Annual report (20-F) - Ono

We have experienced negative cash flow since we commenced operations in 1998, and we
expect to sustain negative cash flow at least until the end of 2006 once we consolidate Retecal in
Cableuropa Group. We cannot assure you that our business will generate sufficient cash to fulfill our debt
obligations or that future financing will be available to us on commercially reasonable terms or at all. To
the extent our results of operation are less than anticipated or we are forced to make significant revisions
to our current business plan, we may need to raise additional capital or refinance all or a portion of our
debt on or before maturity in order to fund operations and to meet our debt service obligations, including
payments under the 2005 senior bank facility, the multi-borrower credit facilities, the Notes Proceeds
Loans and the Note guarantees. However, our ability to raise capital or refinance our debt depends on a
number of factors including the liquidity of the capital markets, and we may not be able to do so on
satisfactory terms, or at all. In the event that we cannot raise additional capital or refinance our debt, we
may be unable to meet our payment obligations under the 2005 senior bank facility, the multi-borrower
credit facilities, the Notes Proceeds Loans and the Note guarantees.
Our substantial debt service requirements could have a material adverse effect on our
business, financial condition and results of operations.
We are a leveraged company with significant debt service requirements. As of December 31,
2004 our indebtedness was €1,164.1 million. In addition to the multi-borrower credit facilities and the
Notes Proceeds Loans, as of December 31, 2004 we had the following debt outstanding:
• €645 million drawn down under our 2001 senior bank facility, which was cancelled and
refinanced with the 2005 senior bank facility in February 2005;
• €28.6 million of other debt; and
• €34.0 million of subsidized loans from the Spanish authorities.
In addition, a substantial portion of our debt, including under our 2005 senior bank facility and
the Floating Rate Notes Proceeds Loan, bears interest at variable rates. If market interest rates increase,
our variable rate debt will create higher debt service requirements, which would adversely affect our cash
flow. While we may enter into hedging or other agreements designed to limit our exposure to higher debt
service requirements as a result of our variable-rate debt, there is no guarantee that such agreements will
offer complete protection against such risk.
To fund net losses and finalize the build-out of our network we expect to incur additional
indebtedness principally from drawdowns under the 2005 senior bank facility. Our financial leverage
could have important consequences, including:
• making it more difficult for us to satisfy our financial obligations, including those under the
2005 senior bank facility, our multi-borrower credit facilities, the Notes Proceeds Loans and
the Notes guarantees;
• increasing the cost of, or impeding our ability to obtain, additional debt or equity financing to
fund our capital expenditures and the substantial net losses we expect to incur in connection
with our operations and the completion of the build-out of our network;
• impeding our ability to compete with other providers of telephony, Internet and pay
television services that are less leveraged than we are;
• restricting our ability to bid for, or be awarded, licences or new franchises, make strategic
acquisitions, exploit business opportunities or react to significant changes in our business or
in general economic conditions; and
• adversely affecting public perception of us and our brand.
Subject to certain restrictions, we may be able to incur substantially more debt.
Subject to the restrictions in the indentures governing the Notes and the guarantees (the
“Indentures”), our 2005 senior bank facility, and other outstanding debt, which are subject to a number of
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