AES Corp.’s ongoing liquidity crunch was significantly eased last week after the Arlington, VA-based power company said that it has successfully completed a $2.1 billion bank and bond refinancing and entered into agreements to sell two of its Australian generation businesses for $165 million.
The $2.1 billion bank and bond refinancing consists of a $1.6 billion senior secured credit facility and its exchange offer relating to $500 million of its outstanding debt securities. AES said that this refinancing substantially eliminates all scheduled parent maturities at AES until November 2004, improving liquidity, reducing debt service burden and enhancing financial flexibility.
AES stock has been bloodied this year in the wake of a series of debt rating downgrades and revelations that the company is one of several power suppliers targeted in a federal grand jury investigation in San Francisco of alleged manipulation of California energy markets.
“This refinancing is a major accomplishment as it provides a solid foundation for AES’s future,” said Paul T. Hanrahan, AES president. “With the financial stability afforded by this transaction, we can now focus entirely on implementing our business plan, including our emphasis on operational excellence and the execution of our asset sales and cost reduction programs.”
The $1.6 billion senior secured credit facility is comprised of a $350 million revolving credit facility, three tranches of term loans totaling approximately $1.2 billion, and a reimbursement agreement associated with a GBP 52.5 million letter of credit.
AES said that the credit facility benefits from a first priority lien, subject to certain exceptions, and permitted liens on: (i) all of the capital stock of domestic subsidiaries owned directly by AES and 65% of the capital stock of certain foreign subsidiaries owned directly by AES and (ii) certain inter-company receivables and notes receivable and inter-company tax sharing agreements. The collateral is shared with the company’s new senior secured notes tied to the just completed exchange offer and certain other secured parties.
The credit facility matures on July 15, 2005 with a potential extension to Dec. 12, 2005 if certain conditions are met. The credit pact requires mandatory prepayments associated with a proportion of the proceeds from asset sales, the issuances of debt and equity securities and certain other cash flow sweeps. Minimum amortization of approximately $810 million by no later than Nov. 25, 2004 will be required with mandatory prepayments made prior to that date credited against such required amortization. Loans under the revolving credit facility and the term loan facilities bear an interest rate of LIBOR plus 6.5% or Prime plus 5.5%.
Meanwhile, AES on Friday disclosed that it has entered into agreements to sell its two Australian generation businesses in transactions valued at A$295 million.
Origin Energy Limited, an Australian company, has committed to buy AES Mt Stuart, AES’s 288 MW gas-fired peaking generation business in Queensland, in a transaction valued at A$93 million, or approximately US$52 million.
A consortium of Babcock & Brown and Prime Infrastructure Group has committed to buy AES Ecogen, which comprises AES’s 510 MW Newport and 450 MW Jeeralang gas-fired generation plants in Victoria, in a transaction valued at A$202 million, or approximately US$113 million.
The combined value of both transactions equates to an equity purchase price of A$104.25 million, or approximately US$58 million, which currently represents a premium to AES’s book investment of 140%. Completion of these transactions is subject to the receipt of certain project lender and customer approvals and AES expects the transactions to close by the end of the first quarter of 2003.
“The sale of these two AES businesses in Australia is a terrific first step in our expanded asset sales program, and we are pleased with the value we have received for them,” said Hanrahan. “We think the premium reflects the high quality of these businesses,” he added.
“We are also making good progress on our plan to raise $1 billion from asset sales, in addition to the $800 million of sales from the completed sale of AES NewEnergy and pending sale of Cilcorp,” Hanrahan said. “We continue to focus on improving the financial performance of our company and returning value to our shareholders. The execution of this plan is the primary focus of our company.”
AES in September completed the sale of its NewEnergy retail energy provider unit to Constellation Energy Group for $260 million. AES has proposed to sell its CILCORP subsidiary to Ameren Corp. for $1.4 billion.
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