In a press release ostensibly to announce a stock issuance to improve its liquidity and pay down some debt, TXU Corp. acknowledged Monday that it has received an informal data request from the Securities and Exchange Commission that asks the company to “voluntarily provide documents related to its recent dividend declaration.” TXU said it would comply fully with the request, and does not anticipate “any adverse consequences.”

In October, TXU announced it would cut 80% of its quarterly dividend, to 12.5 cents from an expected 60 cents a share that would be paid Jan. 2. The indicated annual dividend is now 50 cents per share of common stock, according to TXU (see Daily GPI, Oct. 15).

TXU also announced that a special meeting of shareholders has been authorized by the board of directors to approve a “transfer of a portion of the company’s shareholders’ equity from stated capital into surplus, in accordance with the Texas Business Corporation Act.” TXU said the location and time had not been set.

Finally, a TXU subsidiary is issuing $750 million of exchangeable subordinated notes, representing about 17% of the parent corporation’s common stock, to increase liquidity and pay off some debts.

The notes carry a 9% interest rate, which will be due in 2012 to DLJ Merchant Banking Partners III LP, a Credit Suisse First Boston (CSFB) Private Equity Fund.

The transaction, which allows for interest payment deferral, is expected to close by the end of the week through subsidiary TXU Energy Co. LLC. The notes may be exchanged at any time for TXU common stock at an exercise price of $13.15 per share of common stock. The number of shares will be calculated by dividing the principle amount of notes to be exchanged by the exercise price.

On Monday, TXU’s share price closed at $15.57 on the New York Stock Exchange. “On the basis of the current outstanding amount of TXU common stock, the shares to be issued would represent approximately 17% of the TXU common stock on a fully diluted basis,” the Dallas-based company said in a written statement.

DLJ Merchant Banking Partners will have the right to designate one member on the board of managers at TXU Energy and the right to nominate one board member to the TXU board of directors.

The notes and the common stock will not be registered under the amended Securities Act of 1933 and may not be offered or sold in the United States without registration or through an exemption. TXU has agreed that the common stock will have registration rights. Financial advisers to TXU were Credit Suisse First Boston and Merrill Lynch & Co.

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