previously been recorded as prepay customers. A corresponding reduction is included in prepay net additions in the same quarter. |
(3) | Mobile monthly average revenue per user, or Mobile ARPU, is calculated on a quarterly basis by dividing mobile service revenue (contract and prepay) for the period by the average number of active customers (contract and prepay) for the period, divided by three. |
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Summary Non-cable Statistics
Selected statistics for our residential customers that are not connected directly through our cable network, or non-cable customers, for the three months ended March 31, 2011 as well as for the four prior quarters are set forth in the table below. We believe that the presentation of these statistics is important in understanding trends in our non-cable operations. Between March 31, 2010 and March 31, 2011 the total number of non-cable products increased by 24,900 primarily due to an increase in the number of customers taking both telephone and broadband services, which rose to 62.1% at March 31, 2011 from 54.2% at March 31, 2010.
Three months ended | ||||||||||||||||||||
March 31, 2011 |
December 31, 2010 |
September 2010 |
June 30, 2010 |
March 31, 2010 |
||||||||||||||||
Opening customers |
276,700 | 274,000 | 272,600 | 270,600 | 267,200 | |||||||||||||||
Net customer (disconnects) / additions |
(4,000 | ) | 2,700 | 1,400 | 2,000 | 3,400 | ||||||||||||||
Closing customers |
272,700 | 276,700 | 274,000 | 272,600 | 270,600 | |||||||||||||||
Opening Non-cable products: |
||||||||||||||||||||
Telephone |
169,600 | 161,200 | 154,400 | 147,600 | 139,800 | |||||||||||||||
Broadband |
275,900 | 273,100 | 271,800 | 269,600 | 265,700 | |||||||||||||||
445,500 | 434,300 | 426,200 | 417,200 | 405,500 | ||||||||||||||||
Net Non-cable product additions / (disconnects): |
||||||||||||||||||||
Telephone |
1,100 | 8,400 | 6,800 | 6,800 | 7,800 | |||||||||||||||
Broadband |
(4,500 | ) | 2,800 | 1,300 | 2,200 | 3,900 | ||||||||||||||
(3,400 | ) | 11,200 | 8,100 | 9,000 | 11,700 | |||||||||||||||
Closing Non-cable products: |
||||||||||||||||||||
Telephone |
170,700 | 169,600 | 161,200 | 154,400 | 147,600 | |||||||||||||||
Broadband |
271,400 | 275,900 | 273,100 | 271,800 | 269,600 | |||||||||||||||
442,100 | 445,500 | 434,300 | 426,200 | 417,200 | ||||||||||||||||
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Business Segment
Revenue
The summary combined results of operations of our Business segment for the three months ended March 31, 2011 and 2010 were as follows (in millions):
Three months ended March 31, |
||||||||||||
2011 | 2010 | Increase/ (Decrease) |
||||||||||
Revenue |
£ | 159.1 | £ | 139.9 | 13.7 | % | ||||||
Segment contribution |
92.6 | 76.1 | 21.7 |
Our Business segment revenue for the three months ended March 31, 2011 and 2010 was as follows (in millions):
Three months ended March 31, |
||||||||||||
2011 | 2010 | Increase/ (Decrease) |
||||||||||
Revenue: |
||||||||||||
Retail: |
||||||||||||
Data |
£ | 65.4 | £ | 55.0 | 18.9 | % | ||||||
Voice |
38.9 | 41.5 | (6.2 | ) | ||||||||
LAN Solutions and other |
9.2 | 6.2 | 48.3 | |||||||||
£ | 113.5 | 102.7 | 10.6 | |||||||||
Wholesale: |
||||||||||||
Data |
42.0 | 31.3 | 34.2 | |||||||||
Voice |
3.6 | 5.9 | (39.0 | ) | ||||||||
Total revenue |
£ | 159.1 | £ | 139.9 | 13.7 | % | ||||||
For the three months ended March 31, 2011, revenue from business customers increased by 13.7% to £159.1 million from £139.9 million for the three months ended March 31, 2010. This increase was primarily attributable to growth in retail data and wholesale revenues, in part through greater install activity, together with growth in Local Area Network (LAN) solutions revenues partially offset by declines in retail voice revenue.
Retail data revenue represented 57.6% of the retail business revenue for the three months ended March 31, 2011 compared with 53.6% for the three months ended March 31, 2010. Retail data revenue increased in the three months ended March 31, 2011 compared with the same period in 2010 as a result of our strategy of focusing on higher margin data revenue and increasing demand for our data products within a growing data market. Retail voice revenue decreased in the three month ended March 31, 2011 compared with the same period in 2010, mainly as a result of declining telephony usage and lower rental revenues.
LAN solutions and other revenue increased by 48.3% to £9.2 million in the three months ended March 31, 2011 as compared to £6.2 million in the three months ended March 31, 2010, primarily due to increased equipment and LAN project revenues. The majority of this revenue is from infrastructure projects which are non-recurring in nature.
71
Wholesale revenue increased to £45.6 million for the three months ended March 31, 2011 from £37.2 million in the three months ended March 31, 2010 primarily due to increased usage of our network by wholesale data customers, partially offset by reduced wholesale voice revenues.
Business Segment Contribution
For the three months ended March 31, 2011, Business segment contribution increased to £92.6 million from £76.1 million for the three months ended March 31, 2010. The increase in segment contribution in the three months ended March 31, 2011 as compared with the same period in 2010 was due primarily to the higher revenue as described above.
Liquidity and Capital Resources
Overview
Our business is capital intensive and we are highly leveraged. We have significant cash requirements for operating costs, capital expenditures and interest expense. We believe that we will be able to meet our current and medium-term liquidity and capital requirements, including fixed charges, through cash on hand, cash from operations, available borrowings under our revolving credit facility, and our ability to obtain future external financing.
On July 28, 2010, we announced our intention to undertake a range of capital structure optimization actions including 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. During the three months ended March 31, 2011, we increased the capital optimization program to permit the full redemption of the 9.125% senior notes due 2016 on or before August 15, 2011. Our capital structure optimization program may be effected through open market, privately negotiated and / or derivative transactions, and may be implemented through arrangements with one or more brokers. Any shares of common stock acquired in connection with this program will be held in treasury or cancelled. During the three months ended March 31, 2011, we repurchased 7.2 million shares of common stock, at an average purchase price per share of $27.10 ($194.4 million in aggregate), through open market repurchases. The shares of common stock acquired in connection with this program were cancelled. As at March 31, 2011, the remaining amount authorized under the share repurchase program was £93.5 million. No shares of common stock were repurchased in the three months ended March 31, 2010.
On February 15, 2011, we further amended our senior credit facility to increase our operational flexibility. For more information, see Senior Credit Facility below,
On March 3, 2011, our wholly owned subsidiary, Virgin Media Secured Finance PLC, issued $500 million aggregate principal amount of 5.25% senior secured notes due 2021 and £650 million aggregate principal amount of 5.50% senior secured notes due 2021. The senior secured notes due 2021 rank pari passu with our senior credit facility and senior secured notes due 2018 and, subject to certain exceptions, share in the same guarantees and security which have been granted in favor of our senior credit facility and senior secured notes due 2018. We used the net proceeds from the senior secured notes due 2021 to make repayments totaling £900 million under our senior credit facility and for general corporate purposes.
We also intend to redeem the full outstanding principal amount of our 9.125% senior notes due 2016 on or before August 15, 2011 using cash from our balance sheet. For more information, see Unsecured Senior Notes below.
We may opportunistically access the loan and debt markets in order to extend debt maturities and seek improved debt terms.
As of March 31, 2011, we had £6,016.9 million of debt outstanding, compared to £6,020.4 million as of December 31, 2010 and £6,146.9 million as of March 31, 2010, and £482.7 million of cash and cash equivalents, compared to £479.5 million as of December 31, 2010 and £420.7 million as of March 31, 2010. The decrease in debt since both March 31, 2010 and December 31, 2010 is due to favorable movements in exchange rates and, to a lesser extent, an increase in net borrowing.
72
Our long term debt was issued by Virgin Media Inc. and certain of its subsidiaries that have no independent operations or significant assets other than investments in their respective subsidiaries and receivables under intercompany loans. As a result, they will depend upon the receipt of sufficient funds from their respective subsidiaries or payments under intercompany loans to meet their obligations. In addition, the terms of our existing and future indebtedness and the laws of the jurisdictions under which our subsidiaries are organized limit the payment of dividends, loan repayments and other distributions from them under many circumstances.
Our debt agreements contain restrictions on our ability to transfer cash between groups of our subsidiaries. As a result of these restrictions, although our overall liquidity may be sufficient to satisfy our obligations, we may be limited by covenants in some of our debt agreements from transferring cash to other subsidiaries that might require funds. In addition, cross default provisions in our other indebtedness may be triggered if we default on any of these debt agreements.
Our cash balance of £482.7 million as of March 31, 2011 is held in a combination of short term bank deposits, money market funds and bank accounts that have a duration to maturity between overnight and up to three months. Our bank accounts are held with major financial institutions and, as part of our cash management process we perform regular evaluations of the credit standing of these institutions using a range of metrics.
Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2011 and 2010
For the three months ended March 31, 2011, cash provided by operating activities increased to £271.6 million from £202.2 million for the three months ended March 31, 2010. This increase was primarily attributable to the improvement in operating results. For the three months ended March 31, 2011, cash paid for interest, exclusive of amounts capitalized, increased to £112.4 million from £109.0 million during the same period in 2010. This increase was the result of differences in the timing of interest payments on our senior credit facility and senior notes. The change in the timing of the interest payments on our senior notes is as a result refinancing activity undertaken during the year ended December 31, 2010 and the three months ended March 31, 2011.
For the three months ended March 31, 2011, cash used in investing activities was £154.0 million compared with cash used in investing activities of £179.3 million for the three months ended March 31, 2010. The cash used in investing activities in the three months ended March 31, 2011 and March 31, 2010 mainly represented purchases of fixed assets. Purchases of fixed and intangible assets decreased to £163.3 million for the three months ended March 31, 2011 from £181.5 million for the same period in 2010 primarily due to the timing of payments to suppliers and an increase in fixed assets acquired under finance leases.
Cash used in financing activities for the three months ended March 31, 2011 was £104.4 million compared to cash used in financing activities of £20.3 million for the three months ended March 31, 2010. Cash used in financing activities for the three months ended March 31, 2011 was primarily for principal payments on long term debt and repurchases of common stock, partially offset by new debt issuances. Cash used in financing activities for the three months ended March 31, 2010 primarily related to principal payments on long term debt offset by new debt issuances.
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Senior Credit Facility
On March 16, 2010, we entered into a senior facilities agreement (as amended and restated on March 26, 2010 and February 15, 2011), or the Senior Facilities Agreement, under which Deutsche Bank AG, London Branch, BNP Paribas London Branch, Bank of America, N.A., Crédit Agricole Corporate and Investment Bank, GE Corporate Finance Bank SAS, Goldman Sachs Lending Partners LLC, J.P. Morgan Chase Bank, N.A. London Branch, Lloyds TSB Bank plc, The Royal Bank of Scotland plc and UBS Limited agreed to make available to certain subsidiaries of the Company a term loan A facility, or Tranche A, and a revolving credit facility, or RCF. On April 12, 2010, a term loan B facility, or Tranche B was added to the Senior Facilities Agreement 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 £1,675.0 million under the senior credit facility and applied the proceeds towards the repayment in full of all amounts outstanding under our previous 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, among others, (i) fix the total net leverage ratio to 3.75:1.00 from December 31, 2011 until December 31, 2015; (ii) delete the cap on the amount of cash that can be deducted in calculating consolidated senior net debt and consolidated net debt; (iii) allow the Company to incur debt so long as it remains in compliance with the total net leverage; (iv) change the required level for the ratio of consolidated senior net debt to consolidated operating cashflow from 2.25:1.00 to 3.00:1.00; (v) include sale and leaseback arrangements in certain financial baskets; (vi) increase certain financial baskets to the greater of £250 million plus amounts outstanding as of the original execution date and the amount that could be incurred so that the ratio of consolidated senior net debt to consolidated operating cashflow is equal to, or less than, 3.00:1.00 for the purposes of incurring secured debt; (vii) eliminate the excess cash flow sweep; and (viii) eliminate the restriction on using the proceeds of an additional facility or additional senior secured notes for the payment of any dividends or distributions to the Company and the repayment or prepayment of the 9.125% senior notes due 2016. Certain additional amendments were outlined in the senior credit facility, including the extension of certain lenders portion of our June 30, 2014 scheduled amortization payment of £200 million by one year, to June 30, 2015.
In March 2011, we used the proceeds from our senior secured notes due 2021 (as described in Senior Secured Notes below) to prepay approximately £532.5 million of the Tranche A outstanding under our senior credit facility, thus eliminating scheduled amortization in 2011 through 2014, and approximately £367.5 million of Tranche B outstanding under our senior credit facility that was scheduled for payment in 2015.
As at March 31, 2011, our senior credit facility is comprised of Tranche A in an aggregate outstanding principal amount of £467.5 million; Tranche B in an aggregate outstanding principal amount of £307.5 million; and the RCF in an aggregate outstanding principal amount of £250 million. The proceeds from Tranches A and B may be used for general corporate purposes, while the proceeds from the RCF are available for the financing of our ongoing working capital requirements and general corporate purposes. The final maturity date of Tranche A and the RCF under our senior credit facility is June 30, 2015, and the final maturity date of Tranche B is December 31, 2015.
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Principal Amortization
Following the amendments to the Senior Facilities Agreement and the prepayments made under our senior credit facility in March 2011, the remaining principal payments on our senior credit facility scheduled as of March 31, 2011 were as follows (in millions):
Date |
Amount | |||
Tranche A June 30, 2015 |
£ | 467.5 | ||
Tranche B December 31, 2015 |
307.5 | |||
Total |
£ | 775.0 | ||
Mandatory Prepayments
Our senior credit facility must be prepaid in certain circumstances by certain amounts, including:
| 50% of the net cash proceeds of any issuance of equity greater than £10 million (above an aggregate prepayment threshold) subject to customary exceptions, which percentage may be reduced to 25% or 0% if certain leverage ratios are met; |
| from the net proceeds of insurance claims subject to an aggregate prepayment threshold amount, other minimum thresholds and customary exceptions; and, |
| from the net proceeds of certain asset disposals subject to an aggregate prepayment threshold amount, other minimum thresholds and customary exceptions. |
In addition, our senior credit facility must be repaid and all commitments will be cancelled upon the occurrence of a change of control.
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Interest Margins
The annual rate of interest payable under our senior credit facility is the sum of (i) the London Intrabank Offer Rate (LIBOR), plus (ii) the applicable interest margin and (iii) the applicable cost of complying with any mandatory costs requirement.
The applicable interest margin for Tranche A and the RCF under our senior credit facility depends upon the total net leverage ratio of the bank group (which comprises VMIH and most of its subsidiaries, and certain other operating companies which are subsidiaries of Virgin Media Inc. but not of VMIH) then in effect as set forth below:
Leverage Ratio |
Margin | |||
Greater than 3.75:1.00 |
3.50 | % | ||
Equal to or less than 3.75:1.00 but greater than 3.25:1.00 |
3.25 | % | ||
Equal to or less than 3.25:1.00 but greater than 2.75:1.00 |
3.00 | % | ||
Equal to or less than 2.75:1.00 |
2.75 | % |
Leverage ratio is calculated by comparing consolidated net debt at any quarter end date against consolidated operating cash flow on a rolling 12 month basis ending on such quarter date (such defined terms have the same meaning as in the Senior Facilities Agreement).
The applicable interest margin for Tranche B is 3.75%.
Guarantees; Security
Our senior credit facility requires that members of the bank group which generate not less than 80% of the consolidated operating cash flow of the bank group (excluding the consolidated net income attributable to any joint venture) in any financial year guarantee the payment of all sums payable under our senior credit facility and such members are required to grant first-ranking security over all or substantially all of their assets to secure the payment of all sums payable under our senior credit facility. Virgin Media Finance PLC has also provided a guarantee for the payment of all sums payable under our senior credit facility and has secured its obligations under that guarantee by granting security over its interest in the intercompany debt owed to it by its direct subsidiary, VMIH and over all of the shares in VMIH.
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Financial Maintenance Covenants
Our senior credit facility contains the following financial covenant ratios:
| Consolidated net debt to consolidated operating cashflow, which we refer to as the leverage ratio; and, |
| Consolidated operating cashflow to consolidated total net cash interest, which we refer to as the interest coverage ratio. |
These covenant ratios are calculated with respect to our bank group companies, pursuant to the definitions contained in our senior credit facility, and are subject to certain adjustments provided therein. The minimum required ratios are outlined below:
Quarter Date |
Leverage Ratio |
Interest Coverage Ratio |
||||||
March 31, 2011 |
4.60:1.00 | 2.75:1.00 | ||||||
June 30, 2011 |
4.40:1.00 | 2.80:1.00 | ||||||
September 30, 2011 |
4.35:1.00 | 2.85:1.00 | ||||||
December 31, 2011 |
3.75:1.00 | 2.95:1.00 | ||||||
March 31, 2012 |
3.75:1.00 | 3.00:1.00 | ||||||
June 30, 2012 |
3.75:1.00 | 3.05:1.00 | ||||||
September 30, 2012 |
3.75:1.00 | 3.10:1.00 | ||||||
December 31, 2012 |
3.75:1.00 | 3.10:1.00 | ||||||
March 31, 2013 |
3.75:1.00 | 3.15:1.00 | ||||||
June 30, 2013 |
3.75:1.00 | 3.20:1.00 | ||||||
September 30, 2013 |
3.75:1.00 | 3.25:1.00 | ||||||
December 31, 2013 |
3.75:1.00 | 3.35:1.00 | ||||||
March 31, 2014 |
3.75:1.00 | 3.45:1.00 | ||||||
June 30, 2014 |
3.75:1.00 | 3.55:1.00 | ||||||
September 30, 2014 |
3.75:1.00 | 3.70:1.00 | ||||||
December 31, 2014 |
3.75:1.00 | 3.80:1.00 | ||||||
March 31, 2015 |
3.75:1.00 | 3.95:1.00 | ||||||
June 30, 2015 |
3.75:1.00 | 4.00:1.00 | ||||||
September 30, 2015 |
3.75:1.00 | 4.00:1.00 | ||||||
December 31, 2015 |
3.75:1.00 | 4.00:1.00 |
Failure to meet these covenant levels would result in a default under our senior credit facility. As of March 31, 2011, we were in compliance with these covenants.
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Restrictions
Our senior credit facility significantly, and in some cases absolutely, restricts the ability of the members of the bank group to, among other things:
| incur or guarantee additional indebtedness; |
| pay dividends at certain levels of leverage, or make other distributions, or redeem or repurchase equity interests or subordinated obligations; |
| make investments; |
| dispose of assets, including the capital stock of subsidiaries; |
| create liens; |
| enter into agreements that restrict the ability of the members of the bank group to make payments or other distributions in cash to other members of the bank group; |
| merge or consolidate or transfer all or substantially all of their assets; and |
| enter into transactions with affiliates. |
We are also subject to financial maintenance covenants under our senior credit facility.
The senior credit facility also contains certain carve-outs from these limitations.
Events of Default
The occurrence of events of default specified in the Senior Facilities Agreement entitle the lenders, after the expiry of any grace periods, as applicable, to cancel any undrawn portion of the facilities, require the immediate payment of all amounts outstanding under the facilities and enforce or direct the security interests that have been granted. These events of defaults include, among other things:
| failure to make payments of principal or interest when due; |
| breaches of representations; |
| breaches of obligations and undertakings under the Senior Facilities Agreement or related finance documents, including failure to comply with financial covenants; |
| cross-defaults to other indebtedness of any member of the group, subject to certain threshold amounts and other customary exceptions; |
| the occurrence of insolvency contingencies affecting the Company, Virgin Media Finance PLC, any borrower under the Senior Facilities Agreement or any guarantor that is a material subsidiary; |
| repudiation of the Senior Facilities Agreement or related finance documents; |
| illegality; and |
| the occurrence of any event or circumstance which would have a material adverse effect in (i) the financial condition, assets or business of the obligors (taken as a whole) under the Senior Facilities Agreement, and (ii) the ability of obligors (taken together) under the Senior Facilities Agreement to perform and comply with their payment or other material obligations under the Senior Facilities Agreement or related finance documents (taking into account the resources available to the obligors from any other member of the bank group). |
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The foregoing description of our senior credit facility does not purport to be complete and is qualified in its entirety by reference to the full text of the Senior Facilities Agreement which is filed as Exhibit 10.1 in Virgin Media Inc.s current report on Form 8-K, as filed with the SEC on February 16, 2011, and is incorporated herein by reference.
Senior Notes
In November 2009, Virgin Media Finance issued U.S. dollar denominated 8.375% senior notes due 2019 with a principal amount outstanding of $600 million and sterling denominated 8.875% senior notes due 2019 with a principal amount outstanding of £350 million, collectively, the senior notes due 2019. Interest on the senior notes due 2019 is payable on April 15 and October 15 of each year. The senior notes due 2019 are unsecured senior obligations of Virgin Media Finance and rank pari passu with Virgin Media Finances outstanding senior notes due 2014 and 2016. The senior notes due 2019 mature on October 15, 2019 and are guaranteed on a senior basis by Virgin Media Inc., Virgin Media Group LLC, Virgin Media Holdings Inc., Virgin Media (UK) Group, Inc. and Virgin Media Communications Limited and on a senior subordinated basis by VMIH and Virgin Media Investments Limited.
In June 2009, Virgin Media Finance issued U.S. dollar denominated 9.50% senior notes due 2016 with a principal amount outstanding of $750 million and euro denominated 9.50% senior notes due 2016 with a principal amount outstanding of 180 million. In July 2009, Virgin Media Finance issued additional U.S. dollar denominated 9.50% senior notes due 2016 with a principal amount outstanding of $600 million. The U.S. dollar denominated senior notes issued in June 2009 and July 2009, respectively, are treated as a single issuance of the same notes under the indenture for these notes, collectively, the 9.50% senior notes due 2016. Interest on the 9.50% senior notes due 2016 is payable on February 15 and August 15 of each year. The 9.50% senior notes due 2016 are unsecured senior obligations of Virgin Media Finance and rank pari passu with Virgin Media Finances outstanding senior notes due 2014 and 2019 and its 9.125% senior notes due 2016. The 9.50% senior notes due 2016 mature on August 15, 2016 and are guaranteed on a senior basis by Virgin Media Inc., Virgin Media Group LLC, Virgin Media Holdings Inc., Virgin Media (UK) Group, Inc. and Virgin Media Communications Limited and on a senior subordinated basis by VMIH and VMIL.
In July 2006, Virgin Media Finance issued U.S. dollar denominated 9.125% senior notes due 2016, or the 9.125% senior notes due 2016, with a principal amount outstanding of $550 million. The 9.125% senior notes due 2016 are unsecured senior obligations of Virgin Media Finance and rank pari passu with Virgin Media Finances outstanding 9.50% senior notes due 2016 and its senior notes due 2014 and 2019. Interest on the 9.125% senior notes due 2016 is payable on February 15 and August 15 of each year. The 9.125% senior notes due 2016 mature on August 15, 2016 and are guaranteed on a senior basis by Virgin Media Inc., Virgin Media Group LLC, Virgin Media Holdings Inc., Virgin Media (UK) Group, Inc. and Virgin Media Communications Limited and on a senior subordinated basis by VMIH and VMIL. We intend to fully redeem the 9.125% senior notes due 2016 on or before August 15, 2011 using cash from our balance sheet.
Senior Secured Notes
On January 19, 2010, our wholly owned subsidiary Virgin Media Secured Finance PLC issued U.S. dollar denominated 6.50% senior secured notes due 2018 with a principal amount outstanding of $1.0 billion and sterling denominated 7.00% senior secured notes due 2018 with a principal amount outstanding of £875 million, collectively, the senior secured notes due 2018. Interest is payable on the senior secured notes due 2018 on June 15 and December 15 each year, beginning on June 15, 2010.
On August 5, 2010, we completed an offer to exchange any and all of the then outstanding senior secured notes due 2018, which we originally issued in a U.S. private placement, for an equivalent amount of new senior secured notes due 2018 which have been registered under the U.S. Securities Act of 1933, as amended. In connection with this offer, we exchanged a total of $999,369,000 aggregate principal amount, or 99.9% of the original U.S. dollar denominated notes, and £867,373,000 aggregate principal amount, or 99.1% of the original sterling denominated notes, for an equivalent amount of newly issued senior secured notes due 2018. Holders of the original senior secured notes due 2018 who did not tender their notes in compliance with the offer terms will remain subject to restrictions on transfer of these notes. Completion of the exchange offer satisfied our obligations in full under a registration rights agreement entered into in connection with the original note issuance in January 2010. We did not receive any additional proceeds from the exchange offer. For further details relating to the exchange offer, please see Amendment No.1 to the Registration Statement on Form S-4 of Virgin Media Inc., as filed with the SEC on June 30, 2010.
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On March 3, 2011, Virgin Media Secured Finance PLC issued a further U.S. dollar denominated 5.25% senior secured notes due 2021 with a principal amount outstanding of $500 million and sterling denominated 5.50% senior secured notes due 2021 with a principal amount outstanding of £650 million, collectively, the senior secured notes due 2021. Interest is payable on the senior secured notes due 2021 on January 15 and July 15 each year, beginning on July 15, 2011. The net proceeds from the senior secured notes due 2021 were partly applied towards the prepayment of £532.5 million of the Tranche A outstanding under our senior credit facility and £367.5 million of the Tranche B Facility outstanding under our senior credit facility. The remainder of the net proceeds are being used for general corporate purposes. For further details relating to the senior secured notes due 2021, please see Virgin Media Inc.s current report on Form 8-K, as filed with the SEC on March 3, 2011, which is incorporated herein by reference.
The senior secured notes due 2018 and the senior secured notes due 2021 rank pari passu with and, subject to certain exceptions, share in the same guarantees and security which has been granted in favor of our senior credit facility. See Senior Credit FacilityGuarantees: Security.
Convertible Senior Notes
In April 2008, Virgin Media Inc. issued U.S. denominated 6.50% convertible senior notes due 2016 with a principal amount outstanding of $1.0 billion. The convertible senior notes are unsecured senior obligations of Virgin Media Inc. and, consequently, are subordinated to our obligations under our senior credit facility and rank equally with Virgin Media Inc.s guarantees of the senior notes. The convertible senior notes bear interest at an annual rate of 6.50% payable semi-annually on May 15 and November 15 of each year, beginning November 15, 2008. The convertible senior notes mature on November 15, 2016 and may not be redeemed by us prior to the maturity date. Upon conversion, we may elect to settle in cash, shares of common stock or a combination of cash and shares of our common stock. Up to 80,840,700 shares of our common stock are issuable upon the conversion of our convertible senior notes. Our current report on Form 8-K, as filed with the SEC on April 16, 2008 contains a more detailed description of the terms of our convertible senior notes.
Holders of convertible senior notes may tender their notes for conversion at any time on or after August 15, 2016 through to the second scheduled trading date preceding the maturity date. Prior to August 15, 2016, holders may convert their notes, at their option, only under the following circumstances: (i) in any quarter, if the closing sale price of Virgin Media Inc.s common stock during at least 20 of the last 30 trading days of the prior quarter was more than 120% of the applicable conversion price per share of common stock on the last day of such prior quarter; (ii) if, for five consecutive trading days, the trading price per $1,000 principal amount of notes was less than 98% of the product of the closing price of our common stock and the then applicable conversion rate; (iii) if a specified corporate event occurs, such as a merger, recapitalization, reclassification, binding share exchange or conveyance of all, or substantially all, of Virgin Media Inc.s assets; (iv) the declaration by Virgin Media Inc. of the distribution of certain rights, warrants, assets or debt securities to all, or substantially all, holders of Virgin Media Inc.s common stock; or (v) if Virgin Media Inc. undergoes a fundamental change (as defined in the indenture governing the convertible senior notes), such as a change in control, merger, consolidation, dissolution or delisting.
The initial conversion rate of the convertible senior notes represents an initial conversion price of approximately $19.22 per share of common stock. The conversion rate is subject to adjustment for stock splits, stock dividends or distributions, the issuance of certain rights or warrants, certain cash dividends or distributions or stock repurchases where the price exceeds market values. In the event of specified fundamental changes relating to Virgin Media Inc., referred to as make whole fundamental changes, the conversion rate will be increased as provided by a formula set forth in the indenture governing the convertible senior notes.
Holders may also require us to repurchase the convertible senior notes for cash in the event of a fundamental change (as defined in the indenture governing the convertible senior notes), such as a change in control, merger, consolidation, dissolution or delisting (including involuntary delisting for failure to continue to comply with the NASDAQ listing criteria), for a purchase price equal to 100% of the principal amount, plus accrued but unpaid interest to the purchase date.
If the trading price of our common stock exceeds 120% of the conversion price of the convertible notes for 20 out of the last 30 trading days of a calendar quarter, holders of the convertible notes may elect to convert
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their convertible notes during the following quarter. This condition was met in the three months ended March 31, 2011. If conversions of this nature occur, we may deliver cash, common stock, or a combination of both, at our election, to settle our obligations. We have classified this debt as long-term debt in the consolidated balance sheet as of March 31, 2011 because we determined, in accordance with the Derivatives and Hedging Topic of the FASB ASC, that we have the ability to settle the obligations in equity in all circumstances, except in the case of a fundamental change (as defined in the indenture governing the convertible senior notes). This condition must be fulfilled on 20 of the last 30 trading days of each calendar quarter. If the condition is not met during that time period, the notes will not be convertible in the following quarter.
Cash Dividends
During the year ended December 31, 2010 and the three months ended March 31, 2011, we paid the following dividends:
Board Declaration Date |
Per Share | Record Date | Payment Date | Total Amount |
||||||||||||
(in millions) | ||||||||||||||||
Year ended December 31, 2010: |
||||||||||||||||
March 2, 2010 |
$ | 0.04 | March 12, 2010 | March 22, 2010 | £ | 8.8 | ||||||||||
May 27, 2010 |
0.04 | June 11, 2010 | June 21, 2010 | 9.0 | ||||||||||||
July 23, 2010 |
0.04 | September 13, 2010 | September 23, 2010 | 8.2 | ||||||||||||
November 23, 2010 |
0.04 | December 13, 2010 | December 23, 2010 | 8.1 | ||||||||||||
Three months ended March 31, 2011: |
||||||||||||||||
March 4, 2011 |
$ | 0.04 | March 14, 2011 | March 24, 2011 | £ | 8.0 |
Future payments of regular quarterly dividends by us are at the discretion of the Board of Directors and will be subject to our future needs and uses of cash, which could include investments in operations, the repayment of debt, and share repurchase programs. In addition, the terms of our and our subsidiaries existing and future indebtedness and the laws of jurisdictions under which those subsidiaries are organized limit the payment of dividends, loan repayments and other distributions to us under many circumstances.
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Off-Balance Sheet Arrangements
As of March 31, 2011 and 2010, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K under the U.S. Securities Exchange Act of 1934, as amended.
Contractual Obligations and Commercial Commitments
Other than the changes to our long term debt obligations, described in the Liquidity and Capital Resources section above, our contractual obligations and commercial commitments as of March 31, 2011 were not materially different to the contractual obligations disclosed in our 2010 Annual Report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. As some of our indebtedness accrues interest at variable rates, we have exposure to volatility in future cash flows and earnings associated with variable interest rate payments.
Also, substantially all of our revenues, operating costs and selling, general and administrative expenses are earned and paid in pounds sterling but we pay interest and principal obligations on some of our indebtedness in U.S. dollars and euros. As of March 31, 2011, £3,125.8 million, or 50.4%, of our indebtedness based upon contractual obligations, was denominated in U.S. dollars and £158.6 million, or 2.6%, of our indebtedness based upon contractual obligations, was denominated in euros. As a result, we have exposure to volatility in future cash flows and earnings associated with changes in foreign exchange rates on payments of principal and interest on a portion of our indebtedness. We also have committed and forecasted purchases of goods and services in U.S. dollars, euros and South African rand.
To mitigate the risk from these exposures, we have implemented a hedging program. The objective of this program is to reduce, but not eliminate, the volatility of our cash flows and earnings caused by changes in underlying rates. To achieve this objective we have entered into a number of derivative instruments. The derivative instruments utilized comprise interest rate swaps, cross-currency interest rate swaps and foreign currency forward contracts. We do not enter into derivative instruments for trading or speculative purposes. See note 5 to the consolidated financial statements of Virgin Media Inc.
The fair market value of long term fixed interest rate debt and the amount of future interest payments on variable interest rate debt are subject to interest rate risk.
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The following table provides information as of March 31, 2011 about our long term fixed and variable interest rate debt that are sensitive to changes in interest rates and foreign currency exchange rates (in millions):
Year ended December 31, | Thereafter | Total | Fair Value March 31, 2011 |
|||||||||||||||||||||||||||||
2011 | 2012 | 2013 | 2014 | 2015 | ||||||||||||||||||||||||||||
Long term debt |
||||||||||||||||||||||||||||||||
U.S. Dollars |
||||||||||||||||||||||||||||||||
Fixed rate Average interest rate |
|
$550.0 9.125 |
% |
| | | | |
$4,450.0 7.522% |
|
$ | 5,000.0 | $ | 6,088.7 | ||||||||||||||||||
Average forward exchange rate |
0.63 | 0.71 | ||||||||||||||||||||||||||||||
Euros |
||||||||||||||||||||||||||||||||
Fixed rate Average interest rate |
| | | | | |
180.0 9.500% |
|
| 180.0 | | 204.1 | ||||||||||||||||||||
Average forward exchange rate |
0.89 | |||||||||||||||||||||||||||||||
Pounds Sterling |
||||||||||||||||||||||||||||||||
Fixed rate Average interest rate |
| | | | | |
£1,875.0 6.830% |
|
£ | 1,875.0 | £ | 1,966.7 | ||||||||||||||||||||
Variable rate Average interest rate |
| | | | |
£775.0 LIBOR |
|
| £ | 775.0 | £ | 773.8 | ||||||||||||||||||||
Currency swap agreements related to long term debt |
||||||||||||||||||||||||||||||||
Receipt of U.S. Dollars (interest and principal) |
||||||||||||||||||||||||||||||||
Notional amount Average forward exchange rate Average sterling interest rate paid |
| | | | |
|
$3,500.0 0.60 8.75% |
|
$ | 3,500.0 | £ | 53.7 | ||||||||||||||||||||
Receipt of U.S. Dollars (interest and principal) |
||||||||||||||||||||||||||||||||
Notional amount Average contract exchange rate Average sterling interest rate paid |
| | | | | |
$500.0 0.62 |
|
$ | 500.0 | £ | (3.8 | ) | |||||||||||||||||||
Receipt of U.S. Dollars (interest only) |
||||||||||||||||||||||||||||||||
Notional amount Average contract exchange rate Average sterling interest rate paid |
| | | | |
|
$1,000.0 0.51 6.95% |
|
$ | 1,000.0 | £ | 30.5 | ||||||||||||||||||||
Receipt of Euros (interest and principal) |
||||||||||||||||||||||||||||||||
Notional amount Average contract exchange rate Average sterling interest rate paid |
| | | | |
|
180.0 0.88 10.18% |
|
| 180.0 | £ | (4.5 | ) | |||||||||||||||||||
Interest rate derivative financial instruments related to long term debt |
||||||||||||||||||||||||||||||||
Sterling Interest Rate Swaps |
||||||||||||||||||||||||||||||||
Notional amount Average sterling interest rate paid Sterling interest rate received |
| | | |
|
£600.0 2.86 LIBOR |
%
|
|
£650.0 LIBOR+1.84% 5.50% |
|
£ | 1,250.0 | £ | 7.6 |
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ITEM 4. CONTROLS AND PROCEDURES
(a) | Disclosure Controls and Procedures |
Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our chief executive officer and chief financial officer have concluded that, as of the end of such period, these controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) | Changes in Internal Control Over Financial Reporting |
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the third fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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We are involved in lawsuits, claims, investigations and proceedings, consisting of intellectual property, commercial, employee and employee benefits which arise in the ordinary course of our business. For instance, the U.K. tax authorities have challenged our Value Added Tax, or VAT, treatment of certain of our activities. Any challenge made could become subject to court proceedings. We currently expect an initial hearing on this matter to take place in late 2011 or early 2012; however, any formal assessment issued by the U.K. tax authorities could require us to make a payment based on the U.K. tax authorities interpretation of VAT owed in order to advance our case in court proceedings.
While we do not believe any of the litigation matters alone or in the aggregate will have a material adverse effect on our financial position or results of operation, any adverse outcome in one or more of these matters could be material to our consolidated financial statements for any one period.
There have been no material changes in the risk factors discussed under Risk Factors and elsewhere in our 2010 Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) | Not applicable. |
(b) | Not applicable. |
(c) | Shares Repurchases |
Period |
Total Number of Shares Purchased |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Approximate Value of Shares That May Yet Be Purchased Under the Program (in Pounds Sterling millions) (1) |
||||||||||||
January 131, 2011 |
| | | 213.5 | ||||||||||||
February 128, 2011 |
350,000 | $ | 27.26 | 350,000 | 207.6 | |||||||||||
March 131, 2011 |
6,825,074 | $ | 27.09 | 6,825,074 | 93.5 | |||||||||||
Total |
7,175,074 | $ | 27.10 | 7,175,074 | 93.5 |
(1) | On July 28, 2010, we announced a capital structure optimization program 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. On March 4, 2011, we increased the capital optimization program to permit the full redemption of the 9.125% senior notes due 2016 on or before August 15, 2011. In the first quarter of 2011, the repurchases were made through open market transactions. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. (REMOVED AND RESERVED)
None.
85
Exhibit No. |
||
3.1 | Second Restated Articles of Incorporation of Virgin Media Inc. (Incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on March 1, 2007). | |
3.2 | Restated by-laws of Virgin Media Inc. (Incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on March 1, 2007). | |
3.3 | Memorandum and Articles of Association of Virgin Media Investment Holdings Limited (Incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 26, 2010). | |
3.4 | Memorandum and Articles of Association of Virgin Media Investments Limited (Incorporated by reference to Exhibit 3.4 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | |
4.1 | Fourth Supplemental Indenture, dated as of February 18, 2011, among VMWH Limited, Virgin Media Secured Finance PLC and The Bank of New York Mellon as trustee (Incorporated by reference to Exhibit 4.23 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | |
4.2 | Indenture, dated as of March 3, 2011, among Virgin Media Secured Finance PLC, the guarantors party thereto, The Bank of New York Mellon as trustee and paying agent and The Bank of New York Mellon (Luxembourg) S.A. as Luxembourg paying agent (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on March 3, 2011). | |
4.3 | Release of Note Guarantee, dated as of February 15, 2011, among Virgin Media Secured Finance PLC, the companies listed in schedule 1 thereto and The Bank of New York Mellon as trustee (Incorporated by reference to Exhibit 4.27 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | |
4.4 | Release of Note Guarantee, dated as of February 18, 2011, among Virgin Media Secured Finance PLC, Telewest Communications Holdings Limited and The Bank of New York Mellon as trustee (Incorporated by reference to Exhibit 4.28 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | |
4.5 | Registration Rights Agreement, dated as of March 3, 2011, among Virgin Media Secured Finance PLC, Virgin Media Inc., Virgin Media Finance PLC, Virgin Media Investment Holdings Limited and the initial purchasers party thereto (Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on March 3, 2011). | |
4.6* | Composite Debenture, dated as of February 18, 2011, made between VMWH Limited and Deutsche Bank AG, London Branch. | |
4.7* | Scottish Confirmation Deed, dated as of March 3, 2011, among Virgin Media Investment Holdings Limited, each of its subsidiaries listed on the signature pages thereto, Deutsche Bank AG, London Branch and The Bank of New York Mellon. | |
4.8* | English Confirmation Deed, dated as of March 3, 2011, among Virgin Media Investment Holdings Limited, each of its subsidiaries listed on the signature pages thereto, Deutsche Bank AG, London Branch and The Bank of New York Mellon. | |
4.9* | Reaffirmation Agreement, dated as of March 3, 2011, among Virgin Media Inc., each of its subsidiaries listed on the signature pages thereto, Deutsche Bank AG, London Branch and The Bank of New York Mellon. |
86
Exhibit No. |
||
4.10 | Senior Facilities Agreement, dated March 16, 2010, as amended and restated on March 26, 2010 and February 15, 2011, among Virgin Media Inc. as Ultimate Parent, Virgin Media Finance PLC as Parent, Virgin Media Investment Holdings Limited, Virgin Media Limited, Virgin Media Wholesale Limited, VMIH Sub Limited and Virgin Media SFA Finance Limited as Original Borrowers, BNP Paribas London Branch, Deutsche Bank AG, London Branch, Crédit Agricole Corporate and Investment Bank, GE Corporate Finance Bank SAS, Goldman Sachs International, J.P. Morgan PLC, Lloyds TSB Corporate Markets, Merrill Lynch International, The Royal Bank of Scotland plc and UBS Limited as Bookrunners and Mandated Lead Arrangers, Deutsche Bank AG, London Branch as Facility Agent, Deutsche Bank AG, London Branch as Security Trustee and the financial and other institutions named in it as Lenders (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 16, 2011). | |
10.1 | Description of the 2011-2013 Virgin Media Inc. Long Term Incentive Plan (Incorporated by reference to Exhibit 10.34 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | |
10.2 | JSOP Trust Agreement dated as of January 28, 2011 between Virgin Media Inc. as grantor and Christiana Trust, a division of Wilmington Savings Fund Society, as trustee (Incorporated by reference to Exhibit 10.35 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | |
10.3 | Trustee Joint Ownership Agreement relating to the Virgin Media Inc. 2010 Stock Incentive Plan dated as of January 28, 2011 between Virgin Media Inc. and Christiana Trust, a division of Wilmington Savings Fund Society (Incorporated by reference to Exhibit 10.36 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | |
10.4 | Form of Employee Joint Ownership Agreement relating to the Virgin Media Inc. 2010 Stock Incentive Plan (Incorporated by reference to Exhibit 10.37 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | |
10.5 | Form of Restricted Stock Unit Agreement (JSOP Supplementary Award) used for grants made under the Virgin Media Inc. Joint Share Ownership Plan (Incorporated by reference to Exhibit 10.38 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | |
10.6 | Form of Restricted Stock Unit Agreement used for grants made under the Virgin Media Inc. 2011-2013 Long Term Incentive Plan (Incorporated by reference to Exhibit 10.39 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | |
10.7 | Form of Non-qualified Stock Option Notice used for grants made under the Virgin Media Inc. 2011-2013 Long Term Incentive Plan (Incorporated by reference to Exhibit 10.40 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | |
10.8 | Form of Incentive Stock Option Notice used for grants made under the Virgin Media Inc. 2011-2013 Long Term Incentive Plan (Incorporated by reference to Exhibit 10.41 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | |
10.9 | Form of Performance Share Agreement used for grants made under the Virgin Media Inc. 2011-2013 Long Term Incentive Plan (Incorporated by reference to Exhibit 10.42 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | |
10.10 | Form of Company Share Option Plan (CSOP) Option Certificate used for grants made under the Virgin Media Inc. 2011-2013 Long Term Incentive Plan and under the Joint Share Ownership Plan |
87
Exhibit No. |
||
(Incorporated by reference to Exhibit 10.43 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | ||
10.11 | Description of the Virgin Media Inc. 2011 Bonus Scheme (Incorporated by reference to Exhibit 10.46 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | |
10.12 | Amendment Letter, dated December 8, 2010, between Virgin Media Inc. and Neil A. Berkett relating to the Service Agreement, dated as of July 3, 2009 (Incorporated by reference to Exhibit 10.58 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | |
10.13* | Amendment Letter, dated as of April 1, 2011, relating to the Service Agreement, dated as of July 10, 2009, between Virgin Media Limited and Andrew Barron. | |
10.14* | Amendment Letter, dated as of April 1, 2011, relating to the Service Agreement, dated as of July 31, 2009, between Virgin Media Limited and Paul Buttery. | |
10.15 | Form of Supplemental Incentive Stock Option Notice (to be used for Bryan H. Hall) (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on January 18, 2011). | |
10.16* | Release Agreement, dated as of March 12, 2011, between Virgin Media Inc. and Bryan H. Hall. | |
10.17 | Service Agreement dated as of December 21, 2010 between Virgin Media Limited and Scott G. Dresser (Incorporated by reference to Exhibit 10.89 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). | |
31.1* | Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. | |
31.2* | Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. | |
32.1* | Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Filed herewith. |
| Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections. |
88
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
VIRGIN MEDIA INC. | ||||||
Date: May 5, 2011 | By: | /s/ NEIL A. BERKETT Neil A. Berkett Chief Executive Officer | ||||
Date: May 5, 2011 | By: | /s/ EAMONN OHARE Eamonn OHare Chief Financial Officer | ||||
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED | ||||||
Date: May 5, 2011 | By: | /s/ NEIL A. BERKETT Neil A. Berkett Chief Executive Officer | ||||
Date: May 5, 2011 | By: | /s/ EAMONN OHARE Eamonn OHare Chief Financial Officer | ||||
VIRGIN MEDIA INVESTMENTS LIMITED | ||||||
Date: May 5, 2011 | By: | /s/ NEIL A. BERKETT Neil A. Berkett Chief Executive Officer | ||||
Date: May 5, 2011 | By: | /s/ EAMONN OHARE Eamonn OHare Chief Financial Officer |
89
Exhibit 4.6
Dated 18 February 2011
COMPOSITE DEBENTURE
Between
VMWH LIMITED
as Chargor
and
DEUTSCHE BANK AG, LONDON BRANCH
as Security Trustee
TABLE OF CONTENTS
Page | ||||||
1. |
INTERPRETATION |
1 | ||||
2. |
SECURED OBLIGATIONS |
9 | ||||
3. |
CHARGES |
10 | ||||
4. |
SET-OFF |
15 | ||||
5. |
UNDERTAKINGS |
16 | ||||
6. |
REAL PROPERTY: PERFECTION |
18 | ||||
7. |
FURTHER ASSURANCE |
19 | ||||
8. |
CERTAIN POWERS OF THE SECURITY TRUSTEE AND THE BENEFICIARIES: ENFORCEMENT |
20 | ||||
9. |
APPOINTMENT AND POWERS OF RECEIVER OR ADMINISTRATOR |
22 | ||||
10. |
APPLICATION OF PROCEEDS; PURCHASERS |
25 | ||||
11. |
INDEMNITIES; COSTS AND EXPENSES |
26 | ||||
12. |
ENFORCEMENT |
27 | ||||
13. |
POWER OF ATTORNEY |
28 | ||||
14. |
CONTINUING SECURITY AND OTHER MATTERS |
28 | ||||
15. |
CURRENCIES |
31 | ||||
16. |
THE SECURITY TRUST AGREEMENT |
32 | ||||
17. |
MISCELLANEOUS |
32 | ||||
18. |
NOTICES |
34 | ||||
19. |
LAW AND JURISDICTION |
35 | ||||
SCHEDULE 1 CHARGORS | 36 | |||||
SCHEDULE 2 NOTICES OF ASSIGNMENT/ACKNOWLEDGEMENTS | 37 | |||||
Part 1 Intercompany Indebtedness |
37 | |||||
Part 1A Form of Notice of Assignment |
37 | |||||
Part 1B Form of Acknowledgement of Assignment |
39 | |||||
Part 2 Insurances |
41 | |||||
Part 2A Form of Notice of Assignment |
41 | |||||
Part 2B Form of Acknowledgement of Assignment |
44 | |||||
SCHEDULE 3 DETAILS OF CHARGED LAND | 45 | |||||
Part 1 PART 1A Registered Land |
45 | |||||
PART 1B Unregistered Land |
45 | |||||
SCHEDULE 4 REGISTERED, INTELLECTUAL PROPERTY RIGHTS | 46 | |||||
SCHEDULE 5 INTERCOMPANY LOANS | 48 |
(i)
THIS COMPOSITE DEBENTURE is dated 18 February 2011 and made
BETWEEN:
(1) | VMWH LIMITED whose registered number and shareholders are set out in Schedule 1 (the Chargor); and |
(2) | DEUTSCHE BANK AG, LONDON BRANCH as security trustee for the Beneficiaries (the Security Trustee). |
WHEREAS:
(A) | The Senior Lenders have agreed to make available to the Borrowers (as defined in the Senior Facilities Agreement (as defined below)) certain credit facilities pursuant to the terms and subject to the conditions of the Senior Facilities Agreement and the Group Intercreditor Agreement. |
(B) | Virgin Media Secured Finance PLC has issued and sold the Senior Secured Notes under the Senior Secured Notes Indenture. |
(C) | By an intercreditor deed dated 3 March 2006, as amended and restated on 13 June 2006, 10 July 2006, 31 July 2006, 15 May 2008, 30 October 2009 and 8 January 2010 (the Group Intercreditor Deed) the Security Trustee, the Facility Agent, the Original Senior Borrowers, the Original Senior Guarantors, the Senior Lenders, the Hedge Counterparties, the Intergroup Debtors and the Intergroup Creditors (as each of those terms are defined therein) and certain other members of the Group have agreed to regulate their relationship as creditors on the terms set out therein. |
(D) | The board of directors of the Chargor is satisfied that the Chargor is entering into this Deed for the purposes of carrying on its business and that its doing so benefits the Chargor. |
(E) | The Security Trustee holds the benefit of this Deed on trust for itself and the other Beneficiaries on the terms and subject to the conditions of the Security Trust Agreement and the Group Intercreditor Deed. |
NOW THIS DEED WITNESSES as follows:
1. | INTERPRETATION |
1.1 | Definitions |
In this Deed, unless the context otherwise requires:
Acknowledgement means a duly completed acknowledgement of assignment in the form set out in the relevant Part of Schedule 2 (Notices of Assignment/Acknowledgements) being:
(a) | Schedule 2Part 1B, in the case of Intercompany Indebtedness; and |
(b) | Schedule 2Part 2B, in the case of Insurances; |
Assigned Assets means, in relation to the Chargor, all of the assets described in Clause 3.2 (Assignments);
Beneficiaries means the First Beneficiary and the Second Beneficiaries;
Charged Assets means all the undertaking, goodwill, property, assets and rights of the Chargor described in Clauses 3.1 (Fixed Charge), 3.2 (Assignments) and 3.4 (Floating Charge);
Charged Land means in respect of the Chargor the English Real Property specified in Schedule 3 (Details of Charged Land);
Default Rate means the rate specified in clause 28.2 (Default Rate) of the Senior Facilities Agreement or, upon its repayment in full and cancellation of all undrawn commitments thereunder such equivalent provision in the Relevant Facilities Agreement;
Designated Secured Obligations means Financial Indebtedness in the form of notes or other such similar instruments of any member of the Group that is designated as Designated Secured Obligations by written notice from the Company to the Security Trustee which notice will certify that the Financial Indebtedness is an instrument for which Rule 3-16 of Regulation S-X under the Securities Act (Rule 3-16) is applicable or will become applicable upon registration of such instrument or an instrument exchangeable for such instrument pursuant to a contractual requirement;
disposal includes any sale, lease, sub-lease, assignment or transfer, the grant of an option or similar right, the grant of any easement, right or privilege, the creation of a trust or other equitable interest in favour of a third party, a sharing or parting with possession or occupation whether by way of licence or otherwise and the granting of access to any other person over any intellectual property, and dispose and disposition shall be construed accordingly;
Enforcement Date means the date on which, following the occurrence of an Event of Default that is continuing, either the Relevant Agent or the Security Trustee notifies the Chargor of the occurrence of that Event of Default, or takes, under any one or more of the Senior Finance Documents, any of the steps it is entitled to take by reason of the occurrence of such Event of Default;
English Real Property means, at any time and in respect of the Chargor, freehold or leasehold property in England and Wales in which the Chargor has an interest, including all rights, easements and privileges from time to time attached or appurtenant thereto and all buildings, erections and Fixtures from time to time therein or thereon;
Event of Default means each of:
(a) | a Senior Default; and |
(b) | an event of default or termination event (however described) under any Hedging Agreement; |
2
Excluded Charged Assets has the meaning given to such term in Clause 3.12(b) (Rule 3-16 Limitation);
Fixtures means, in relation to any Real Property, all fixtures and fittings (including trade fixtures and fittings) and fixed plant, machinery and equipment and other items attached to the relevant Real Property whether or not constituting a fixture at law;
Floating Charge Assets means the assets of the Chargor from time to time expressed to be charged by this Deed by way of floating charge pursuant to Clause 3.4 (Floating Charge);
Incapacity means, in relation to any person, the insolvency, bankruptcy, liquidation, dissolution, winding-up, administration, receivership, amalgamation, reconstruction or other incapacity of that person whatsoever;
Indemnified Party has the meaning set out in Clause 11.3 (Indemnity from Charged Assets);
Insurances means, in relation to the Chargor, all present and future contracts or policies of insurance (including life policies) in which the Chargor from time to time has an interest;
Intellectual Property Rights means all patents, trade marks, service marks, designs, design rights, utility models, business names, topographical or similar rights, copyrights, moral rights, database rights, rights in inventions, computer software, know-how, trade secrets and confidential information and other intellectual property rights and any interests (including by way of licence) subsisting anywhere in the world in any of the foregoing (in each case whether registered or not and including all applications for the same) owned by the Chargor;
Intercompany Indebtedness means indebtedness owing by any member of the Group to the Chargor under each of the loan agreements or other debt instruments listed in Schedule 5 (Intercompany Loans) and any other such indebtedness from time to time outstanding;
Investments means the Shares and any other stocks, debentures, bonds, warrants and other securities of any kind whatsoever and any units in Unit Trust Schemes;
Lease means any present or future lease, sublease, licence, tenancy or other agreement or right to occupy whether on a fixed term or periodic basis governing the use or occupation of any freehold, heritable or leasehold property;
Liability means any obligation or liability for the payment of money, whether in respect of principal, interest or otherwise, whether actual or contingent, whether owed jointly or severally and whether owed as principal or surety or in any other capacity;
Notice of Assignment means a duly completed notice of assignment in the form set out in the relevant Part of Schedule 2 (Notices of Assignment/Acknowledgements) being:
(a) | Part 1, in the case of Intercompany Indebtedness; and |
3
(b) | Part 2, in the case of Insurances; |
Permitted Borrowing means any Financial Indebtedness permitted under clause 25.4 (Financial Indebtedness) of the Senior Facilities Agreement or upon its repayment in full and cancellation of all undrawn commitments thereunder such equivalent provision in the Relevant Facilities Agreement;
Permitted Disposal means any disposal permitted under clause 25.6 (Disposals) of the Senior Facilities Agreement or upon its repayment in full and cancellation of all undrawn commitments thereunder such equivalent provision in the Relevant Facilities Agreement;
Permitted Encumbrance means any Encumbrance permitted under clause 25.2 (Negative Pledge) of the Senior Facilities Agreement or upon its repayment in full and cancellation of all undrawn commitments thereunder such equivalent provision in the Relevant Facilities Agreement;
Real Property means the English Real Property and any other land, buildings or erections anywhere in the world and any estate or interest therein and any reference to Real Property includes all rights, easements and privileges from time to time attached or appurtenant thereto and all buildings, erections and Fixtures from time to time therein or thereon;
Realisation Account means each account maintained from time to time by the Security Trustee for the purposes of Clause 8.7 (Realisation Accounts);
Receiver means a receiver and manager, or any other receiver (whether appointed pursuant to this Deed or any statute, by a court or otherwise) of all or any of the Charged Assets and shall, where permitted by law, include an administrative receiver;
Related Rights means, in relation to any Investment of the Chargor:
(a) | any proceeds of and any right or option to receive any dividend, distribution, interest or other income paid or payable in relation to any such Investment; and |
(b) | any right or option to receive, call for delivery of or otherwise acquire any stocks, shares, debentures, bonds, loan stocks, warrants, securities, monies or other property of any kind, accruing or offered at any time or deriving therefrom, whether in addition to or in substitution for such Investment; |
Relevant Facilities Agreement means the Senior Facilities Agreement, or, upon its repayment in full and cancellation of all undrawn commitments thereunder, the Designated Refinancing Facilities Agreement, provided that if upon the repayment in full and cancellation of all undrawn commitments under the Senior Facilities Agreement there is no Designated Refinancing Facilities Agreement, until such time that a Refinancing Facilities Agreement has been designated as a Designated Refinancing Facilities Agreement, the Relevant Facilities Agreement shall be the Senior Facilities Agreement immediately prior to such termination, and provided further that upon the repayment in full and cancellation of all undrawn commitments under the Designated Refinancing Facilities, until such time that a Refinancing
4
Facilities Agreement has been designated as a Designated Refinancing Facilities Agreement, the Relevant Facilities Agreement shall be the Designated Refinancing Facilities Agreement immediately prior to such termination;
Restricted Lease means any lease to which the Chargor is a party which would be breached, if the consent of the relevant landlord and any other relevant party was not obtained prior to such lease becoming subject to any security interest created pursuant to this Deed;
Rule 3-16 has the meaning given to such term in Designated Secured Obligations;
SEC means the United States Securities and Exchange Commission;
Secured Obligations means the Security Trustee Liabilities, the Senior Liabilities and the Hedging Liabilities, provided that any liabilities that have been designated as New Senior Liabilities under the Group Intercreditor Deed or are incurred after 31 December 2009 under any Refinancing Facilities Agreement entered into after such date,
(a) | in breach of the provisions of the Senior Facilities Agreement, or upon its repayment in full and cancellation of all undrawn commitments thereunder (unless there is no Designated Refinancing Facilities Agreement), the Designated Refinancing Facilities Agreement, or any Refinancing Facilities Agreement on the date of such designation (excluding any applicable cure period), or |
(b) | that the Security Trustee, acting reasonably, has not agreed to act as security trustee for, |
shall not, in any such case constitute Secured Obligations for the purpose of this Deed;
Securities Act means the United States Securities Act of 1933, as amended;
Security Provider means any person who has granted or may at any time hereafter grant any security interest as security for the Secured Obligations;
Security Trust Agreement means the security trust agreement dated 3 March 2006 and amended and restated on 19 January 2010 between, Deutsche Bank AG, London Branch as Security Trustee and as Facility Agent, Virgin Media Investment Holdings Limited and the companies named therein as Original Obligors;
Senior Facilities Agreement means the senior facilities agreement dated 16 March 2010 (as amended, restated, supplemented or novated from time to time) and made between, inter alia, Virgin Media Inc. as Ultimate Parent, Virgin Media Finance PLC as Parent, Virgin Media Investment Holdings Limited, Virgin Media Limited, Virgin Media Wholesale Limited, VMIH Sub Limited and Virgin Media SFA Finance Limited as Original Borrowers, BNP Paribas London Branch and Deutsche Bank AG, London Branch as Global Coordinators and Physical Bookrunners, BNP Paribas London Branch, Deutsche Bank AG, London Branch, Crédit Agricole Corporate and Investment Bank, GE Corporate Finance Bank SAS, Goldman Sachs International,
5
J.P. Morgan PLC, Lloyds TSB Corporate Markets, Merrill Lynch International, The Royal Bank of Scotland plc and UBS Limited as Bookrunners and Mandated Lead Arrangers, Deutsche Bank AG, London Branch as Facility Agent, Deutsche Bank AG, London Branch as Security Trustee and the financial and other institutions named in it as Lenders;
Senior Secured Notes has the meaning given to the term Notes in the Senior Secured Notes Indenture;
Senior Secured Notes Documents means the Senior Secured Notes Indenture including the guarantees set out therein, and the Senior Secured Notes;
Senior Secured Notes Indenture means the indenture dated 19 January 2010 governing the $1,000,000,000 6.50% Senior Secured Notes due 2018 and the £875,000,000 7.00% Senior Secured Notes due 2018, among Virgin Media Inc., Virgin Media Investment Holdings Limited, Virgin Media Finance PLC, Virgin Media Secured Finance PLC, the subsidiary guarantors named therein, The Bank of New York Mellon, as trustee, registrar and paying agent and The Bank of New York Mellon (Luxembourg), S.A., as Luxembourg paying agent, as amended, restated, supplemented or otherwise modified from to time;
Shares means all shares in the capital of any member of the Group, any Joint Venture or any other person now or in the future legally or beneficially owned by the Chargor and/or any nominee on behalf of the Chargor; and
Unit Trust Scheme has the meaning set out in Section 237(2) of the Financial Services and Markets Act 2000.
1.2 | Successors and Assigns |
The expressions Senior Lenders, Beneficiaries, Chargor, Senior Finance Party, Relevant Agent, Security Provider and Security Trustee include, where the context admits, their respective successors, permitted assigns and transferees and, in the case of the Beneficiaries, their Transferees and, in the case of the Security Trustee, such other person as may from time to time be appointed as Security Trustee for the Beneficiaries pursuant to the provisions of the Security Trust Agreement.
1.3 | Agreement Definitions |
Unless the context otherwise requires or unless otherwise defined in this Deed, words and expressions defined in the Group Intercreditor Deed and (unless otherwise defined in the Group Intercreditor Deed) the Relevant Facilities Agreement shall have the same meaning when used in this Deed (including its recitals).
1.4 | Headings |
Clause and schedule headings and the contents page are inserted for convenience of reference only and shall be ignored in the interpretation of this Deed.
6
1.5 | Construction of Certain Terms |
In this Deed, unless the context otherwise requires:
(a) | references to clauses and the schedules are to be construed as references to the clauses of, and the schedules to, this Deed and references to this Deed include its schedules; |
(b) | references to (or to any specified provision of) this Deed or any other agreement or document shall be construed as references to this Deed, that provision, that agreement or that document as in force for the time being and as from time to time amended, supplemented, varied, extended, restated, replaced or novated in accordance with the terms thereof, or, as the case may be, with the agreement of the relevant parties and (where such consent is, by the terms of any Security Document or the relevant document, required to be obtained as a condition to such amendment being permitted) the prior written consent of an Instructing Party; |
(c) | references to a regulation include any present or future regulation, rule, directive, requirement, request or guideline (whether or not having the force of law) of any agency, authority, central bank or government department or any self-regulatory or other national or supra-national authority; |
(d) | words importing the plural shall include the singular and vice versa; |
(e) | references to a time of day are to London time; |
(f) | references to a person shall be construed as including references to an individual, firm, company, corporation, unincorporated body of persons or any state or any agency thereof and that persons successors in title; |
(g) | references to a guarantee include references to an indemnity or other assurance against financial loss including, without limitation, an obligation to purchase assets or services as a consequence of a default by any other person to pay any Indebtedness and guaranteed shall be construed accordingly; |
(h) | references to any enactment shall be deemed to include references to such enactment as re-enacted, amended or extended; and |
(i) | references to business in relation to the Chargor means any business referred to in the definition of Group Business in the Relevant Facilities Agreement which the Chargor engages in, and references to ordinary course of business in relation to the Chargor shall be similarly construed. |
1.6 | Implied Covenants |
In accordance with Rule 68 of the Land Registration Rules 2003:
(a) | the covenants set out in section 3(1) of the Law of Property (Miscellaneous Provisions) Act 1994 shall extend to Clauses 3.1 (Fixed Charge), 3.2 (Assignments) and 3.4 (Floating Charge) save for the words other than any |
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charges, encumbrances or rights which that person does not and could not reasonably be expected to know about; and |
(b) | the covenants set out in section 3(2) of the Law of Property (Miscellaneous Provisions) Act 1994 shall extend to Clauses 3.1 (Fixed Charge), 3.2 (Assignments) and 3.4 (Floating Charge) save for the words except to the extent that such liabilities and rights are, by reason of (a) being, at the time of the disposition, only potential liabilities and rights in relation to the property or (b) being liabilities and rights imposed or conferred in relation to property generally, not such as to constitute defects in title; and |
(c) | the covenants set out in section 6(2) of the Law of Property (Miscellaneous Provisions) Act 1994, |
shall not extend to Clauses 3.1 (Fixed Charge), 3.2 (Assignments) and 3.4 (Floating Charge).
1.7 | Nominees |
If the Security Trustee requires shares or any other asset to be registered in the name of a nominee for the Security Trustee, any reference in this Deed to the Security Trustee shall, if the context so permits or requires, be construed as a reference to each of the Security Trustee and such nominee.
1.8 | Third Party Rights |
A person which is not a party to this Deed (a third party) shall have no rights to enforce the provisions of this Deed save for:
(a) | those rights it would have had if the Contracts (Rights of Third Parties) Act 1999 had not come into effect; and |
(b) | a person who is a co-trustee (with the Security Trustee) for the Beneficiaries under the Security Trust Agreement whether or not it is a party to the Security Trust Agreement. |
provided also that this Deed may be rescinded or altered without the consent of any third party referred to in paragraph (b) of this Clause 1.8.
1.9 | Effect as a Deed |
This Deed is intended to take effect as a deed notwithstanding that the Security Trustee or any other party hereto may have executed it under hand only.
1.10 | Group Intercreditor Deed |
This Debenture should be read and construed subject to the terms of the Group Intercreditor Deed. In the event of any inconsistency between the terms of this Deed and the Group Intercreditor Deed, the terms of the Group Intercreditor Deed shall prevail.
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1.11 | Secured Obligations |
It is acknowledged and agreed that (without prejudice to the extension of the Secured Obligations to any other Indebtedness from time to time included within the definition thereof) as at the date hereof, the Secured Obligations shall include:
(a) | all Liabilities under the Senior Facilities Agreement; and |
(b) | all Liabilities under the Senior Secured Notes Documents. |
2. | SECURED OBLIGATIONS |
2.1 | Covenant to Pay |
The Chargor hereby covenants that it will on demand made on it by the Security Trustee pay to the Security Trustee for the account of the relevant Beneficiaries any Secured Obligation which is due and payable but unpaid provided that before any such demand is made on a Restricted Guarantor, demand for payment of the relevant Secured Obligation shall first have been made on the Borrower from which such unpaid Secured Obligation is due.
2.2 | Statements of Account |
Any statement of account of the Chargor, signed as correct by an officer of the Security Trustee, showing the amount of any Secured Obligations of the Chargor shall be prima facie evidence as to the amount of the Secured Obligations of the Chargor from time to time.
2.3 | No Security |
The Chargor warrants that it has not taken or received, and undertakes that until all the Secured Obligations have been paid or discharged in full it will not, without the consent in writing of the Security Trustee, take or receive any security from any other person in respect of its obligations under this Deed.
2.4 | Payments by the Chargor |
All payments to be made by the Chargor under this Deed shall be made in full, without any set-off or counterclaim whatsoever and free and clear of any deductions or withholdings in the relevant currency on the due date to such account as the Security Trustee may from time to time specify.
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3. | CHARGES |
3.1 | Fixed Charge |
The Chargor, with full title guarantee and as continuing security for the payment, discharge and performance of the Secured Obligations, hereby charges in favour of the Security Trustee to hold the same on trust for the Beneficiaries on the terms set out in the Group Intercreditor Deed and the Security Trust Agreement:
(a) | by way of first legal mortgage, all of the Charged Land and all other Real Property now vested in the Chargor and the proceeds of sale of all or any part thereof; |
(b) | by way of first fixed charge (but in the case of paragraphs (iii) and (iv) only if and to the extent the rights in question have not been effectively assigned pursuant to Clause 3.2 (Assignments) or such rights have been effectively assigned but such assignment has not been perfected by the service of the appropriate Notice of Assignment): |
(i) | to the extent not effectively charged pursuant to Clause 3.1(a) (Fixed Charge), all estates or interests in any Real Property (whether such interests are freehold, leasehold or licenses) vested in, or acquired by, it now or after the date of this Deed and the proceeds of sale of all or any part thereof; |
(ii) | to the extent not effectively charged pursuant to Clauses 3.1(a) (Fixed Charge) or 3.1(b)(i) (Fixed Charge), all plant and machinery, equipment, computers, vehicles and other chattels (excluding any for the time being forming part of the Chargors stock-in-trade or work in progress) now or in the future owned by the Chargor or (to the extent of such interest) in which the Chargor has an interest and the benefit of all contracts and warranties relating to the same; |
(iii) | all Investments and all Related Rights now or in the future beneficially and/or legally owned by the Chargor; |
(iv) | all of its rights, title, interests and benefits in, to or in respect of the Insurances and all claims (and proceeds) and returns of premiums to which the Chargor is now or may at any future time become entitled; |
(v) | any interest, claim or entitlement of the Chargor in, to or in respect of any pension fund; |
(vi) | all the present and future goodwill of the Chargor (including all brand names not otherwise subject to a fixed charge or assignment under this Deed); |
(vii) | all of its rights, title, interests and benefits in, to or in respect of all present and future licences, consents and authorisations (statutory or otherwise) held in connection with the business of the Chargor or the use of any asset of the Chargor and the right to recover and receive all |
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compensation which may at any time become payable to it in respect of any such licence; |
(viii) | all its present and future uncalled capital; and |
(ix) | all its present and future patents, registered trade marks and registered designs (if any) including applications for any of the same in any part of the world and including, without limitation, the patents, registered designs and trade marks specified in Schedule 4 (Registered, Intellectual Property Rights). |
3.2 | Assignments |
Subject to Clause 3.3 (Non-Assignable Rights), the Chargor with full title guarantee hereby assigns absolutely by way of continuing security for the payment and discharge of the Secured Obligations to the Security Trustee:
(a) | all its present and future rights, title, benefit and interests under and in respect of the Intercompany Indebtedness and any other amounts payable in respect thereof, including under any other loan agreements from time to time entered into by the Chargor; |
(b) | all of its rights, title, interests and benefits in, to or in respect of the Insurances (including all proceeds) and all claims and returns of premiums in respect thereof to which the Chargor is now or may at any future time become entitled; and |
(c) | to the extent not charged under the provisions of Clause 3.1(b) (Fixed Charge) all of its present and future Intellectual Property Rights. |
3.3 | Non-Assignable Rights |
The Chargor declares that to the extent that any right, title, interest or benefit described in Clause 3.2 (Assignments) is for any reason not effectively assigned pursuant to Clause 3.2 (Assignments) for whatever reason, the Chargor shall:
(a) | hold the benefit of the same on trust for the Security Trustee as security for the payment and discharge of the Secured Obligations; and |
(b) | promptly notify the Security Trustee of the same and the reasons therefor and thereafter take such steps as the Security Trustee may reasonably require to attempt to remove any relevant prohibition or other reason for such failure. |
3.4 | Floating Charge |
The Chargor with full title guarantee hereby charges to the Security Trustee by way of first floating charge and as a continuing security for the payment and discharge of the Secured Obligations its undertaking and all its property, assets and rights whatsoever and wheresoever both present and future, other than any property or assets from time to time effectively charged by way of fixed charge or assignment pursuant to Clauses 3.1 (Fixed Charge) and 3.2 (Assignments) and including (without limitation and whether or not so effectively charged) any of its property and assets situated in
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Scotland, provided that, for the avoidance of doubt, the floating charge shall not attach to any plant or machinery, or any interest therein, which is the subject of a lease where the title thereto vests in the relevant lessor and not the Chargor. The parties to this Deed agree that the floating charge created by this Clause 3.4 is a qualifying floating charge for the purposes of paragraph 14 of schedule B1 to the Insolvency Act 1986.
3.5 | Automatic Conversion of Floating Charge |
Notwithstanding anything expressed or implied in this Deed, if:
(a) | the Chargor creates or attempts to create any other Encumbrance over all or any of the Floating Charge Assets without the prior consent in writing of the Security Trustee or otherwise as permitted by the Senior Finance Documents; |
(b) | any person levies or attempts to levy any distress, execution, sequestration or other process against any of the Charged Assets or takes any steps to enforce any rights against any of the Floating Charge Assets; or |
(c) | any meeting of the members of the Chargor is convened to consider a resolution to wind up the Chargor or a petition is presented or application made to wind up the Chargor, |
the floating charge created by Clause 3.4 (Floating Charge) over the property or asset concerned shall thereupon automatically without notice be converted into a fixed charge. Nothing in this Clause 3.5 shall cause the floating charge created by Clause 3.4 (Floating Charge) to crystallise solely because a moratorium has been obtained by any person in relation to the Chargor or any person has taken any steps with a view to obtaining a moratorium in relation to the Chargor under Section 1A and Schedule A1 of the Insolvency Act 1986.
3.6 | Conversion of Floating Charge by Notice |
Notwithstanding anything expressed or implied in this Deed, the Security Trustee shall be entitled at any time by giving notice in writing to that effect to the Chargor to convert the floating charge over all or any part of the Floating Charge Assets into a fixed charge if and to the extent that the Security Trustee reasonably considers the assets specified in such notice may be in danger of being seized or sold under or pursuant to any form of distress or execution, or may otherwise be in jeopardy or the Security Trustee otherwise considers (acting reasonably) such conversion to be necessary or desirable to protect the priority of the Security.
3.7 | Subsequent Encumbrances |
If any Beneficiary receives notice of any subsequent Encumbrance affecting the Charged Assets or any part thereof, such Beneficiary may open a new account for the Chargor but if it does not do so then unless such Beneficiary gives express written notice to the contrary to the Chargor it shall nevertheless be treated as if it had opened a new account at the time when it received such notice and as from that time all payments made by or on behalf of the Chargor to such Beneficiary shall be credited or be treated as having been credited to the new account and shall not operate to reduce
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the amount due from the Chargor to such Beneficiary at the time when it received such notice.
3.8 | Section 94(1)(c) Law of Property Act 1925 |
The obligation on the part of the Senior Lenders to make further advances to the Borrowers under the Senior Facilities Agreement or on the part of any creditors under any other Senior Finance Document, as the case may be, shall be deemed to be incorporated in this Deed for the purposes of section 94(1) (c) Law of Property Act 1925.
3.9 | Blocking of Accounts |
The Chargor irrevocably and unconditionally agrees that at any time after the Enforcement Date if there shall from time to time be any credit balance on any of its accounts with any of the Beneficiaries, such Beneficiary shall have the absolute right to refuse to permit such credit balance to be utilised or withdrawn by the Chargor whether in whole or in part if and to the extent that at that time there are outstanding any of the Secured Obligations.
3.10 | Dividends and Voting Rights |
Subject to Clause 8.1 (The Investments), the Chargor may, prior to the occurrence of an Event of Default which is continuing (a) exercise all voting and other rights and powers attached to the Investments and (b) receive, retain and deal with free from this Deed all dividends, distributions, interest and other moneys paid on and received by it in respect of the Investments.
3.11 | Consents of Third Parties |
Notwithstanding Clause 3.1 (Fixed Charge) or 3.4 (Floating Charge):
(a) | unless and until the Chargor has obtained the consent of the relevant landlord and any other relevant party (each being a Consent) the fixed and floating charges granted pursuant to Clause 3.1 (Fixed Charge) and 3.4 (Floating Charge) respectively shall not extend to the Chargors rights over any Restricted Lease; and |
(b) | unless the Chargor has received written confirmation from the Security Trustee that a particular Consent is not required, the Chargor hereby undertakes to use its reasonable endeavours to obtain the Consent. On obtaining the Consent: |
(i) | the relevant Restricted Lease shall thereupon automatically become subject to the fixed charge created pursuant to Clause 3.1 (Fixed Charge) and the floating charge created pursuant to Clause 3.4 (Floating Charge); and |
(ii) | the Chargor shall immediately produce the Certificate or evidence of such Consent to the Security Trustee. |
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3.12 | Rule 3-16 Limitation |
(a) | Clause 3.1 (Fixed Charge) and Clause 3.4 (Floating Charge) notwithstanding, the Excluded Charged Assets are not charged under this Deed to secure the Designated Secured Obligations. For the avoidance of doubt, |
(i) | all other Charged Assets remain charged or assigned (as the case may be) under this Deed to secure all Secured Obligations, including without limitation the Designated Secured Obligations; and |
(ii) | such Excluded Charged Assets remain charged under Clause 3.1 (Fixed Charge) and Clause 3.4 (Floating Charge) to secure any Secured Obligations that are not Designated Secured Obligations. |
(b) | Excluded Charged Assets in relation to any Designated Secured Obligations means any Shares or other securities of a Subsidiary of Virgin Media Inc. (excluding the Shares or other securities issued by Virgin Media Investments Limited and Virgin Media Investment Holdings Limited or, in each case, any successor entity upon any merger, reorganisation or other restructuring effecting it) that are owned by the Chargor to the extent that charging or pledging such Shares or other securities under this Deed to secure such Designated Secured Obligations would result in Rule 3-16 requiring separate financial statements of such Subsidiary to be filed with the SEC, but (i) only to the extent necessary to not be subject to such requirement, (ii) only for so long as such requirement is in existence and (iii) only if no member of the Group files or is otherwise required to file separate financial statements of such Subsidiary with the SEC under a separate rule or regulation; provided that no shares or securities will constitute Excluded Charged Assets if any member of the Group takes any action in the form of a reorganisation, merger or other restructuring, a principal purpose of which is to provide for the limitation of the charge on any Shares or other securities pursuant to paragraph (a) above. |
(c) | In the event that Rule 3-16 is amended, modified or interpreted by the SEC to require (or is replaced with another rule or regulation, or any other law, rule or regulation is adopted, which would require) the filing with the SEC (or any other United States federal or state governmental agency) of separate financial statements of any such Subsidiary due to the fact that such Subsidiarys Shares or other securities secure any Designated Secured Obligations, then such Shares or other securities (as applicable) of such Subsidiary shall automatically be deemed to be Excluded Charged Assets for such Designated Secured Obligations but (i) only to the extent necessary to not be subject to any such financial statement requirement, (ii) only for so long as such financial statement requirement would otherwise have been applicable to such Subsidiary and (iii) only if no member of the Group files or is otherwise required to file separate financial statements of such Subsidiary with the SEC or such other governmental agency under a separate rule or regulation. If the circumstances described in this paragraph (c) apply, this Deed may be amended or modified, without the consent of any Senior Finance Party, to the extent necessary to release the charge (but only to the extent securing such Designated Secured Obligations and without prejudice to the charge securing |
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Secured Obligations referred to in paragraph (a)(ii) of this Clause 3.12) in favour of the Security Trustee on the relevant Shares and/or other securities that are so deemed to constitute Excluded Charged Assets. |
(d) | In the event that Rule 3-16 is amended, modified or interpreted by the SEC to permit (or is replaced with another rule or regulation, or any other law, rule or regulation is adopted, which would permit) such Subsidiarys Shares and/or other securities to secure any Designated Secured Obligations in excess of the amount then pledged without the filing with the SEC (or any other United States federal or state governmental agency) of separate financial statements of such Subsidiary, then the Shares or other securities (as applicable) of such Subsidiary will automatically be deemed not to be Excluded Charged Assets for such Designated Secured Obligations, but limited to the extent necessary to not be subject to any such financial statement requirement. If the circumstances described in this paragraph (d) apply, this Deed may be amended or modified, without the consent of any Senior Finance Party, to the extent necessary to charge in favour of the Security Trustee such additional Shares or other securities that were deemed to constitute Excluded Charged Assets. |
4. | SET-OFF |
4.1 | Set-off |
The Chargor hereby agrees that after the Enforcement Date the Security Trustee and/or each other Beneficiary may at any time without notice, notwithstanding any settlement of account or other matter whatsoever, combine or consolidate all or any of its then existing accounts wheresoever situate (including accounts in the name of the Security Trustee, such other Beneficiary or of the Chargor jointly with others), whether such accounts are current, deposit, loan or of any other nature whatsoever, whether they are subject to notice or not and whether they are denominated in Sterling or in any other currency, and set-off or transfer any sum standing to the credit of any one or more such accounts in or towards satisfaction of the Secured Obligations owed to the Security Trustee and/or such other Beneficiary which, to the extent not then payable, shall automatically become payable to the extent necessary to effect such set-off.
4.2 | Purchase of Currencies |
For the purpose of Clause 4.1 (Set-Off), the Chargor authorises the Security Trustee and each other Beneficiary to purchase with the moneys standing to the credit of such accounts such other currencies as may be necessary to effect such applications at the spot rate of exchange (as, save in the case of manifest error, conclusively determined by the Security Trustee or the relevant other Beneficiary) prevailing in the London foreign exchange market for purchasing Sterling with the currency in which the sum standing to the credit of the relevant account is denominated.
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5. | UNDERTAKINGS |
5.1 | Undertakings |
The Chargor hereby undertakes with the Security Trustee that during the continuance of this security the Chargor will:
(a) | Deposit of deeds |
deposit with the Security Trustee (to be held at the risk of the Chargor save where the Chargor suffers any loss, costs or expenses as a result of the Security Trustees gross negligence or wilful default):
(i) | all certificates and documents of title relating to its Investments and such deeds of transfer in blank and other documents as the Security Trustee may from time to time reasonably require for perfecting the title of the Security Trustee to such Investments (duly executed by or signed on behalf of the registered holder) or for vesting or enabling it to vest the same in itself or its nominees or in any purchaser; and |
(ii) | all such other documents relating to its Charged Assets as are in its possession or which it can reasonably obtain as the Security Trustee may from time to time reasonably require; |
(b) | Calls, etc |
duly and promptly pay all calls, instalments or other moneys which may from time to time become due in respect of any of its Investments it being acknowledged by the Chargor that neither the Security Trustee nor any of the Beneficiaries shall in any circumstances incur any liability whatsoever in respect of any such calls, instalments or other moneys;
(c) | Provision of information |
forthwith inform the Security Trustee of any claim or notice relating to the Investments received from any other party and likely to materially prejudice the value of the Investments and of all matters relevant thereto;
(d) | Purchase of shares |
not, save as otherwise permitted or not restricted under each of the Senior Finance Documents, (without the prior consent in writing of the Security Trustee) redeem or purchase any of its own shares or pay any dividend, other than a dividend permitted or not restricted to be paid under each of the Senior Finance Documents;
(e) | Options |
save to the extent expressly permitted or not restricted under each of the Senior Finance Documents not, without the prior consent of the Security Trustee, grant any option with respect to any of the Investments;
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(f) | Notification |
forthwith inform the Security Trustee of any material claims or notice relating to any Assigned Assets received from any other party and all other matters relevant or in any way material thereto;
(g) | Reports |
ensure that the Chargor reports to the Security Trustee on a monthly basis as to whether the Consents referred to in Clause 3.11 (Consents of Third Parties) have been obtained, such reports to be provided until the earlier of (i) all of the Consents having been obtained, or (ii) the Chargor confirming that the same will not be provided;
(h) | Notice of assignment |
deliver to the Security Trustee, or procure the delivery to the Security Trustee of, a duly executed Notice of Assignment to each relevant party in relation to the Assigned Assets, and will use reasonable endeavours to procure delivery to the Security Trustee of duly executed Acknowledgments thereof until (in each case) requested to do so by the Security Trustee upon or following the occurrence of an Event of Default which is continuing whereupon it shall do so forthwith;
(i) | Insurances |
(i) | procure that a note of the interest of the Security Trustee is endorsed, and the Security Trustee is endorsed as loss payee, upon all Insurances (other than those referred to in Clause 10.2(c) (Insurance Proceeds)) which shall at any time during the subsistence of this Security be effected, maintained or held by the Chargor or any person; and |
(ii) | not do or omit to do, or permit or suffer to be done or omitted to be done, anything which might render any of the Insurances void, voidable or unenforceable; and |
(j) | Intellectual Property |
if requested by the Security Trustee, execute all such documents and do all acts that the Security Trustee may reasonably require to record the interest of the Security Trustee in any registers relating to any registered Intellectual Property owned by the Chargor.
5.2 | Power to Remedy |
If the Chargor at any time defaults in complying with any of its obligations contained in this Deed, the Security Trustee shall, without prejudice to any other rights of the Security Trustee arising as a consequence of such default, be entitled (but not bound) to make good such default and the Chargor hereby irrevocably authorises the Security Trustee and its employees and agents by way of security to do all such things (including, without limitation, entering the Chargors property having given such notice as is reasonable in the circumstances) necessary or reasonably desirable in
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connection therewith. Any moneys so expended by the Security Trustee shall be repayable by the Chargor to the Security Trustee within 30 days of demand together with interest at the Default Rate from the date being 30 days after the date of demand until such repayment, both before and after judgment. No exercise by the Security Trustee of its powers under this Clause 5.2 shall make it or any of the Beneficiaries liable to account as a mortgagee in possession.
6. | REAL PROPERTY: PERFECTION |
6.1 | Modification of Law of Property (Miscellaneous Provisions) Act 1994 |
Section 3(1) of the Law of Property (Miscellaneous Provisions) Act 1994 will be amended as follows (in so far as it applies to Clause 3 (Charges)):
(a) | after from all charges and encumbrances (whether monetary or not) add other than Permitted Encumbrances and after the words other than any charges, encumbrances or rights which that person does not and would not reasonably be expected to know about add but not so as to include any such charges, encumbrances or rights affecting the Charged Land disclosed by the following searches: |
(i) | in the case of registered Charged Land listed in Part 1A of Schedule 3 (Details of Charged Land), OS1/2 Land Registry searches; and |
(ii) | in relation to the unregistered Charged Land listed in Part 1B of Schedule 3 (Details of Charged Land), land charges searches made against all relevant estate owners since the date of the grant of the relevant lease or as the case may be the date of the root conveyance. |
6.2 | Notices of Charge in respect of Charged Land |
The Chargor which owns or leases Charged Land shall (unless an alternative course of action is agreed between the Chargor and the Security Trustee) deliver to the Security Trustee (or procure delivery of) notices of charge duly executed by, or on behalf of, the Chargor, together with all relevant fees and addresses, in relation to all landlords from which the Chargor leases any Charged Land owned or leased by the Chargor in respect of each Lease under which the Chargor leases such Charged Land in existence on the date hereof, as soon as reasonably practicable following execution of this Deed and in each case shall use all reasonable endeavours to procure that each notice is acknowledged by the relevant landlord. The Chargor shall have no liability in the event that, having used such reasonable endeavours, the relevant landlord refuses to give such acknowledgement.
6.3 | Real Property: Delivery of Documents of Title |
(a) | The Chargor shall (unless an alternative course of action is agreed between the Chargor and the Security Trustee) in respect of all Charged Land set out in 1B of Schedule 3 (Details of Charged Land) next to the name of the Chargor (if any), as soon as reasonably practicable after the execution of this Deed, deliver (or procure delivery) to the Security Trustee of, and the Security |
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Trustee shall be entitled to hold and retain, all deeds, certificates and other documents of title relating to such property. |
(b) | The Chargor shall not be in breach of this Clause 6.3 if it does not deliver any such documents on account of its not having possession of the same provided that it uses all reasonable endeavours to obtain any such document and delivers such document promptly to the Security Trustee upon receipt. |
6.4 | Land Registration |
In respect of the Charged Land the title to which is registered at the Land Registry and Real Property which is acquired by or on behalf of the Chargor, the title to which is required to be registered at the Land Registry under the Land Registration Act 2002 the parties hereto agree to make or procure that there is made a due and proper application to the Land Registry (with the Security Trustees consent as proprietor of the relevant registered charge):
(a) | for a restriction in the following terms to be entered on the Proprietorship Register relating thereto: |
No disposition of the registered estate by the proprietor of the registered estate or by the proprietor of any registered charge is to be registered without a written consent signed by the proprietor for the time being of the charge dated [insert date] in favour of [insert name of Security Trustee] referred to in the Charges Register or signed on such proprietors behalf by its secretary or conveyancer;
(b) | to enter a note of the obligation to make further advances by the Beneficiaries on the Charges Register of any registered land forming part of the Charged Assets; and |
(c) | to note this Deed on the Charges Register. |
7. | FURTHER ASSURANCE |
7.1 | Further Assurance |
The Chargor shall at any time if and when required by the Security Trustee execute such further Encumbrances and assurances in favour of the Security Trustee and/or the Beneficiaries and do all such acts and things as the Security Trustee shall from time to time reasonably require over or in relation to all or any of the Charged Assets to secure the Secured Obligations or to perfect or protect the security intended to be created by this Deed over the Charged Assets or any part thereof or, on or after the Enforcement Date, to facilitate the realisation of the same.
7.2 | Certain Documentary Requirements |
Such further Encumbrances and assurances shall be prepared by or on behalf of the Security Trustee at the expense of the Chargor (such expense to be reasonable and properly incurred) and shall contain (a) an immediate power of sale without notice, (b) a clause excluding section 93 Law of Property Act 1925 and the restrictions
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contained in section 103 Law of Property Act 1925 and (c) such other clauses for the benefit of the Beneficiaries as the Security Trustee may reasonably require.
7.3 | Specific Security Documents Required |
The Chargor covenants with the Security Trustee that after the Enforcement Date if and when required by the Security Trustee (acting reasonably) it will to give notice in a form acceptable to the Security Trustee to such persons as the Security Trustee may require of the security over all or any part of the Charged Assets constituted by this Deed or granted pursuant to it.
8. | CERTAIN POWERS OF THE SECURITY TRUSTEE AND THE BENEFICIARIES: ENFORCEMENT |
8.1 | The Investments |
The Chargor further covenants and agrees with the Security Trustee that:
(a) | the Security Trustee and its nominees at the discretion of the Security Trustee may after an Event of Default has occurred and so long as the same is continuing, exercise in the name of the Chargor or otherwise at any time whether before or after demand for payment and without any further consent or authority on the part of the Chargor (but subject to Clause 8.1(d) in respect of the Investments), any voting rights and/or powers given to trustees by section 10(3) and (4) Trustee Act 1925 (as amended by section 9 Trustee Investments Act 1961) in respect of securities or property subject to a trust and any powers or rights which may be exercisable by the person in whose name any of the Investments are registered or by the bearer thereof; |
(b) | the Chargor will if so requested by the Security Trustee after an Event of Default has occurred and so long as the same is continuing transfer all or any of the Investments to the Security Trustee or such nominees or agents as the Security Trustee may select, provided that, for the avoidance of doubt, the Security Trustee may not request any such transfer prior to the occurrence of an Event of Default; |
(c) | until the Enforcement Date, the Security Trustee will hold all dividends, distributions, interest and other moneys paid on and received by it in respect of any Investments which are transferred to it pursuant to Clause 8.1(b) for the account of the Chargor; and |
(d) | until the Enforcement Date the Security Trustee will exercise all voting and other rights and powers attached to the Investments which are given to it pursuant to the Trustee Act 1925 (as referred to in Clause 8.1(a)) or which relate to the Investments which are transferred to it pursuant to Clause 8.1(b) as the Chargor may from time to time in writing direct provided that the Security Trustee shall be under no obligation to comply with any such direction where compliance would, in the Security Trustees reasonable opinion, be prejudicial to the security created by this Deed or to the interests of the Beneficiaries in relation to the relevant assets. |
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8.2 | Power of Sale |
At any time on or after the Enforcement Date, the Security Trustee may (without notice to the Chargor) sell or otherwise dispose of the Charged Assets or any of them and shall be entitled to apply the proceeds of such sale or other disposal in paying the costs of such sale or disposal and thereafter in or towards the discharge of the Secured Obligations or otherwise as provided for in this Deed.
8.3 | Statutory Powers |
For the purposes of all powers implied by statute, the Secured Obligations shall be deemed to have become due and payable on the date of this Deed.
8.4 | Law of Property Act |
At any time on or after the Enforcement Date or if requested by the Chargor, the Security Trustee may, without further notice, without the restrictions contained in sections 93 and 103 of the Law of Property Act 1925 and whether or not a Receiver shall have been appointed, exercise all the powers conferred upon mortgagees by the Law of Property Act 1925 as varied or extended by this Deed and all the powers and discretions conferred by this Deed on a Receiver either expressly or by reference and also, in the case of the Investments, all rights or powers which may be exercisable by the registered holder or beneficial owner of the same.
8.5 | Statutory Power of Leasing |
The statutory powers of leasing conferred on the Security Trustee shall be extended so as to authorise the Security Trustee to lease and make agreements for leases at a premium or otherwise, to accept surrenders of leases and to grant options on such terms as the Security Trustee shall consider expedient and without the need to observe any of the provisions of sections 99 and 100 Law of Property Act 1925, and Clause 8.2 (Power of Sale) shall operate as a variation and extension of section 101 of such Act.
8.6 | Distributions |
On or after the Enforcement Date all dividends, interest and other distributions relating to the Investments may be applied by the Security Trustee as though they were proceeds of sale under this Deed.
8.7 | Realisation Accounts |
If the Security Trustee (whether by the appointment of a Receiver or otherwise) enforces the Security the Security Trustee (or such Receiver) may:
(a) | open and maintain with such bank or banks (or other financial institutions) as it thinks fit one or more Realisation Accounts; |
(b) | pay the proceeds of any recoveries effected by it into any such number of Realisation Accounts as it considers appropriate; and |
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(c) | subject to the payment of any claims having priority to this Security, withdraw amounts standing to the credit of the Realisation Accounts to: |
(i) | discharge all costs, charges and expenses incurred and payments made by the Security Trustee (or such Receiver) in the course of such enforcement; |
(ii) | pay remuneration to the Receiver as and when the same becomes due and payable; and |
(iii) | discharge the Secured Obligations as and when the same become due and payable. |
8.8 | Right of Appropriation |
To the extent the Charged Assets constitute financial collateral and this Deed constitutes a security financial collateral arrangement (as defined in the Financial Collateral Arrangements (No. 2) Regulations 2003 (SI 2003 No. 3226)) the Security Trustee may appropriate all or any part of the Charged Assets in or towards satisfaction of the Secured Obligations, the value of the assets so appropriated being such amount as the Security Trustee shall determine in a commercially reasonable manner.
9. | APPOINTMENT AND POWERS OF RECEIVER OR ADMINISTRATOR |
9.1 | Appointment of Administrator |
At any time on or after the Enforcement Date the Security Trustee may appoint an administrator pursuant to the power contained in paragraph 14 of Schedule B1 to the Insolvency Act 1986.
9.2 | Appointment of Receivers |
The Security Trustee may at any time on or after the Enforcement Date or if the Chargor requests it to do so, by written instrument and without notice to the Chargor, appoint any one or more persons as Receiver of such part of the Charged Assets as may be permitted by law, each such person being entitled to act individually as well as jointly and being for all purposes deemed to be the agent of the Chargor and shall as such agent be deemed to be in the same position as a Receiver duly appointed by a mortgagee under the Law of Property Act 1925. The Security Trustee may from time to time by writing under its hand remove any Receiver appointed by it and may, whenever it may deem expedient, appoint a new Receiver in the place of any Receiver whose appointment may for any reason have terminated.
9.3 | Receiver as Agent |
A Receiver shall be the agent of the Chargor in respect of which he is appointed and (subject to the provisions of this Deed) the Chargor shall be solely responsible for his acts or defaults and for his remuneration.
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9.4 | Powers of Receiver |
A Receiver shall have all the powers conferred from time to time on receivers and administrative receivers by statute (in the case of powers conferred by the Law of Property Act 1925, without the restrictions contained in section 103 of that Act) and power on behalf and at the expense of the Chargor (notwithstanding liquidation of the Chargor) to do or omit to do anything which the Chargor could do or omit to do in relation to the Charged Assets or any part thereof. In particular (but without limitation) a Receiver shall have power to do all or any of the following acts and things:
(a) | Take possession |
take possession of, collect and get in all or any of the Charged Assets and exercise in respect of the Investments, all voting or other powers or rights available to a registered holder thereof in such manner as he may think fit;
(b) | Carry on business |
carry on, manage, develop, reconstruct, amalgamate or diversify the business of the the Chargor or any part thereof or concur in so doing; lease or otherwise acquire and develop or improve properties or other assets without being responsible for loss or damage subject to the terms of this Deed;
(c) | Borrow money |
raise or borrow any money from or incur any other Liability to the Security Trustee or the Beneficiaries or others on such terms with or without security as he may think fit and so that any such security may be or include a charge on the whole or any part of the Charged Assets ranking in priority to this security or otherwise;
(d) | Dispose of assets |
without the restrictions imposed by section 103 Law of Property Act 1925 or the need to observe any of the provisions of sections 99 and 100 of such Act, sell by public auction or private contract, let, surrender or accept surrenders, grant licences or otherwise dispose of or deal with all or any of the Charged Assets or concur in so doing in such manner for such consideration and generally on such terms and conditions as he may think fit with full power to convey, let, surrender, accept surrenders or otherwise transfer or deal with such Charged Assets in the name and on behalf of the Chargor or otherwise and so that covenants and contractual obligations may be granted and assumed in the name of and so as to bind the Chargor (or other estate owner) if he shall consider it necessary or expedient so to do; any such sale, lease or disposition may be for cash, debentures or other obligations, shares, stock, securities or other valuable consideration and be payable immediately or by instalments spread over such period as he shall think fit and so that any consideration received or receivable shall ipso facto forthwith be and become charged with the payment of all the Secured Obligations; plant, machinery and other fixtures may be severed and sold separately from the premises containing
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them and the Receiver may apportion any rent and the performance of any obligations affecting the premises sold without the consent of the Chargor;
(e) | Form Subsidiaries |
promote the formation of companies with a view to the same becoming a Subsidiary of the Chargor and purchasing, leasing, licensing or otherwise acquiring interests in all or any of the Charged Assets or otherwise, arrange for such companies to trade or cease to trade and to purchase, lease, license or otherwise acquire all or any of the Charged Assets on such terms and conditions whether or not including payment by instalments secured or unsecured as he may think fit;
(f) | Compromise contracts |
make any arrangement or compromise or enter into or cancel any contracts which he shall think expedient;
(g) | Repair and maintain assets |
make and effect such repairs, renewals and improvements to the Charged Assets or any part thereof as he may think fit and maintain, renew, take out or increase insurances;
(h) | Appoint employees |
appoint managers, agents, officers and employees for any of the purposes referred to in this Clause 9 or to guard or protect the Charged Assets at such salaries and commissions and for such periods and on such terms as he may determine and may dismiss the same;
(i) | Exercise statutory leasehold powers |
without any further consent by or notice to the Chargor exercise for and on behalf of the Chargor all the powers and provisions conferred on a landlord or a tenant by the Landlord and Tenant Acts, the Rent Acts, the Housing Acts or the Agricultural Holdings Act or any other legislation from time to time in force in any relevant jurisdiction relating to rents or agriculture in respect of any part of the Charged Assets but without any obligation to exercise any of such powers and without any liability in respect of powers so exercised or omitted to be exercised;
(j) | Make calls and legal proceedings |
make calls conditionally or unconditionally on the members of the Chargor in respect of uncalled capital and institute, continue, enforce, defend, settle or discontinue any actions, suits or proceedings in relation to the Charged Assets or any part thereof or submit to arbitration as he may think fit;
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(k) | Execute documents |
sign any document, execute any deed and do all such other acts and things as may be considered by him to be incidental or conducive to any of the matters or powers aforesaid or to the realisation of the security of the Security Trustee and the Beneficiaries and to use the name of the Chargor for all the purposes aforesaid;
(l) | Insolvency Act powers |
do all the acts and things described in schedules 1 or 2 to the Insolvency Act 1986 as if the words he and him referred to the Receiver and company referred to the Chargor; and
(m) | General Powers |
do all such other acts and things as it may consider desirable or necessary for realising all or any part of the Charged Assets over which he is appointed or incidental or conducive to any of the matters, powers or authorities conferred on a Receiver under or by virtue of this Deed; to exercise in relation to all or any part of the Charged Assets over which he is appointed all such powers, authorities and things as he would be capable of exercising if he were the absolute beneficial owner of the same; and to use the name of the Chargor for all or any of such purposes.
9.5 | Remuneration of Receiver |
The Security Trustee may from time to time determine the remuneration of any Receiver appointed by it without the limitations imposed by section 109 of the Law of Property Act 1925. A Receiver shall be entitled to remuneration appropriate to the work and responsibilities involved upon the basis of charging from time to time adopted by the Receiver in accordance with the current practice of his firm.
10. | APPLICATION OF PROCEEDS; PURCHASERS |
10.1 | Application of Proceeds |
All moneys received by the Security Trustee or by any Receiver shall be applied, after the discharge of the remuneration and expenses of the Receiver and all liabilities having priority to the Secured Obligations, in or towards satisfaction of the Secured Obligations in accordance with the terms of the Group Intercreditor Deed and the Security Trust Agreement, except that the Security Trustee may credit the same to a suspense account for so long and in such manner as the Security Trustee may from time to time determine and the Receiver may retain the same for such period as he and the Security Trustee consider expedient.
10.2 | Insurance Proceeds |
With the exception of those moneys:
(a) | which relate to a particular claim and do not exceed £2,500,000; |
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(b) | are paid under third party liability insurance to the relevant third party; or |
(c) | which relate to (a) Insurances of leasehold property or leasehold equipment in cases where the relevant lessor is named as loss payee, and (b) Insurances in favour of lenders to any member of the Group where the relevant borrowing is (A) a Permitted Borrowing and (B) either a Finance Lease or secured by a Permitted Encumbrance and (C) either the relevant lender is named as loss payee or naming the Security Trustee would be contrary to the terms of the relevant borrowing; |
all moneys receivable by virtue of any of the Insurances on or after the Enforcement Date shall be paid to the Security Trustee (or if not paid by the insurers directly to the Security Trustee shall be held on trust for the Security Trustee) and shall, at the option of the Security Trustee, be (i) applied in replacing, restoring or reinstating the property or assets destroyed, damaged or lost (any deficiency being made good by the Chargor) or (ii) (except where the Chargor is obligated (as landlord or tenant) to lay out such moneys under any lease of any of the Charged Assets) credited (for a period not exceeding 30 days at the end of which period such moneys shall, at the option of the Security Trustee, be applied in accordance with either (i) above or (iii) below) to an account charged to the Security Trustee (on behalf of the Beneficiaries) in a manner acceptable to the Security Trustee and at the cost of the Chargor as a continuing security for the payment and discharge of the Secured Obligations or (iii) (except where the Chargor is obliged (as landlord, tenant, lessor or lessee) to lay out such insurance moneys under the provisions of any lease of any of the Charged Assets) applied in reduction of the Secured Obligations. Without prejudice to the foregoing provisions of this Clause 10 the Security Trustee agrees to negotiate with the Chargor in good faith as to the application of any insurance proceeds paid to or held on trust for the Security Trustee.
11. | INDEMNITIES; COSTS AND EXPENSES |
11.1 | Enforcement Costs |
The Chargor hereby undertakes with the Security Trustee to pay on demand all costs, charges and expenses which the Security Trustee or any Receiver shall certify as sustained or incurred by it as a consequence of the enforcement, preservation or attempted preservation of any of the security created by or pursuant to this Deed or any of the Charged Assets on a full indemnity basis, together with interest at the Default Rate from the date falling 30 days after the date of demand for payment of such expenses to the date of payment by the Chargor (both before and after judgment) provided that before any such demand is made on a Restricted Guarantor, demand for payment of such expenses shall first have been made on the Chargor which is not a Restricted Guarantor.
11.2 | No liability as Mortgagee in Possession |
None of the Beneficiaries, the Security Trustee or any Receiver shall be liable to account as mortgagee or heritable creditor in possession in respect of all or any of the Charged Assets or be liable for any loss upon realisation or for any neglect or default of any nature whatsoever for which a mortgagee in possession may be liable as such
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except in the case of fraud, wilful misconduct or gross negligence on the part of a Beneficiary, the Security Trustee or a Receiver (as the case may be).
11.3 | Indemnity from Charged Assets |
The Beneficiaries, the Security Trustee and any Receiver, attorney, agent or other person appointed by the Security Trustee under this Deed and the directors, officers and employees of each of the aforementioned (each an Indemnified Party) shall be entitled to be indemnified out of the Charged Assets in respect of all costs, losses, actions, claims, demands or liabilities whether in contract, tort, delict or otherwise and whether arising at common law, in equity or by statute which may be incurred by, or made against, any of them (or by or against any manager, agent, officer or employee for whose liability, act or omission any of them may be answerable) at any time relating to or arising directly or indirectly out of or as a consequence of:
(a) | anything done or omitted in the exercise or purported exercise of the powers contained in this Deed; or |
(b) | any breach by the Chargor of any of its obligations under this Deed; or |
(c) | an Environmental Claim made or asserted against an Indemnified Party which would not have arisen if this Deed had not been executed and which was not caused by the negligence or wilful default of the relevant Indemnified Party, |
in each case, except in the case of fraud, wilful misconduct or gross negligence on the part of an Indemnified Party.
11.4 | Powers of the Security Trustee |
To the fullest extent permitted by law, all or any of the powers, authorities and discretions of a Receiver in respect of the Charged Assets may, if a Receiver has been or could have been appointed, be exercised by the Security Trustee in relation to the whole or any part of the Charged Assets whether or not a Receiver is or has been appointed.
12. | ENFORCEMENT |
12.1 | When Enforceable |
If (and only if) the Enforcement Date has occurred then the charges created pursuant to this Deed shall become enforceable. Section 103 Law of Property Act 1925 shall not apply in respect of any Charged Assets.
12.2 | Authority |
No purchaser or other person shall be bound or concerned to see or enquire whether the right of the Security Trustee or any Receiver to exercise any of the powers conferred by this Deed has arisen or not or be concerned with notice to the contrary or with the propriety of the exercise or purported exercise of such powers.
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13. | POWER OF ATTORNEY |
13.1 | Power of Attorney |
The Chargor, by way of security for the performance of its obligations under this Deed, hereby irrevocably appoints each of the Security Trustee and any Receiver of all or any part of the Charged Assets and their respective delegates and sub-delegates each to be its attorney acting severally (or jointly with any other such attorney or attorneys) in its name and on its behalf:
(a) | to execute and complete on or after the Enforcement Date any documents or instruments which the Security Trustee or such Receiver may require for perfecting the title of the Security Trustee to the Charged Assets or for vesting the same in the Security Trustee, its nominees or any purchaser; |
(b) | to sign, execute, seal and deliver and otherwise perfect any further security document or notice referred to in Clause 6 (Real Property: Perfection) in accordance with the terms thereof; and |
(c) | otherwise generally on or after the Enforcement Date to sign, seal, execute and deliver all deeds, assurances, agreements and documents and to do all acts and things which may be required for the full exercise of all or any of the powers conferred on the Security Trustee or a Receiver under this Deed or which may be deemed expedient by the Security Trustee or a Receiver in connection with any disposition, realisation or getting in by the Security Trustee or such Receiver of the Charged Assets or any part thereof or in connection with any other exercise of any power under this Deed. |
13.2 | Ratification |
The Chargor ratifies and confirms and agrees to ratify and confirm all acts and things which any attorney as is mentioned in Clause 13.1 (Power of Attorney) shall do or purport to do in the exercise of his powers under such clause.
13.3 | General Power |
This appointment shall operate as a general power of attorney under section 10 of the Powers of Attorney Act 1971 and the Chargor hereby covenants with the Security Trustee and separately with any such Receiver to ratify and confirm any document, act or thing and all transactions which any such attorney may lawfully execute or do.
14. | CONTINUING SECURITY AND OTHER MATTERS |
14.1 | Continuing Security |
This Deed and the obligations of the Chargor under this Deed shall:
(a) | secure the ultimate balance of the Secured Obligations from time to time owing notwithstanding the dissolution, bankruptcy, liquidation or other Incapacity or any change in the constitution of the Chargor or in the name or style thereof and shall be a continuing security notwithstanding any settlement of account or other matter whatsoever; |
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(b) | be in addition to, and shall not merge with or otherwise prejudice or affect, any present or future Security Document, Encumbrance, right or remedy held by or available to the Beneficiaries or any of them and/or the Security Trustee and may be enforced notwithstanding the same; and |
(c) | not merge with or be in any way prejudiced or affected by the existence of any such Security Documents, Encumbrance, rights or remedies or by the same being or becoming wholly or in part void, voidable or unenforceable on any ground whatsoever or by the Beneficiaries or any of them and/or the Security Trustee dealing with, exchanging, releasing, varying or failing to perfect or enforce any of the same, or giving time for payment or indulgence or compounding with any other person liable. |
14.2 | Security Documents |
Neither the Security Trustee nor any of the Beneficiaries shall be obliged to resort to any other Security Documents or other means of payment now or hereafter held by or available to it before enforcing this Deed and no action taken or omitted by the Security Trustee or any of the Beneficiaries in connection with any such Security Document or other means of payment shall discharge, reduce, prejudice or affect the liability of the Chargor nor shall the Security Trustee or any of the Beneficiaries be obliged to account for any money or other property received or recovered in consequence of any enforcement or realisation of any such Security Document or other means of payment.
14.3 | New Accounts |
Notwithstanding that any charge hereby created ceases to be continuing for any reason whatsoever the Security Trustee or any of the Beneficiaries may continue any account of the Chargor or other Security Provider or open one or more new accounts and the liability of the Chargor hereunder shall not in any manner be reduced or affected by any subsequent transaction or receipts or payments into or out of any such account.
14.4 | Settlements Conditional |
Any release, discharge or settlement between the Chargor and the Security Trustee shall be conditional upon no security, disposition or payment to the Security Trustee or any of the Beneficiaries by the Chargor or any other person being void, set aside or ordered to be refunded pursuant to any enactment or law relating to bankruptcy, liquidation, administration or insolvency or for any other reason whatsoever and if such condition shall not be fulfilled the Security Trustee shall be entitled to enforce this Deed subsequently as if such release, discharge or settlement had not occurred and any such payment had not been made.
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14.5 | No Release |
The liability of the Chargor shall not be affected nor shall the charge hereby created be discharged or diminished by reason of:
(a) | the Incapacity or any change in the name, style or constitution of the Chargor or any other person liable; or |
(b) | the Security Trustee or any of the Beneficiaries compounding with, discharging, releasing or varying the liability of or granting any time indulgence or concession to the Chargor or any other person or renewing, determining, varying or increasing any accommodation, facility or transaction in any manner whatsoever or concurring in accepting or varying any compromise, arrangement or settlement or omitting to claim or enforce payment from the Chargor or any other person; or |
(c) | any act or omission which would not have discharged or affected the liability of the Chargor had it been principal debtor instead of guarantor or by anything done or omitted which but for this provision might operate to exonerate the Chargor. |
14.6 | Restriction of the Chargors Rights |
Until all the Secured Obligations have been paid, discharged or satisfied in full (and notwithstanding payment of a dividend in any liquidation or under any compromise or arrangement or the discharge by any person of its liability) the Chargor agrees that without the prior written consent of the Security Trustee it will not:
(a) | exercise its rights of subrogation, reimbursement and indemnity against the Chargor or any other person; |
(b) | save as otherwise permitted or not restricted in each of the Senior Finance Documents, the Refinancing Facilities Agreements and the Group Intercreditor Deed, demand or accept repayment in whole or in part of any obligations or liabilities now or hereafter due to the Chargor from any other Security Provider demand or accept any guarantee or any other document or instrument (including, without limitation, any other document or instrument creating or evidencing a mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment, trust arrangement or security interest of any kind) in respect of such obligations or liabilities or dispose of the same; |
(c) | take any step to enforce any right against any other Security Provider in respect of any such obligations or liabilities; or |
(d) | claim any set-off or counter-claim in respect of any such obligations or liabilities against any other Security Provider or claim or prove in competition with the Security Trustee or any of the Beneficiaries in the bankruptcy, liquidation or administration of any other Security Provider or have the benefit of, or share in, any payment from or composition with any Security Provider or other Security Document now or hereafter held by the Security Trustee or any of the Beneficiaries for any obligations or liabilities of any Security |
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Provider but so that, if so directed by the Security Trustee, it will prove for the whole or any part of its claim in the liquidation of any other Security Provider on terms that the benefit of such proof and of all money received by it in respect thereof shall be held on trust for the Security Trustee and applied in or towards discharge of the Secured Obligations in accordance with the provisions of the Group Intercreditor Deed and the Security Trust Agreement. |
14.7 | Recoveries by the Chargor |
If contrary to Clause 2.3 (No Security) or 14.6 (Restriction of the Chargors Rights) the Chargor takes or receives the benefit of any security or receives or recovers any money or other property, such security, money or other property shall be held on trust for the Security Trustee and shall be delivered to the Security Trustee on demand.
14.8 | Treatment of claims |
The Chargor hereby agrees not to assert or enforce (whether by or in a legal or equitable proceeding or otherwise) any claims (as defined in section 101(4) of the United States Bankruptcy Code) against the Chargor, whether arising under any applicable law or otherwise, to which the Chargor is or would be entitled. It is hereby acknowledged by the Security Trustee that this Clause 14.8 does not restrict the right of the Chargor to assert or enforce any claims against any other Security Provider to the extent that such claims arise after all the Security Providers have been released from all their respective obligations and liabilities hereunder.
15. | CURRENCIES |
15.1 | Conversion of Currencies |
All moneys received or held by the Security Trustee or by a Receiver under this Deed at any time on or after the Enforcement Date in a currency other than a currency in which the Secured Obligations are denominated may from time to time be sold for such one or more of the currencies in which the Secured Obligations are denominated as the Security Trustee or Receiver considers necessary or desirable and the Chargor shall indemnify the Security Trustee against the full Sterling cost (including all costs, charges and expenses) properly incurred in relation to such sale. Neither the Security Trustee nor any Receiver shall have any liability to the Chargor in respect of any loss resulting from any fluctuation in exchange rates after any such sale.
15.2 | Currency Indemnity |
No payment to the Security Trustee (whether under any judgment or court order or otherwise) shall discharge the obligation or liability of the Chargor in respect of which it was made unless and until the Security Trustee shall have received payment in full in the currency in which such obligation or liability was incurred. To the extent that the amount of any such payment shall on actual conversion into such currency fall short of such obligation or liability expressed in that currency the Security Trustee shall have a further separate cause of action against the Chargor and shall be entitled to enforce the charges hereby created to recover the amount of the shortfall.
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16. | THE SECURITY TRUST AGREEMENT |
The Chargor and the Security Trustee hereby acknowledges that the covenants of the Chargor contained in this Deed and the security and other rights, titles and interests constituted by this Deed and the Charged Assets and all other moneys, property and assets paid to the Security Trustee or held by the Security Trustee or received or recovered by the Security Trustee pursuant to or in connection with this Deed are held by the Security Trustee subject to and on the terms of the trusts declared in the Security Trust Agreement.
17. | MISCELLANEOUS |
17.1 | Exchange of Information |
The Chargor hereby authorises the Security Trustee and the Beneficiaries to exchange between themselves any information concerning the Charged Assets unless such information is the subject of a duty of confidentiality on the part of the Security Trustee or any Beneficiary not to disclose such information.
17.2 | Remedies Cumulative |
No failure or delay on the part of the Security Trustee or any of the Beneficiaries to exercise any power, right or remedy shall operate as a waiver thereof nor shall any single or any partial exercise or waiver of any power, right or remedy preclude its further exercise or the exercise of any other power, right or remedy.
17.3 | Representations and Warranties |
The Chargor represents and warrants to the Security Trustee that:
(a) | Shareholders |
it has as its shareholders those persons set out in Schedule 1 (Chargor) (with the percentage interest set out therein) and no others;
(b) | Assets charged |
it has charged all or substantially all of the assets it owns pursuant to the provisions of this Deed; and
(c) | Repetition |
the representation and warranty contained in Clause 17.3(b) shall be deemed to be repeated by the Chargor on the date on which all or any of the representations and warranties contained in clause 21 (Representations and Warranties) of the Senior Facilities Agreement, or upon its repayment in full and cancellation of all undrawn commitments thereunder such equivalent provision in the Relevant Facilities Agreement, are deemed to be repeated pursuant to the relevant provisions thereof.
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17.4 | No Breach of Memorandum and Articles of Association |
It is hereby certified by the Chargor that neither the execution of this Deed nor the creation of the charges contained in this Deed contravenes any of the provisions of the Memorandum and Articles of Association of the Chargor.
17.5 | Statutory Power of Leasing |
During the continuance of this security the statutory and any other powers of leasing, letting, entering into agreements for leases or lettings and accepting or agreeing to accept surrenders of leases or tenancies shall not be exercised by the Chargor in relation to the Charged Assets or any part thereof.
17.6 | Successors |
Any appointment or removal of a Receiver under Clause 9 (Appointment and Powers of Receiver or Administrator) and any consents under this Deed may be made or given in writing signed or sealed by any successor Security Trustee appointed pursuant to the terms of the Security Trust Agreement and their respective successors in title and accordingly the Chargor hereby irrevocably appoints each successor Security Trustee appointed pursuant to the Security Trust Agreement and their respective successors in title to be its attorney in the terms and for the purposes set out therein.
17.7 | Consolidation |
Section 93 Law of Property Act 1925 shall not apply to the security created by this Deed or to any security given to the Security Trustee or any of the Beneficiaries pursuant to this Deed.
17.8 | Reorganisation |
This Deed shall remain binding on the Chargor notwithstanding any change in the constitution of the Security Trustee or any Beneficiary or the absorption of the Security Trustee or any Beneficiary in, or amalgamation with, or the acquisition of all or part of its undertaking by, any other person, or any reconstruction or reorganisation of any kind. The security granted by this Deed shall remain valid and effective in all respects in favour of the Security Trustee as trustee for the Beneficiaries.
17.9 | Unfettered Discretion |
Save as otherwise provided herein any ability or power which may be exercised or any determination which may be made under this Deed by the Security Trustee or a Beneficiary may be exercised or made in its absolute and unfettered discretion and it shall not be obliged to give reasons therefor.
17.10 | Provisions Severable |
Each of the provisions of this Deed is severable and distinct from the others and if any one or more of such provisions is or becomes invalid, illegal or unenforceable the validity, legality and enforceability of the remaining provisions of this Deed shall not in any way be affected or impaired thereby.
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17.11 | Law of Property (Miscellaneous Provisions) Act 1989 |
For the purposes of the Law of Property (Miscellaneous Provisions) Act 1989 any provisions of any Senior Finance Document relating to any disposition of an interest in land shall be deemed to be incorporated in this Deed.
17.12 | No Assignment by the Chargor |
The Chargor may not assign or transfer any of its rights or obligations under this Deed.
17.13 | Joint and Several Liabilities |
The covenants, agreements, obligations and liabilities of the Chargor contained in this Deed or implied on their part are joint and several and shall be construed accordingly.
17.14 | Liabilities Survive Deficiencies and Releases |
The Chargor agrees to be bound by this Deed notwithstanding that any person intended to execute or to be bound by this Deed may not do so or may not be effectually bound and notwithstanding that any charges contained in this Deed may be terminated or released or may be or become invalid or unenforceable against any other person whether or not the deficiency is known to the Security Trustee or any of the Beneficiaries.
17.15 | Letters of Non-crystallisation |
The Security Trustee shall, at the request and cost of the Chargor, execute such letters of non-crystallisation as may be reasonably necessary to permit any Permitted Disposal of the Floating Charge Assets.
17.16 | Release |
Upon the satisfaction in full of all of the Secured Obligations and there no longer being any obligation on any Beneficiary to make any of the Secured Obligations available, then subject only to Clause 14.4 (Settlements Conditional), the Security Trustee shall, at the request and cost of the Chargor, execute and do all such deeds, acts and things as may be necessary to release the Charged Assets from the security constituted, and to reassign the property and assets assigned to the Security Trustee, hereby.
18. | NOTICES |
18.1 | Mode of Service |
Any notice or demand for payment by the Security Trustee under this Deed shall, without prejudice to any other effective mode of making the same, be deemed to have been properly served on the Chargor in the manner and at the address set out in clause 20 (Notices) of the Group Intercreditor Deed.
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18.2 | Notices Conclusive |
Any such notice or demand or any certificate as to the amount at any time secured by this Deed shall, save for manifest error, be conclusive and binding upon the Chargor if signed by an officer of the Security Trustee.
19. | LAW AND JURISDICTION |
19.1 | Governing Law |
This Deed, including all non-contractual obligations arising out of or in connection with it, shall be governed by English law.
19.2 | Submission to Jurisdiction |
The Chargor agrees for the benefit of the Security Trustee that any legal action or proceedings in connection with this Deed against the Chargor or any of their respective assets may be brought in the English courts. The Chargor irrevocably and unconditionally submits to the jurisdiction of such courts. The submission to such jurisdiction shall not (and shall not be construed so as to) limit the right of the Security Trustee or any of the Beneficiaries to enforce any judgment obtained in any court referred to in this Clause 19.2 in any jurisdiction in which any of the assets of the Chargor are situated, nor shall the taking of proceedings in any one or more jurisdiction referred to in this Clause 19.2 preclude the taking of proceedings in any other such jurisdiction, whether concurrently or not.
19.3 | Inconvenient Forum |
The Chargor irrevocably waives any objection it may have now or hereafter to the laying of venue of any action or proceeding in any court or jurisdiction referred to in Clause 19.2 (Submission to Jurisdiction) and any claim it may have now or hereafter that any action or proceeding brought in such courts or jurisdiction has been brought in an inconvenient forum.
IN WITNESS whereof this Deed has been executed and delivered by or on behalf of the parties on the date stated at the beginning of this Deed.
35
SCHEDULE 1
CHARGOR
COMPANY NAME |
COMPANY NUMBER |
NAME OF SHAREHOLDER(S) |
NO. OF SHARES | |||
VMWH Limited |
7531816 | Telewest Communications Holdings Limited |
632,001 |
36
SCHEDULE 2
NOTICES OF ASSIGNMENT/ACKNOWLEDGEMENTS
Part 1
Intercompany Indebtedness
Part 1A
Form of Notice of Assignment
To: [specify relevant intercompany debtor]
[Date]
Dear Sirs,
We, VMWH Limited, hereby give you notice that:
1. | pursuant to a debenture dated [] (the Debenture) (a copy of which is appended hereto) entered into by (inter alios) us in favour of [] as security trustee for the Beneficiaries as therein defined (the Security Trustee) we have assigned the following assets to the Security Trustee: |
(a) | all our present and future rights, title, benefits and interests in and under the loan agreements dated [specify] (the Intercompany Loan Agreement(s)); |
(b) | all our present and future rights, title benefit and interest in and to all principal and interest payable under the Intercompany Loan Agreement(s) and any other amounts payable in respect thereof; |
2. | the Security Trustee has agreed that, until such time as the Security Trustee notifies you to the contrary, we may continue to exercise all of our rights under the Intercompany Loan Agreement(s); |
3. | upon the security granted by the Debenture becoming enforceable, we may not vary extend release determine or rescind any of the Intercompany Loan Agreement(s) or grant time for payment or indulgence or compound with discharge waive release set off or vary the liability of any other person thereunder or consent to any act or omission as would otherwise constitute a breach or concur in accepting or varying any compromise arrangement or settlement relating thereto or do or suffer any act or thing or permit any set off whereby the recovery of any moneys payable may be delayed or impeded; |
4. | the authority and instructions herein contained cannot be revoked or varied by us without the prior written consent of the Security Trustee. |
37
Please acknowledge receipt of this notice by signing the acknowledgement attached to the enclosed copy letter and returning the same to the Security Trustee.
Yours faithfully,
For and on behalf of |
VMWH Limited |
|
Authorised Officer |
38
Part 1B
Form of Acknowledgement of Assignment
[To be attached to the Notice of Assignment]
To: []
[Date]
Dear Sirs,
1. | We refer to the notice of assignment issued to us by VMWH Limited. |
2. | Unless the context otherwise requires, terms defined in, or incorporated by reference into, the Debenture (as defined below) shall bear the same meaning herein. |
3. | We hereby: |
(a) | acknowledge receipt of notice from VMWH Limited that, by a debenture dated [] (the Debenture) and made between (inter alios) VMWH Limited and the Security Trustee, VMWH Limited has assigned to the Security Trustee all of its present and future rights, title, benefits and interests in and under the Intercompany Loan Agreement(s), as therein defined; |
(b) | agree to, and accept, the making of such assignment; |
(c) | undertake to the Security Trustee to accept as valid, and act upon and observe where required, any notices or demands given or made by the Security Trustee in respect of the Intercompany Loan Agreement(s) in place of VMWH Limited; |
(d) | agree to deliver to the Security Trustee copies of all notices delivered by us to VMWH Limited; |
(e) | acknowledge that the making of the assignment referred to above shall not affect the liability of VMWH Limited to perform all the obligations assumed by it under the Intercompany Loan Agreement(s) and that the Security Trustee shall have no obligations (whether in place of VMWH Limited or otherwise) in respect of the Intercompany Loan Agreement(s) except insofar as such obligations may arise as a result of the Security Trustee exercising any of those rights conferred upon it under any agreement between (inter alios) us and the Security Trustee relating to the Assigned Assets; and |
(f) | confirm that we have not received any prior notice of assignment, transfer or charge in respect of VMWH Limited, rights, title, benefits and interests in and under the Intercompany Loan Agreement(s). |
39
4. | This Acknowledgement shall be governed by, and construed in accordance with, English law. |
Yours faithfully,
For and on behalf of
[]
|
Authorised Officer |
40
Part 2
Insurances
Part 2A
Form of Notice of Assignment
To: [insert name of insurer]
[Date]
Dear Sirs,
We, VMWH Limited, hereby give you notice that:
(i) | pursuant to a debenture dated [] (the Debenture) we have charged and assigned to [ ] (as security trustee for the Beneficiaries referred to in the Debenture, the Security Trustee) all our rights, title, interests and benefits in, to or in respect of the insurance policies with you detailed in Part 1 of the Schedule attached hereto (the Insurances) including all claims and returns of premiums in respect thereof to which we are, or may at any future time become, entitled. |
With effect from your receipt of this notice we hereby request and instruct that:
1. | you immediately name the Beneficiaries (details of whom are set out in Part 2 of the Schedule attached hereto) and the Security Trustee (in its capacity as security trustee) as loss payee in respect of each of the Insurances); |
2. | upon the security granted by the Debenture in respect of the Insurances becoming enforceable (as notified to you by the Security Trustee): |
(a) | all payments under or arising from the Insurances are to be made to the Security Trustee or to its order; |
(b) | all remedies provided for in the Insurances or available at law or in equity are to be exercisable by the Security Trustee; |
(c) | all rights to compel the performance of the Insurances are to be exercisable by the Security Trustee; and |
(d) | all rights, title, interests and benefits whatsoever accruing to or the benefit of ourselves arising from the Insurances shall belong to the Security Trustee; and |
3. | you give notice to the Security Trustee promptly in writing: |
(a) | if we propose to cancel or give notice of cancellation of any Insurance, at least 30 days before such cancellation is to take effect; |
(b) | of any material alteration or the termination or expiry of any such Insurance, at least 30 days before such alteration, termination or expiry is to take effect; and |
41
(c) | of any default in the payment of any premium or failure to renew any such Insurance and shall give the Security Trustee not less than 30 days in which to pay the defaulted premium without cancelling the policy during such 30 days period. |
Please confirm your receipt of this notice and your acknowledgement of the matters and instructions set out above by signing and dating the Acknowledgement of Assignment set out on the enclosed copy of this notice, and returning the same to the Security Trustee with a copy to ourselves.
Yours faithfully,
For and on behalf of
VMWH Limited
|
Authorised Officer |
42
SCHEDULE
Part 1
Relevant Insurance Policies
None
Part 2
Beneficiaries
None
43
Part 2B
Form of Acknowledgement of Assignment
[To be attached to the Notice of Assignment]
To: |
[] | |
as Security Trustee |
[Date]
Dear Sirs,
We hereby acknowledge receipt of a notice in the terms set out above (the Notice).
We confirm that we shall hereafter act in accordance with the Notice and that we have not received any other notice of any other third party interests whether by way of assignment or charge in respect of any of the Insurances.
We further confirm that no amendment or termination of any of the Insurances shall be effective unless we have given you [30] days prior written notice of our intention to so amend or terminate the same.
Yours faithfully,
|
(Authorised Signatory) |
[INSURER]
Date:
44
SCHEDULE 3
DETAILS OF CHARGED LAND
Part 1
PART 1A
Registered Land
CHARGOR |
ADDRESS | FREEHOLD / LEASEHOLD |
TITLE NUMBER |
TERM (IF LEASEHOLD) |
DATE OF LEASE (IF LEASEHOLD) | |||||
N/A |
N/A | N/A | N/A | N/A | N/A |
PART 1B
Unregistered Land
The freehold/leasehold property known as and comprised in the following title deed(s) or other document(s) of title:
CHARGOR |
ADDRESS | FREEHOLD/LEASEHOLD | DATE OF LEASE (IF LEASEHOLD) | |||
N/A |
N/A | N/A | N/A |
45
SCHEDULE 4
REGISTERED, INTELLECTUAL PROPERTY RIGHTS
A. | UNITED KINGDOM TRADE MARKS |
Mark |
App./Reg. No. |
App./Reg. Date |
Class(es) | Proprietor | Status | |||||
N/A | N/A | N/A | N/A | N/A | N/A |
B. | COMMUNITY TRADE MARKS |
Mark |
App./Reg. No. |
App./Reg. Date |
Class(es) | Proprietor | Status | |||||
N/A | N/A | N/A | N/A | N/A | N/A |
EP PATENTS
PATENT NUMBER |
TITLE |
DATE OF FILING | STATUS | |||
N/A |
N/A | N/A | N/A |
GB PATENTS
PATENT NUMBER |
TITLE |
DATE OF FILING | STATUS | |||
N/A |
N/A | N/A | N/A |
47
SCHEDULE 5
INTERCOMPANY LOANS
Company name (Creditor) |
Company name (Debtor) | Balances in GBP as at 31 March 2010 | ||
(US GAAP) | ||||
N/A | N/A | N/A |
SIGNATORIES
The Chargor
EXECUTED as a DEED for and on behalf of VMWH LIMITED |
) ) ) |
|||||||
) | By: | /s/ ROBERT GALE |
||||||
Name: | Robert Gale | |||||||
Title: | Director |
In the presence of: |
||||
Witnesss signature: |
/s/ OMAR NASAR |
|||
Name: |
Omar Nasar | |||
Address: |
99 City Road | |||
London | ||||
EC1Y 1AX |
THE SECURITY TRUSTEE
DEUTSCHE BANK AG, LONDON BRANCH
By: /s/ Nicola Dawes
By: /s/ Craig Hoepfl
Address: Winchester House, 1 Great Winchester Street, London EC2N 2DB,United Kingdom
Fax Number:
Attention: Dawes/ Hoepfl
Exhibit 4.7
Dated 3 March 2011
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
(VMIH and each of its subsidiaries listed on the signature pages hereto, such subsidiaries and VMIH,
together, as the Confirming Parties)
and
DEUTSCHE BANK AG, LONDON BRANCH
(as Security Trustee)
and
THE BANK OF NEW YORK MELLON
(as Trustee under the New Notes)
CONFIRMATION DEED
THIS CONFIRMATION DEED (this Deed) is made
AMONG:
(1) | VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED, a company incorporated in England and Wales with registered company number 03173552 (VMIH), and each of its subsidiaries listed in Schedule A (The Subsidiaries) hereto (such subsidiaries and VMIH together, the Confirming Parties); |
(2) | DEUTSCHE BANK AG, LONDON BRANCH, in its capacity as security trustee and agent for and on behalf of the Beneficiaries under the Security Documents (the Security Trustee); and |
(3) | THE BANK OF NEW YORK MELLON, in its capacity as trustee for and on behalf of itself and the holders of the New Notes (as referred below) from time to time. |
WHEREAS:
(A) | Reference is made to: |
(a) | the Senior Facilities Agreement, dated 16 March 2010, (as from time to time amended, varied, novated or supplemented) (the SFA) between the Ultimate Parent, Virgin Media Finance PLC, Virgin Media Investment Holdings Limited, Virgin Media Limited, Virgin Media Wholesale Limited, VMIH Sub Limited and Virgin Media SFA Finance Limited as Original Borrowers, BNP Paribas London Branch and Deutsche Bank AG, London Branch as Global Coordinators and Physical Bookrunners, BNP Paribas London Branch, Deutsche Bank AG, London Branch, Crèdit Agricole Corporate and Investment Bank, GE Corporate Finance Bank SAS, Goldman Sachs International, J.P. Morgan PLC, Lloyds TSB Corporate Markets, Merrill Lynch International, The Royal Bank of Scotland plc and UBS Limited as Bookrunners and Mandated Lead Arrangers, Deutsche Bank AG, London Branch as Facility Agent, Deutsche Bank AG, London Branch as Security Trustee and the financial and other institutions named in it as Lenders and Deutsche Bank AG, London Branch as Original L/C Bank; |
(b) | the $1,000,000,000 6.50% Senior Secured Notes due 2018 and the £875,000,000 7.00% Senior Secured Notes due 2018 (together, the Existing Notes), in each case, of Virgin Media Secured Finance PLC (the Issuer) and the related Indenture dated as of January 19, 2010 (the Existing Indenture) between the Issuer, the Ultimate Parent, Virgin Media Finance PLC, VMIH, the subsidiary guarantors named therein, The Bank of New York Mellon as Trustee and Paying Agent and The Bank of New York Mellon (Luxembourg) S.A. as Luxembourg Paying Agent; |
(c) | the Group Intercreditor Deed, dated 3 March 2006, as amended and restated on 13 June 2006, 10 July 2006, 31 July 2006, 15 May 2008, 30 October 2009 and 8 January 2010 (the Group Intercreditor Agreement) between the Security Trustee and the borrowers, guarantors, lenders, financial institutions, intergroup debtors and intergroup creditors party thereto; |
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(d) | the $500,000,000 5.25% Senior Secured Notes due 2021 and the £650,000,000 5.50% Senior Secured Notes due 2021 (together, the New Notes) of the Issuer and the related Indenture dated as of 3 March 2011 (the New Indenture) between the Issuer, the Ultimate Parent, Virgin Media Finance PLC, VMIH, the subsidiary guarantors named therein, The Bank of New York Mellon as Trustee (in such capacity, the New Trustee) and Paying Agent and The Bank of New York Mellon (Luxembourg) S.A. as Luxembourg Paying Agent; and |
(e) | the Security Documents listed in Schedule B (Scots Security Documents) hereto (the Security Documents). |
(B) | Each Confirming Party is a party to the SFA, the Existing Indenture, the New Indenture, the Group Intercreditor Agreement and/or one or more of the Security Documents, as applicable. |
(C) | Each Confirming Party has realised, and continues to realise, substantial direct and indirect benefits as a result of the SFA, the Existing Notes and the Existing Indenture continuing to be effective and as a result of the New Notes and the New Indenture becoming effective and the consummation of the transactions contemplated thereby. |
(D) | Each Confirming Party expects to realise substantial direct and indirect benefits as a result of the New Notes and the New Indenture and the consummation of the transactions contemplated thereby. |
IT IS AGREED as follows:
1. | DEFINITIONS |
Capitalised terms, unless otherwise specified herein, shall have the meanings ascribed to them in the Group Intercreditor Agreement. In addition:
New Guarantees means the Note Guarantees as defined in the New Indenture; and
New Notes Documents means the New Notes, the New Guarantees, the New Indenture and any other document evidencing the obligations and liabilities of the Issuer and/or the other Confirming Parties in relation to the New Notes and the New Guarantees.
2. | INTERPRETATION |
2.1 | Clause, schedule and paragraph headings are inserted for convenience only and shall not affect the interpretation of this Deed. |
2.2 | A person includes a natural person, corporate or unincorporated body (whether or not having separate legal personality). |
2.3 | The schedules form part of this Deed and shall have effect as if set out in full in the body of this Deed. Any reference to this Deed includes the schedules. |
2.4 | Unless the context otherwise requires, words in the singular shall include the plural and in the plural include the singular. |
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2.5 | Unless the context otherwise requires, a reference to one gender shall include a reference to the other genders. |
2.6 | A reference to any party shall include that partys personal representatives, successors and permitted assigns. |
2.7 | A reference to a statute or statutory provision is a reference to it as amended, extended or re-enacted from time to time provided that, as between the parties, no such amendment, extension or re-enactment shall apply for the purposes of this Deed to the extent that it would impose any new or extended obligation, liability or restriction on, or otherwise adversely affect the rights of, any party. |
2.8 | A reference to a statute or statutory provision shall include all subordinate legislation made from time to time under that statute or statutory provision. |
2.9 | A reference to this Deed or to any other agreement or document referred to in this Deed is a reference to this Deed or such other document or agreement as varied or novated (in each case, other than in breach of the provisions of this agreement) from time to time. |
3. | CONFIRMATION |
3.1 | Each Confirming Party hereby acknowledges and agrees to the issuance of the New Notes, the New Guarantees and the New Indenture and the transactions contemplated thereby and hereby confirms all payment and performance obligations, contingent or otherwise, and undertakings arising under or in connection with its respective agreements, guarantees, pledges and grants of Liens (as defined in the New Indenture), as applicable, under and subject to the terms of Liens, the Group Intercreditor Agreement and each Security Document to which it is party, and agrees that, notwithstanding the effectiveness of the New Notes, the New Guarantees and the New Indenture and the consummation of the transactions contemplated thereby, the pledges and grants of Liens given in connection with the Security Documents are in full force and effect and remain and shall hereafter continue to secure the Senior Liabilities (under and as defined in the Group Intercreditor Agreement), as applicable. |
3.2 | Each Confirming Party confirms that (i) its guarantee under the SFA continues in full force and effect on the terms of the SFA as amended and any Accession Notice (as defined in the SFA) applicable to that Confirming Party; and (ii) its guarantee under the Existing Indenture continues in full force and effect and on the terms of the Existing Indenture, in each case, subject to any limitations set out in the SFA or Existing Indenture. Each Confirming Party further confirms that any Security created by it under the Security Documents extends to the New Senior Liabilities including, for the avoidance of doubt, the New Guarantees. |
4. | ACKNOWLEDGMENT |
Each of the Confirming Parties designates, acknowledges and agrees that:
(a) | the New Trustee (and the other agents under the New Notes and the New Indenture) and the New Noteholders from time to time under and in respect of the New Notes and the New Indenture are: |
(i) | Senior Finance Parties (under and as defined in the Group Intercreditor Agreement); and |
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(ii) | Beneficiaries (under and as defined in the Group Intercreditor Agreement and each Security Document); |
(b) | all obligations of the Confirming Parties in respect of the New Notes, the New Guarantees and the New Notes Documents are: |
(i) | New Senior Liabilities and Senior Liabilities (under and as defined in the Group Intercreditor Agreement) and Senior Liabilities (under and as defined in the Security Trust Agreement); and |
(ii) | Secured Obligations (under and as defined in each Security Document) and the Security Trust Agreement); and |
(c) | the Security Trustee is and remains and shall hereafter be the Security Trustee (under and as defined in the Group Intercreditor Agreement). |
5. | SECURITY TRUSTEE |
The Security Trustee hereby agrees to act as security trustee for the New Notes and the New Senior Liabilities under the New Notes Documents.
6. | REPRESENTATIONS |
Each Confirming Party hereby makes those representations and warranties set out in Clauses 21.2, 21.5, 21.6, 21.7, 21.9 and 21.10 of the SFA as if such Clauses were set out in full in this Deed save that references to the Finance Documents shall be construed as references to this Deed.
7. | SENIOR FINANCE DOCUMENT |
Each of this Deed and the New Note Documents is a Senior Finance Document (under and as defined in the Group Intercreditor Agreement). This Deed is also a Relevant Finance Document (under and as defined in the SFA).
8. | RATIFICATION OF SECURITY DOCUMENTS |
Each party to each Security Document hereby ratifies and confirms such Security Document on the terms of this Deed .
9. | SEVERABILITY |
If any one or more of the provisions of this Deed shall for any reason whatsoever be held invalid, then such provisions shall be deemed severable from the remaining provisions of this Deed and shall in no way affect the validity or enforceability of such other provisions.
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10. | FURTHER ASSURANCE |
Each Confirming Party agrees that it shall promptly, upon the reasonable request of the Security Trustee, execute and deliver at its own expense any document and do any act or thing in order to confirm or establish the validity and enforceability of this Deed.
11. | GOVERNING LAW |
This Deed and any non-contractual obligations arising out of or in connection with this Deed are governed by and shall be construed in accordance with Scots law.
IN WITNESS WHEREOF this Deed consisting of this and the preceding four pages and the two attached schedules has been executed as follows: -
Executed for and on behalf of
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
acting by:
Robert Mackenzie (Print Full Name) |
/s/ ROBERT MACKENZIE |
Director | ||
in the presence of: | ||||
/s/ KARAN CHOPRA |
Witness | |||
Karan Chopra
99 City Road London EC1Y 1AX |
Print full name of Witness
Address of Witness |
At |
Bartley Way on 1 March 2011 Hook Hampshire RG27 9UP |
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Executed for and on behalf of
NTL GLASGOW
acting by:
Robert Mackenzie (Print Full Name) |
/s/ ROBERT MACKENZIE |
Director |
in the presence of:
/s/ KARAN CHOPRA |
Witness | |||||
Karan Chopra
99 City Road London EC1Y 1AX |
Print full name of Witness
Address of Witness |
At | Bartley Way on 1 March 2011 Hook Hampshire RG27 9UP |
Executed for and on behalf of
TELEWEST COMMUNICATIONS (MOTHERWELL) LIMITED
acting by:
Robert Mackenzie (Print Full Name) |
/s/ ROBERT MACKENZIE |
Director |
in the presence of:
/s/ KARAN CHOPRA |
Witness | |||||
Karan Chopra
99 City Road London EC1Y 1AX |
Print full name of Witness
Address of Witness |
At | Bartley Way on 1 March 2011 Hook Hampshire RG27 9UP |
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Executed for and on behalf of
TELEWEST COMMUNICATIONS (DUNDEE & PERTH) LIMITED
acting by:
Robert Mackenzie (Print Full Name) |
/s/ ROBERT MACKENZIE |
Director |
in the presence of:
/s/ KARAN CHOPRA |
Witness | |||||
Karan Chopra
99 City Road London EC1Y 1AX |
Print full name of Witness
Address of Witness |
At | Bartley Way on 1 March 2011 Hook Hampshire RG27 9UP |
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Executed for and on behalf of
DEUTSCHE BANK AG, LONDON BRANCH (as Security Trustee)
acting by:
Rajeen Thakeria (Print Full Name) | /s/ RAJEEN THAKERIA |
Authorised Signatory | ||||||
Vikki Adams (Print Full Name) | /s/ VIKKI ADAMS |
Authorised Signatory | ||||||
in the presence of: | ||||||||
/s/ HANNAH FAULKNER |
Witness | |||||||
Hannah Faulkner
Latham & Watkins 99 Bishopsgate London EC2M 3XF |
Print full name of Witness
Address of Witness |
At | 10 Bishops Square on 2 March 2011 London E1 6EG
12pm |
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Executed for and on behalf of
THE BANK OF NEW YORK MELLON (as Trustee under the New Notes)
acting by:
Michael Lee (Print Full Name) |
/s/ MICHAEL LEE |
Authorised Signatory | ||||||
in the presence of:
|
||||||||
/s/ PAUL CATTERMOLE |
Witness | |||||||
Paul Cattermole
The Bank of New York Mellon One Canada Square London E14 5AL |
Print full name of Witness
Address of Witness |
At | The Bank of New York Mellon on 3 March 2011 One Canada Square London E14 5AL |
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This is Schedule A to the preceding confirmation deed among, inter alios, Virgin Media Investment Holdings Limited, Deutsche Bank AG, London Branch and The Bank of New York Mellon
SCHEDULE A
THE SUBSIDIARIES
Company Name |
Company Number |
Registered Office | ||
NTL Glasgow | SC075177 | Media House 60 Maxwell Road Glasgow G41 1PR | ||
Telewest Communications (Motherwell) Limited | SC121617 | 1 South Gyle Crescent Lane Edinburgh EH12 9EG | ||
Telewest Communications (Dundee & Perth) Limited | SC096816 | 1 South Gyle Crescent Lane Edinburgh EH12 9EG |
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This is Schedule B to the preceding confirmation deed among, inter alios, Virgin Media Investment Holdings Limited, Deutsche Bank AG, London Branch and The Bank of New York Mellon
SCHEDULE B
Scots Security Documents
1. | Share Pledge dated 19 January 2010 and made between NTL Glasgow and Deutsche Bank AG, London Branch. | |
2. | Bond and Floating Charge dated 19 January 2010 and made between NTL Glasgow and Deutsche Bank AG, London Branch. | |
3. | Bond and Floating Charge dated 19 January 2010 and made between Telewest Communications (Motherwell) Limited and Deutsche Bank AG, London Branch. | |
4. | Bond and Floating Charge dated 19 January 2010 and made between Telewest Communications (Dundee & Perth) Limited and Deutsche Bank AG, London Branch. |
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Exhibit 4.8
Dated 3 March 2011
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
(VMIH and each of its subsidiaries listed on the signature pages hereto, such subsidiaries and VMIH, together, as the Confirming Parties)
and
DEUTSCHE BANK AG, LONDON BRANCH
(as Security Trustee)
and
THE BANK OF NEW YORK MELLON
(as Trustee under the New Notes)
CONFIRMATION DEED
THIS CONFIRMATION DEED (this Deed) is made on 3 March, 2011
BETWEEN:
(1) | VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED, a company incorporated in England and Wales with registered company number 03173552 (VMIH), and each of its subsidiaries listed on the signature pages hereto (such subsidiaries and VMIH together, the Confirming Parties); |
(2) | DEUTSCHE BANK AG, LONDON BRANCH, in its capacity as security trustee and agent for and on behalf of the Beneficiaries under the Security Documents (the Security Trustee); and |
(3) | THE BANK OF NEW YORK MELLON, in its capacity as trustee for and on behalf of itself and the holders of the New Notes (as referred below) from time to time. |
WHEREAS:
(A) | Reference is made to: |
(a) | the Senior Facilities Agreement, dated 16 March 2010, (as from time to time amended, varied, novated or supplemented) (the SFA) between the Ultimate Parent, Virgin Media Finance PLC, Virgin Media Investment Holdings Limited, Virgin Media Limited, Virgin Media Wholesale Limited, VMIH Sub Limited and Virgin Media SFA Finance Limited as Original Borrowers, BNP Paribas London Branch and Deutsche Bank AG, London Branch as Global Coordinators and Physical Bookrunners, BNP Paribas London Branch, Deutsche Bank AG, London Branch, Crèdit Agricole Corporate and Investment Bank, GE Corporate Finance Bank SAS, Goldman Sachs International, J.P. Morgan PLC, Lloyds TSB Corporate Markets, Merrill Lynch International, The Royal Bank of Scotland plc and UBS Limited as Bookrunners and Mandated Lead Arrangers, Deutsche Bank AG, London Branch as Facility Agent, Deutsche Bank AG, London Branch as Security Trustee and the financial and other institutions named in it as Lenders and Deutsche Bank AG, London Branch as Original L/C Bank; |
(b) | the $1,000,000,000 6.50% Senior Secured Notes due 2018 and the £875,000,000 7.00% Senior Secured Notes due 2018 (together, the Existing Notes), in each case, of Virgin Media Secured Finance PLC (the Issuer) and the related Indenture dated as of January 19, 2010 (the Existing Indenture) between the Issuer, the Ultimate Parent, Virgin Media Finance PLC, VMIH, the subsidiary guarantors named therein, The Bank of New York Mellon as Trustee and Paying Agent and The Bank of New York Mellon (Luxembourg) S.A. as Luxembourg Paying Agent; |
(c) | the Group Intercreditor Deed, dated 3 March 2006, as amended and restated on 13 June 2006, 10 July 2006, 31 July 2006, 15 May 2008, 30 October 2009 and 8 January 2010 (the Group Intercreditor Agreement) between the Security Trustee and the borrowers, guarantors, lenders, financial institutions, intergroup debtors and intergroup creditors party thereto; |
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(d) | the $500,000,000 5.25% Senior Secured Notes due 2021 and the £650,000,000 5.50% Senior Secured Notes due 2021 (together, the New Notes) of the Issuer and the related Indenture dated as of March 3, 2011 (the New Indenture) between the Issuer, the Ultimate Parent, Virgin Media Finance PLC, VMIH, the subsidiary guarantors named therein, The Bank of New York Mellon as Trustee (in such capacity, the New Trustee) and Paying Agent and The Bank of New York Mellon (Luxembourg) S.A. as Luxembourg Paying Agent; and |
(e) | the Security Documents listed in Schedule A hereto (the Security Documents). |
(B) | Each Confirming Party is a party to the SFA, the Existing Indenture, the New Indenture, the Group Intercreditor Agreement and/or one or more of the Security Documents, as applicable. |
(C) | Each Confirming Party has realised, and continues to realise, substantial direct and indirect benefits as a result of the SFA, the Existing Notes and the Existing Indenture continuing to be effective and as a result of the New Notes and the New Indenture becoming effective and the consummation of the transactions contemplated thereby. |
(D) | Each Confirming Party expects to realise substantial direct and indirect benefits as a result of the New Notes and the New Indenture and the consummation of the transactions contemplated thereby. |
IT IS AGREED as follows:
1. | DEFINITIONS |
Capitalised terms, unless otherwise specified herein, shall have the meanings ascribed to them in the Group Intercreditor Agreement. In addition:
New Guarantees means the Note Guarantees as defined in the New Indenture; and
New Notes Documents means the New Notes, the New Guarantees, the New Indenture and any other document evidencing the obligations and liabilities of the Issuer and/or the other Confirming Parties in relation to the New Notes and the New Guarantees.
2. | INTERPRETATION |
2.1 | Clause, schedule and paragraph headings are inserted for convenience only and shall not affect the interpretation of this Deed. |
2.2 | A person includes a natural person, corporate or unincorporated body (whether or not having separate legal personality). |
2.3 | The schedules form part of this Deed and shall have effect as if set out in full in the body of this Deed. Any reference to this Deed includes the schedules. |
2.4 | Unless the context otherwise requires, words in the singular shall include the plural and in the plural include the singular. |
2.5 | Unless the context otherwise requires, a reference to one gender shall include a reference to the other genders. |
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2.6 | A reference to any party shall include that partys personal representatives, successors and permitted assigns. |
2.7 | A reference to a statute or statutory provision is a reference to it as amended, extended or re-enacted from time to time provided that, as between the parties, no such amendment, extension or re-enactment shall apply for the purposes of this Deed to the extent that it would impose any new or extended obligation, liability or restriction on, or otherwise adversely affect the rights of, any party. |
2.8 | A reference to a statute or statutory provision shall include all subordinate legislation made from time to time under that statute or statutory provision. |
2.9 | A reference to this Deed or to any other agreement or document referred to in this Deed is a reference to this Deed or such other document or agreement as varied or novated (in each case, other than in breach of the provisions of this agreement) from time to time. |
3. | CONFIRMATION |
3.1 | Each Confirming Party hereby acknowledges and agrees to the issuance of the New Notes, the New Guarantees and the New Indenture and the transactions contemplated thereby and hereby confirms all payment and performance obligations, contingent or otherwise, and undertakings arising under or in connection with its respective agreements, guarantees, pledges and grants of Liens (as defined in the New Indenture), as applicable, under and subject to the terms of Liens, the Group Intercreditor Agreement and each Security Document to which it is party, and agrees that, notwithstanding the effectiveness of the New Notes, the New Guarantees and the New Indenture and the consummation of the transactions contemplated thereby, the pledges and grants of Liens given in connection with the Security Documents are in full force and effect and remain and shall hereafter continue to secure the Senior Liabilities (under and as defined in the Group Intercreditor Agreement), as applicable. |
3.2 | Each Confirming Party confirms that (i) its guarantee under the SFA continues in full force and effect on the terms of the SFA as amended and any Accession Notice (as defined in the SFA) applicable to that Confirming Party; and (ii) its guarantee under the Existing Indenture continues in full force and effect and on the terms of the Existing Indenture, in each case, subject to any limitations set out in the SFA or Existing Indenture. Each Confirming Party further confirms that any Security created by it under the Security Documents extends to the New Senior Liabilities including, for the avoidance of doubt, the New Guarantees. |
4. | ACKNOWLEDGMENT |
Each of the Confirming Parties acknowledges and agrees that:
(a) | the New Trustee (and the other agents under the New Notes and the New Indenture) and the New Noteholders from time to time under and in respect of the New Notes and the New Indenture are: |
(i) | Senior Finance Parties (under and as defined in the Group Intercreditor Agreement); and |
(ii) | Beneficiaries (under and as defined in the Group Intercreditor Agreement and each Security Document); |
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(b) | all obligations of the Confirming Parties in respect of the New Notes, the New Guarantees and the New Notes Documents are: |
(i) | New Senior Liabilities and Senior Liabilities (under and as defined in the Group Intercreditor Agreement) and Senior Liabilities (under and as defined in the Security Trust Agreement); and |
(ii) | Secured Obligations (under and as defined in each Security Document and the Security Trust Agreement); and |
(c) | the Security Trustee is and remains and shall hereafter be the Security Trustee (under and as defined in the Group Intercreditor Agreement). |
5. | SECURITY TRUSTEE |
The Security Trustee hereby agrees to act as security trustee for the New Notes and the New Senior Liabilities under the New Notes Documents.
6. | REPRESENTATION |
Each Confirming Party hereby makes those representations and warranties set out in Clauses 21.2, 21.5, 21.6, 21.7, 21.9 and 21.10 of the SFA as if such Clauses were set out in full in this Deed save that references to the Finance Documents shall be construed as references to this Deed.
7. | SENIOR FINANCE DOCUMENT |
Each of this Deed and the New Notes Documents is a Senior Finance Document (under and as defined in the Group Intercreditor Agreement). This Deed is also a Relevant Finance Document (under and as defined in the SFA).
8. | RATIFICATION OF SECURITY DOCUMENTS |
Each party to each Security Document hereby ratifies and confirms such Security Document on the terms of this Deed .
9. | CONTRACTS (RIGHTS OF THIRD PARTIES) ACT |
Each of the Senior Finance Parties may rely on the terms of this Deed. Save as expressly provided otherwise in the preceding sentence, a person who is not party to this Deed may not rely on it and the terms under the Contracts (Rights of Third Parties) Act 1999 are excluded. The parties to this Deed may amend this Deed in writing without the consent of any person that is not a party.
10. | SEVERABILITY |
If any one or more of the provisions of this Deed shall for any reason whatsoever be held invalid, then such provisions shall be deemed severable from the remaining provisions of this Deed and shall in no way affect the validity or enforceability of such other provisions.
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11. | EFFECT AS A DEED |
This document is intended to take effect as a Deed notwithstanding the fact that the parties may have executed it under hand only.
12. | COUNTERPARTS |
This Deed may be executed in any number of counterparts, each of which when executed and delivered shall constitute an original of this Deed, and all of those counterparts taken together will be deemed to constitute one and the same instrument.
13. | GOVERNING LAW |
This Deed and any non-contractual obligations arising out of or in connection with this Deed are governed by and shall be construed in accordance with English law and the provisions of Clause 29 (Jurisdiction) of the Group Intercreditor Deed shall be deemed to be incorporated in this Deed in full, mutatis mutandis, save that references to the Obligors, the Additional Senior Finance Parties and the Intergroup Creditors (or any of them) shall be construed as references to the parties to this Deed.
14. | FURTHER ASSURANCE |
Each Confirming Party agrees that it shall promply, upon the reasonable request of the Security Trustee, execute and deliver at its own expense any document and do any act or thing in order to confirm or establish the validity and enforceability of this Deed.
IN WITNESS WHEREOF this Deed has been executed and delivered as a deed on the date stated at the beginning of this Deed.
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VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
VIRGIN MEDIA SECURED FINANCE PLC | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
VIRGIN MEDIA FINANCE PLC | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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VIRGIN MEDIA INVESTMENTS LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
VIRGIN MEDIA SFA FINANCE LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
VIRGIN MEDIA LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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VIRGIN MEDIA WHOLESALE LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
TELEWEST COMMUNICATIONS NETWORKS LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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NTL BUSINESS LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
VIRGIN MEDIA PAYMENTS LTD | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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VIRGIN MOBILE TELECOMS LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
VIRGIN NET LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
BCMV LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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BARNSLEY CABLE COMMUNICATIONS LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
BIRMINGHAM CABLE LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
CABLE CAMDEN LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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CABLE ENFIELD LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
CABLE HACKNEY & ISLINGTON LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
CABLE HARINGEY LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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DONCASTER CABLE COMMUNICATIONS LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
EUROBELL (SOUTH WEST) LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
EUROBELL (SUSSEX) LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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EUROBELL (WEST KENT) LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
EUROBELL INTERNET SERVICES LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
HALIFAX CABLE COMMUNICATIONS LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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MIDDLESEX CABLE LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
NTL CABLECOMMS BOLTON | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
NTL CABLECOMMS BROMLEY | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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NTL CABLECOMMS BURY AND ROCHDALE | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
NTL CABLECOMMS CHESHIRE | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
NTL CABLECOMMS DERBY | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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NTL CABLECOMMS GREATER MANCHESTER | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
NTL CABLECOMMS MACCLESFIELD | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
NTL CABLECOMMS OLDHAM AND TAMESIDE | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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NTL CABLECOMMS SOLENT | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
NTL CABLECOMMS STAFFORDSHIRE | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
NTL CABLECOMMS STOCKPORT | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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NTL CABLECOMMS SURREY | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
NTL CABLECOMMS SUSSEX | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
NTL CABLECOMMS WESSEX | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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NTL CABLECOMMS WIRRAL | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
NTL CAMBRIDGE LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
NTL KIRKLEES | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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NTL MIDLANDS LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
NTL WIRRAL TELEPHONE AND CABLE TV COMPANY | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
SHEFFIELD CABLE COMMUNICATIONS LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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TELEWEST COMMUNICATIONS (MIDLANDS AND NORTH WEST) LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
TELEWEST COMMUNICATIONS (MIDLANDS) LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
TELEWEST UK LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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VIRGIN MEDIA BUSINESS LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
VIRGIN MOBILE GROUP (UK) LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
VIRGIN MOBILE HOLDINGS (UK) LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
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VMIH SUB LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
VMWH LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
WAKEFIELD CABLE COMMUNICATIONS LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
- 25
X-TANT LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
NTL GLASGOW | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
TELEWEST COMMUNICATIONS (CUMBERNAULD) LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
- 26
TELEWEST COMMUNICATIONS (DUMBARTON) LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
TELEWEST COMMUNICATIONS (DUNDEE & PERTH) LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
TELEWEST COMMUNICATIONS (FALKIRK) LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
- 27
TELEWEST COMMUNICATIONS (GLENROTHES) LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
TELEWEST COMMUNICATIONS (MOTHERWELL) LIMITED | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
- 28
AVON CABLE JOINT VENTURE, by its partners: | ||
Avon Cable Limited Partnership | ||
By: Theseus No. 1 Limited, Avon Cable Limited Partnerships general partner | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
By: Theseus No. 2 Limited, Avon Cable Limited Partnerships general partner | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
Telewest Communications (South West) Limited | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
- 29
TELEWEST COMMUNICATIONS (LONDON SOUTH) JOINT VENTURE, by its partners: | ||
London South Cable Limited Partnership | ||
By: United Cable (London South) Limited Partnership, its managing partner | ||
By: Theseus No. 1 Limited, United Cable (London South) Limited Partnerships general partner | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
By: Theseus No. 2 Limited, United Cable (London South) Limited Partnerships general partner | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
Telewest Communications (London South) Limited | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
- 30
TELEWEST COMMUNICATIONS (NORTH EAST) PARTNERSHIP, by its partners: | ||
Tyneside Cable Limited Partnership | ||
By: Theseus No. 1 Limited, Tyneside Cable Limited Partnerships general partner | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
By: Theseus No. 2 Limited, Tyneside Cable Limited Partnerships general partner | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor | |
Telewest Communications (North East) Limited | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
- 31
Telewest Communications (Tyneside) Limited | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director | |
In the presence of: | ||
/s/ KARAN CHOPRA | ||
Name: | Karan Chopra | |
Address: | 99 City Road, London EC1Y 1AX | |
Occupation: | Solicitor |
- 32
DEUTSCHE BANK AG, LONDON BRANCH | ||
(as Security Trustee) | ||
By: | /s/ RAJEEN THAKERIA | |
Name: | Rajeen Thakeria | |
Title: | AVP | |
By: | /s/ VIKKI ADAMS | |
Name: | Vikki Adams | |
Title: | AVP | |
THE BANK OF NEW YORK MELLON | ||
(as Trustee under the New Notes) | ||
By: | /s/ MICHAEL LEE | |
Name: | Michael Lee | |
Title: | Senior Associate |
- 33
SCHEDULE A
English Security Documents
1. | Composite Debenture dated 19 January 2010 by each of the Obligors listed therein in favour of Deutsche Bank AG, London Branch as Security Trustee. |
2. | Composite Debenture dated 15 April 2010 by Virgin Media SFA Finance Limited in favour of Deutsche Bank AG, London Branch as Security Trustee. |
3. | Composite Debenture dated 10 June 2010 by each of the Obligors listed therein in favour of Deutsche Bank AG, London Branch as Security Trustee. |
4. | Composite Debenture dated 29 June 2010 by each of the Obligors listed therein in favour of Deutsche Bank AG, London Branch as Security Trustee. |
5. | Composite Debenture dated 18 February 2011 by VMWH Limited in favour of Deutsche Bank AG, London Branch as Security Trustee. |
6. | Blocked Account Charge dated 9 February 2010 granted by Virgin Media Investment Holdings Limited as Chargor in favour of Deutsche Bank AG, London Branch as Security Trustee. |
7. | Charge over Shares dated 15 April 2010 granted by Virgin Media Finance PLC as Chargor in favour of Deutsche Bank AG, London Branch as Security Trustee. |
8. | Assignment of loans dated 15 April 2010 granted by Virgin Media Finance PLC in favour of Deutsche Bank AG, London Branch as Security Trustee. |
- 34
Exhibit 4.9
REAFFIRMATION AGREEMENT
This REAFFIRMATION AGREEMENT, dated as of 3 March, 2011 (this Agreement), is entered into by and among Virgin Media Inc., a Delaware corporation (the Ultimate Parent), each of the subsidiaries of the Ultimate Parent listed on the signature pages hereto (each such subsidiary and the Ultimate Parent, collectively, the Reaffirming Parties), Deutsche Bank AG, London Branch, as Security Trustee (the Security Trustee) (such term and each other capitalized term, unless otherwise specified herein, shall have the meanings ascribed to them in the Group Intercreditor Agreement described below), and The Bank of New York Mellon, in its capacity as trustee (the Notes Trustee) for and on behalf of itself and the holders of the notes from time to time, under the New Indenture (as referred below).
WHEREAS, reference is made to (a) a new indenture dated as of 3 March, 2011 (the New Indenture) by and among Virgin Media Secured Finance PLC, a public limited company organized under the laws of England and Wales, the Ultimate Parent, Virgin Media Finance PLC, Virgin Media Investment Holdings Limited (VMIH), the subsidiary guarantors named therein, The Bank of New York Mellon as Trustee and Paying Agent and The Bank of New York Mellon (Luxembourg) S.A. as Luxembourg Paying Agent; (b) the Senior Facilities Agreement dated 16 March 2010 (as from time to time amended, varied, novated or supplemented, the SFA) by and among the Ultimate Parent, certain subsidiaries of the Ultimate Parent, the lenders and agents as defined therein and the Security Trustee; (c) the Group Intercreditor Deed, dated 3 March 2006, as amended and restated on 13 June 2006, 10 July 2006, 31 July 2006, 15 May 2008, 30 October 2009 and 8 January 2010 (the Group Intercreditor Agreement) among the Security Trustee and the borrowers, guarantors, lenders, financial institutions, intergroup debtors and intergroup creditors party thereto; (d) the Indenture dated as of January 19, 2010 (the Existing Indenture) by and among Virgin Media Secured Finance PLC, a public limited company organized under the laws of England and Wales, the Ultimate Parent, Virgin Media Finance PLC, VMIH, the subsidiary guarantors named therein, The Bank of New York Mellon as Trustee and Paying Agent and The Bank of New York Mellon (Luxembourg) S.A. as Luxembourg Paying Agent; and (e) the Amended and Restated Share Pledge Agreement dated as of January 19, 2010 granted by Virgin Media Limited (VML) and others, as Pledgors in favour of Deutsche Bank AG, London Branch as Security Trustee hereto (the Pledge Agreement).
WHEREAS, each Reaffirming Party is party to the SFA, the Existing Indenture, the New Indenture, the Intercreditor Agreement and/or the Pledge Agreement, as applicable;
WHEREAS, each Reaffirming Party has realized, and continues to realize, substantial direct and indirect benefits as a result of the SFA and the Existing Indenture and the consummation of the transactions contemplated thereby;
WHEREAS, each Reaffirming Party expects to realize substantial direct and indirect benefits as a result of the New Indenture becoming effective and the consummation of the transactions contemplated thereby; and
Reaffirmation Agreement
WHEREAS, the execution and delivery of this Agreement is a condition precedent to the consummation of the transactions contemplated by the New Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Reaffirmation and Acknowledgment
SECTION 1.01 Reaffirmation.
Each Reaffirming Party hereby consents to the entering into of the New Indenture and the transactions contemplated thereby and hereby ratifies and confirms all payment and performance obligations, contingent or otherwise, and undertakings arising under or in connection with its respective agreements, guarantees, pledges and grants of Liens (as defined in the New Indenture), as applicable, under and subject to the terms of Liens, the Group Intercreditor Agreement and the Pledge Agreement, and agrees that, notwithstanding the effectiveness of the New Indenture and the consummation of the transactions contemplated thereby, the pledges and grants of Liens given in connection with the Pledge Agreement are in full force and effect and remain and shall hereafter continue to secure the Senior Liabilities (under and as defined in the Group Intercreditor Agreement), as applicable.
SECTION 1.02 Acknowledgment
Each of the Reaffirming Parties acknowledges that (a) the New Indenture is a Senior Finance Document (under and as defined in the Intercreditor Agreement), (b) the lenders and agents from time to time under the New Indenture are (i) Senior Finance Parties (under and as defined in the Group Intercreditor Agreement) and (ii) Beneficiaries (under and as defined in the Group Intercreditor Agreement and the Pledge Agreement) and (c) all obligations of the Reaffirming Parties in respect of the New Indenture are (i) New Senior Liabilities (under and as defined in the Group Intercreditor Agreement) and (ii) Secured Obligations (under and as defined in the Pledge Agreement). Each reference, whether direct or indirect, in the Pledge Agreement to Obligations shall be deemed to include any indebtedness or obligations made pursuant to the New Indenture.
2
ARTICLE II
Miscellaneous
SECTION 2.01 Senior Finance Document.
This Agreement is a (i) Senior Finance Document (under and as defined in the Group Intercreditor Agreement) and (ii) a Relevant Finance Document (under and as defined in the SFA).
SECTION 2.02 Representations and Warranties.
VML hereby certifies that, as of the date hereof, the representations and warranties contained in the Pledge Agreement are true and correct in all material respects with the same effect as if made on the date hereof, except to the extent any such representation or warranty refers or pertains solely to a date prior to the date hereof (in which case such representation and warranty was true and correct in all material respects as of such earlier date). VML further confirms that the Pledge Agreement is and shall continue to be in full force and effect and the same are hereby ratified and confirmed in all respects.
SECTION 2.03 Effectiveness; Counterparts.
This Agreement shall become effective on the date when copies hereof (which, when taken together, bear the signatures of each of the Reaffirming Parties set forth on the signature pages hereto, and the Security Trustee and the Note Trustee) shall have been received by the Security Trustee and the Note Trustee. This Agreement may not be amended nor may any provision hereof be waived except with the prior written consent of all parties hereto. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 2.04 Authorization.
Pursuant to any applicable law, each Reaffirming Party authorizes the Security Trustee to file or record financing statements and other filing or recording documents or instruments with respect to the collateral without the signature of such Reaffirming Party in such form and in such offices as the Security Trustee determines appropriate to perfect the security interests of the Security Trustee under this Agreement. Each Reaffirming Party authorizes the Security Trustee to describe the collateral in any manner it deems appropriate or advisable, including, without limitation, describing collateral as all personal property, whether now owned or hereafter acquired in any such financing statements. Each Reaffirming Party agrees that it shall promptly upon the reasonable request of the Security Trustee, execute and deliver at its own expense any document and do any act or thing in order to confirm or establish the validity and enforceability of this Agreement.
3
SECTION 2.05 No Novation; No Offset.
This Agreement shall not discharge, release or modify the obligations of the Reaffirming Parties under the Senior Finance Documents or the perfection or priority of the Pledge Agreement, any lien thereunder or any other security therefor. Nothing in this Agreement shall be construed as a release or other discharge of any Reaffirming Party under the Pledge Agreement from any of its obligations and liabilities under the SFA, the Existing Indenture, the New Indenture or the Pledge Agreement. Each Reaffirming Party acknowledges that on the date hereof all outstanding Secured Obligations under the Senior Finance Documents are payable in accordance with their terms.
SECTION 2.06 Governing Law.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 2.07 No Amendments.
Except as expressly set forth herein, no amendments to any documents are intended hereby.
[Signature Pages Follow]
4
IN WITNESS WHEREOF, each Reaffirming Party, the Security Trustee and the Note Trustee, for the benefit of the Senior Finance Parties have caused this Agreement to be duly executed by their respective authorized signatories as of the day and year first above written.
Virgin Media Inc. | ||
By: | /s/ SCOTT DRESSER | |
Name: | Scott Dresser | |
Title: | Secretary |
Reaffirmation Agreement
Virgin Media Limited | ||
By: | /s/ ROBERT MACKENZIE | |
Name: | Robert Mackenzie | |
Title: | Director |
Reaffirmation Agreement
Acknowledged and Agreed to by:
Deutsche Bank AG, London Branch, as Security Trustee | ||
By: | /s/ RAJEEN THAKERIA | |
Name: | Rajeen Thakeria | |
Title: | AVP | |
By: | /s/ VIKKI ADAMS | |
Name: | Vikki Adams | |
Title: | AVP | |
The Bank of New York Mellon, as Note Trustee | ||
By: | /s/ MICHAEL LEE | |
Name: | Michael Lee | |
Title: | Senior Associate | |
By: | /s/ PAUL CATTERMOLE | |
Name: | Paul Cattermole | |
Title: | Vice President |
Reaffirmation Agreement
Exhibit 10.13
1st April 2011 |
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PRIVATE & CONFIDENTIAL |
Mr. Andrew Barron
[Address]
Dear Andrew,
RE: CHANGES TO TERMS AND CONDITIONS OF EMPLOYMENT
Pursuant to the Compensation Committee meeting in March, the committee agreed to increase your salary from £400,000.00 to £430,000.00 per annum, with effect from 1st April 2011.
This decision was made in view of your continued good performance, and following a market review of your role.
Please note that all other Terms and Conditions remain unchanged.
Please sign both copies of this letter, returning one copy to Emma Roberts/Rebecca Dobson, Employee Services, Media House, Bartley Wood Business Park, Hook, Hampshire, RG27 9UP.
Thank you for your continued contribution to Virgin Media.
Yours Sincerely,
/s/ Neil Berkett
Neil Berkett
Chief Executive Officer
I confirm my acceptance of the above changes to my Terms and Conditions of Employment.
/s/ Andrew Barron
Andrew Barron
Virgin Media Limited. Registered office: 160 Great Portland Street, London W1W 5QA. Registered in England and Wales No. 2591237.
Exhibit 10.14
1st April 2011 |
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PRIVATE & CONFIDENTIAL |
Mr. Paul Buttery
[Address]
Dear Paul,
RE: CHANGES TO TERMS AND CONDITIONS OF EMPLOYMENT
Pursuant to the Compensation Committee meeting in March, the committee agreed to increase your salary from £330,000.00 to £375,000.00 per annum, with effect from 1st April 2011.
This decision was made in view of your increased responsibilities, continued good performance, and following a market review of your role.
Please note that all other Terms and Conditions remain unchanged.
Please sign both copies of this letter, returning one copy to Emma Roberts/Rebecca Dobson, Employee Services, Media House, Bartley Wood Business Park, Hook, Hampshire, RG27 9UP.
Thank you for your continued contribution to Virgin Media.
Yours Sincerely,
/s/ Neil Berkett
Neil Berkett
Chief Executive Officer
I confirm my acceptance of the above changes to my Terms and Conditions of Employment.
/s/ Paul Buttery
Paul Buttery
Virgin Media Limited. Registered office: 160 Great Portland Street, London W1W 5QA. Registered in England and Wales No. 2591237.
Exhibit 10.16
Release Agreement
WHEREAS, Mr Bryan Hall (the Executive) was employed by Virgin Media Inc. (the Company) as its General Counsel and Company Secretary pursuant to a Third Restated and Amended Employment Agreement, dated as of September 15, 2009 (the Employment Agreement);
WHEREAS the Executive ceased to act as General Counsel and Company Secretary on January 1, 2011 under Section 7(c) of the Employment Agreement and the Executives employment with the Company terminated on January 1, 2011 (the Termination Date).
WHEREAS the parties have entered into this agreement to record and implement the terms of termination;
NOW, THEREFORE, in consideration of the following payments and benefits:
| a severance payment equal to £375,000 (12 calendar months of base salary) less any applicable tax and social security contributions which the Company is obliged to deduct, such payment to be made promptly after the later of the expiry of the revocation period referred to in clause 9 has expired and the Termination Date or on such other date as the parties may agree; |
| the exercise of discretion by the Compensation Committee of the Company to extend the period during which the Executive may exercise any vested but not exercised options as at 1st January 2011 to December 31, 2011; |
| payment in respect of the 2010 Group Bonus Plan (such payment, if any, being linked to both the Executives personal rating and the Companys performance in 2010) which payment, if any, being made at the same time as such payments are made to employees participating in the 2010 Group Bonus Plan; |
| vesting in respect of the restricted stock unit element of the 2008-2010 Long Term Incentive Plan (such vesting, if any, to occur at the same time as vesting for other participants in the 2008-2010 Long Term Incentive Plan, and subject to the applicable performance conditions); |
| vesting in respect of the restricted stock unit element of the 2009-2011 Long Term Incentive Plan pro rata to January 1, 2011 (the General Counsel Resignation Date) (such vesting, if any, to occur at the same time as vesting for other participants in the 2009-2011 Long Term Incentive Plan and subject to the applicable performance conditions); |
| provision by the Company of continued medical benefits cover for 12 months from the General Counsel Resignation Date for the Executive and his family and any associated costs under (and in accordance with the terms of) COBRA |
unless the Executive obtains subsequent employment prior to that date (in which case, the Executive must promptly notify Elisa Nardi at elisa.nardi@virginmedia.co.uk); |
| continued payment by the Company of rent in respect of [Address] (the Property) at a cost of £10,535.40 per month until July 31, 2011; and |
| those prescribed post-termination obligations as provided for under the Employment Agreement, being moving and travel expenses (in accordance with the Companys Expatriate Policy), tax equalization (in accordance with the Companys US Tax & Social Security Equalization Policy) and tax services as agreed with the Companys tax provider. |
(collectively, the Payments and Benefits),
and the mutual release set forth herein, the Executive voluntarily, knowingly and willingly accepts the Payments and Benefits under this Release Agreement in full and final settlement of any claims which the Executive has brought or could bring against the Company in relation to the Executives employment or the termination of that employment and agrees to the terms of this Release Agreement.
1. The Executive acknowledges and agrees that, except as provided for in clause 7(g), the Company is under no obligation to offer the Executive the Payments and Benefits, unless the Executive consents to the terms of this Release Agreement and that save as specifically provided in this Release Agreement he ceased to be entitled to the Expatriate Package terms referred to in clause 3(c) and to participate in the benefit plans and programs referred to in clause 5(a) with effect from the General Counsel Resignation Date,. The Executive further acknowledges that he is under no obligation to consent to the terms of this Release Agreement and that the Executive has entered into this Release Agreement freely and voluntarily after having the opportunity to obtain legal advice in the United States and having obtained legal advice in the United Kingdom.
2. The Executive voluntarily, knowingly and willingly releases and forever discharges the Company and its Affiliates, together with their respective officers, directors, partners, shareholders, employees, agents, and the officers, directors, partners, shareholders, employees, agents of the foregoing, as well as each of their predecessors, successors and assigns (collectively, Releasees), from any and all charges, complaints, claims, promises, agreements, controversies, causes of action and demands of any nature whatsoever that the Executive or his executors, administrators, successors or assigns ever had, now have or hereafter can, shall or may have against Releasees by reason of any matter, cause or thing whatsoever arising prior to the time of signing of this Release Agreement by the Executive. The release being provided by the Executive in this Release Agreement includes, but is not limited to, any rights or claims relating in any way to the Executives employment relationship with the Company, or the termination thereof, or under any statute, including the United States federal Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1990, the Americans with Disabilities Act of 1990, the Executive Retirement Income Security Act of 1974, the Family and Medical Leave Act of 1993, UK and European Union law for a redundancy payment or for remedies for alleged unfair dismissal, wrongful dismissal, breach of
contract, unlawful discrimination on grounds of sex, race, age, disability, sexual orientation, religion or belief, unauthorized deduction from pay, non-payment of holiday pay and breach of the United Kingdom Working Time Regulations 1998, detriment suffered on a ground set out in section 47B of the Employment Rights Act 1996 (protected disclosures), breach of the National Minimum Wage Act 1998 and compensation under the Data Protection Act 1998, each as amended, and any other U.S. or foreign federal, state or local law or judicial decision.
3. The Executive acknowledges and agrees that he shall not, directly or indirectly, seek or further be entitled to any personal recovery in any lawsuit or other claim against the Company or any other Releasee based on any event arising out of the matters released in paragraph 2. The Executive and the Company acknowledge that the conditions regulating compromise agreements in England and Wales including the Employment Rights Act 1996, the Sex Discrimination Act 1975, the Race Relations Act 1976, the Disability Discrimination Act 1995, the Working Time Regulations 1998, the Employment Equality (Age) Regulations 2006, the National Minimum Wage Act 1998 and the Equality Act 2010 have been satisfied in respect of this Release Agreement.
4. The Executive shall be responsible for all outgoings and charges in respect of the Property (save as provided herein) from the General Counsel Resignation Date to July 31, 2011 when the Executive and his family shall vacate the Property (if not previously vacated). The Executive acknowledges and agrees that the Company may deduct from the Payments and Benefits any amounts withheld from the rental deposit for the Property by the landlord in respect of damage to the property caused by the Executive or his dependants.
5. The Executive agrees to reimburse to the Company any amounts payable under the terms of the Companys tax equalisation policy, within three months of the Company or its nominated tax adviser notifying the Executive of the amount payable.
6. Nothing herein shall be deemed to release (i) any of the Executives rights to the Payments and Benefits or (ii) any of the benefits that the Executive has accrued prior to the date this Release Agreement is executed by the Executive under the Companys employee benefit plans and arrangements, or any agreement in effect with respect to the employment of the Executive or (iii) any claim for indemnification as provided under Section 10 of the Employment Agreement or (iv) the Executives right to defend any lawsuit or demand by the Company to recover any amounts pursuant to Section 3(b)(i)(y) of the Employment Agreement.
7. The Executive represents and warrants to the Company that:
(i) Prior to entering into this Release Agreement, the Executive received independent legal advice from Susan Thompson of the firm of Magrath LLP, London, England (the UK Independent Adviser), who has signed the certificate at Appendix 1;
(ii) Such independent legal advice related to the terms and effect of this Release Agreement in accordance with the laws of England and Wales and, in particular, its effect upon the Executives ability to make any further claims under the laws of the United Kingdom in connection with the Executives employment or its termination;
(iii) The Executive has provided the UK Independent Adviser with all available information which the UK Independent Adviser requires or may require in order to advise whether the Executive has any such claims; and
(iv) The Executive was advised by the UK Independent Adviser that there was in force, at the time when the Executive received the independent legal advice, a policy of insurance covering the risk of a claim by the Executive in respect of losses arising in consequence of that advice.
8. The Company will contribute up to a maximum of £500 plus value added tax towards any legal fees reasonably incurred by the Executive in obtaining independent legal advice regarding the terms and effect of this Release Agreement under the laws of the United Kingdom. The contribution will be paid following the Company receiving from the UK Independent Advisers firm an appropriate invoice addressed to the Executive and expressed to be payable by the Company.
9. The Executive acknowledges that he has been offered the opportunity to consider the terms of this Release Agreement for a period of at least forty-five (45) days, although he may sign it sooner should he desire. This release of claims given by the Executive herein will not become effective until seven days after the date on which the Executive has signed it without revocation. Subject to no revocation taking place, the Release Agreement will, upon signature by both parties and the following the expiry of the revocation period, be treated as an open document evidencing a binding agreement.
10. This Release Agreement and the Employment Agreement constitute the entire agreement between the parties hereto, and supersede all prior agreements, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof.
11. Except as provided in the next following sentence, all provisions and portions of this Release Agreement are severable. If any provision or portion of this Release Agreement or the application of any provision or portion of this Release Agreement shall be determined to be invalid or unenforceable to any extent or for any reason, all other provisions and portions of this Release Agreement shall remain in full force and shall continue to be enforceable to the fullest and greatest extent permitted by law; provided, however, that, to the maximum extent permitted by applicable law, (i) if the validity or enforceability of the release or claims given by the Executive herein is challenged by the Executive or his estate or legal representative, the Company shall have the right, in its discretion, to suspend any or all of its obligations hereunder during the pendency of such challenge, and (ii) if, by reason of such challenge, such release is held to be invalid or unenforceable, the Company shall have no obligation to provide the Payments and Benefits.
12. This Release Agreement shall be governed by and construed in accordance with the internal laws of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Release Agreement as of March 15, 2011
THE EXECUTIVE | ||
/s/ Bryan Hall | ||
Mr. Bryan Hall | ||
VIRGIN MEDIA INC. | ||
By: | /s/ Scott Dresser | |
Name: | Scott Dresser | |
Title: | General Counsel and Secretary |
APPENDIX 1
INDEPENDENT ADVISERS CERTIFICATE
I, Susan Thompson, certify that Bryan Hall (the Executive) has received independent legal advice from me as to the terms and effect of this Release Agreement under the laws of the United Kingdom in accordance with the provisions of the Employments Rights Act 1996, the Sex Discrimination Act 1975, the Race Relations Act 1976, the Disability Discrimination Act 1995, the Working Time Regulations 1998, the Employment Equality (Age) Regulations 2006 the National Minimum Wage Act 1998 and the Equality Act 2010.
I also warrant and confirm that I am a solicitor of the Supreme Court of England and Wales, and hold a current practicing certificate. My firm, Magrath LLP, is covered by a policy of insurance, or an indemnity provided for members of a profession or professional body, which covers the risk of any claim by the Executive in respect of any loss arising in consequence of such advice that I have given to him in connection with the terms of this agreement.
Signed: /s/ Susan Thompson
Exhibit 31.1
CERTIFICATION
I, Neil A. Berkett, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Virgin Media Inc. (Virgin Media), Virgin Media Investment Holdings Limited and Virgin Media Investments Limited; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining the registrants disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and Virgin Medias internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed Virgin Medias internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: May 5, 2011 | /s/ Neil A. Berkett | |||||
Name: | Neil A. Berkett | |||||
Title: | Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Eamonn OHare, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Virgin Media Inc. (Virgin Media), Virgin Media Investment Holdings Limited and Virgin Media Investments Limited; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining the registrants disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and Virgin Medias internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed Virgin Medias internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: May 5, 2011 | /s/ Eamonn OHare | |||||
Name: | Eamonn OHare | |||||
Title: | Chief Financial Officer |
Exhibit 32.1
Certification of CEO and CFO Pursuant to
18 U.S.C. Section 1350
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the quarterly report on Form 10-Q of Virgin Media Inc., Virgin Media Investment Holdings Limited and Virgin Media Investments Limited (collectively, the Registrants) for the three months ended March 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the Report), Neil A. Berkett, as Chief Executive Officer of the Registrants, and Eamonn OHare, as Chief Financial Officer of the Registrants, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrants. |
Date: May 5, 2011 | By: | /s/ Neil A. Berkett | ||||
Name: | Neil A. Berkett | |||||
Title: | Chief Executive Officer | |||||
Date: May 5, 2011 | By: | /s/ Eamonn OHare | ||||
Name: | Eamonn OHare | |||||
Title: | Chief Financial Officer |
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Registrants and will be retained by the Registrants and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Registrants for purposes of Section 18 of the Securities Exchange Act of 1934.
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