Allegheny Energy Arranges New and Restructured Credit Facilities Totaling $2.4 Billion to Improve Financial Stability.Business Editors/Energy Writers HAGERSTOWN Hagerstown (hā`gərztoun'), city (1990 pop. 35,445), seat of Washington co., NW Md., on Antietam Creek near its junction with the Potomac River, in the fertile Cumberland Valley; inc. 1791. , Md.--(BUSINESS WIRE)--Feb. 25, 2003 Allegheny Energy Allegheny Energy (NYSE: AYE) is a traditional public utility based in the Pittsburgh suburb of Greensburg. It services communities in Western Pennsylvania, Western Maryland, Northern West Virginia, Northwest Virginia. , Inc. (NYSE NYSE See: New York Stock Exchange : AYE AYE Allegheny Energy, Inc. (stock symbol) AYE Ayer Rajah Expressway AYE Amplifying Your Effectiveness (conference) ) announced today that it and its subsidiary, Allegheny Energy Supply Company, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control (Allegheny Energy Supply), have entered into agreements with lenders on new and restructured credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities totaling $2.4 billion. Proceeds from the financing will be used to refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. existing debt and for general corporate purposes. Allegheny Energy Chairman, President, and Chief Executive Officer Alan A`lan´ n. 1. A wolfhound. J. Noia said, "This is an important milestone for Allegheny Energy as we work to restore the financial health of our Company and refocus Verb 1. refocus - focus once again; The physicist refocused the light beam" focus - cause to converge on or toward a central point; "Focus the light on this image" 2. on our core businesses. We appreciate our lenders' support." The new credit facilities at Allegheny Energy Supply will provide $470 million of additional funding and refinance $1.637 billion of existing debt and letters of credit, including $895 million outstanding under revolving credit agreements Revolving credit agreement A legal commitment in which a bank promises to lend a customer up to a specified maximum amount during a specified period. revolving credit agreement See line of credit. , $269 million outstanding under a synthetic lease Synthetic Lease An operating lease that is structured in a way so that it is not recorded as a liability on the balance sheet. Instead, it is considered to be an expense on the income statement. for the Springdale generation project, which is nearly completed, and $380 million of A-Note debt in the St. Joseph synthetic lease, which will be restructured and assumed by Allegheny Energy Supply. As detailed in the attachments, the majority of Allegheny Energy Supply's restructured debt is secured by substantially all of its assets. The new credit facilities at Allegheny Energy, Inc. are unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. and will refinance $330 million of existing debt and letters of credit. Summary terms and conditions of the credit facilities are outlined in the attachments to this news release. "The new facilities at Allegheny Energy Supply require repayments of $250 million in the fourth quarter of 2003 and $250 million and $150 million, respectively, in the third and fourth quarters of 2004. The new facilities at Allegheny Energy, Inc. require repayment of $7.5 million each quarter. The facilities also have customary provisions requiring prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. out of the proceeds of asset sales and debt and equity issuances In financial markets, an Equity Issuance is the sale of new equity or "stocks" by a firm to investors. Equity Issuance can involve a private sale, in which the transaction between investors and the firm takes place directly, or publicly, in which case the firm has to . While our short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. liquidity needs have now been addressed, we must continue to concentrate on meeting our objectives for raising equity, selling assets, and further reducing costs in order to achieve long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. financial stability. In the coming months, we will be focused on these initiatives to improve our financial condition and strengthen our balance sheet," Noia said. As previously announced, Allegheny Energy has already taken steps to reduce its cost structure, preserve cash, and strengthen its balance sheet. Beginning in the third quarter of 2002, the Company scaled back its wholesale energy trading activity; cancelled the development of several generating facilities, saving $700 million in capital expenditures over the next several years; reduced its workforce by approximately 10 percent; and suspended sus·pend v. sus·pend·ed, sus·pend·ing, sus·pends v.tr. 1. To bar for a period from a privilege, office, or position, usually as a punishment: suspend a student from school. the dividend on its common stock. Today, Allegheny Energy will also file a Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. with the Securities and Exchange Commission, which contains certain projections regarding the Company's future operating performance. This information was prepared for the Company's lenders as part of the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and financing negotiations and includes balance sheets, income statements, and cash flow statements for Allegheny Energy, Inc. and Allegheny Energy Supply. The information includes a projection of 2003 and 2004 consolidated net income of $131 million and $125 million, respectively. Among other things, as further detailed in the 8-K, these preliminary projections give effect to the new and restructured credit facilities and assume that Allegheny Energy issues $330 million of 8% mandatory convertible Mandatory Convertible A type of convertible bond that has a required conversion or redemption feature. Either on or before a contractual conversion date, the holder must convert the mandatory convertible into the underlying common stock. debt in the third quarter of 2003 and $375 million of 8% mandatory convertible debt in the third and fourth quarters of 2004 to meet scheduled debt amortization. They do not include any assumptions regarding any sale of assets. Allegheny Energy will comment further on the new and restructured credit facilities in an analyst conference call on Wednesday, February 26, 2003, at 11:00 a.m. (Eastern Time). Investors, the news media, and others may listen to a live internet broadcast of the call at www.alleghenyenergy.com or www.streetevents.com by clicking on an available audio link. The call will also be archived for replay purposes for 10 working days after the live broadcast on both of these web sites. Lazard served as strategic financial advisor for Allegheny Energy. With headquarters in Hagerstown, Md., Allegheny Energy is an integrated energy company with a balanced portfolio of businesses, including Allegheny Energy Supply, which owns and operates electric generating facilities and supplies energy and energy-related commodities in selected domestic retail and wholesale markets; Allegheny Power, which delivers low-cost, reliable electric and natural gas service to about three million people in Maryland Maryland (mâr`ələnd), one of the Middle Atlantic states of the United States. It is bounded by Delaware and the Atlantic Ocean (E), the District of Columbia (S), Virginia and West Virginia (S, W), and Pennsylvania (N). , Ohio, Pennsylvania Pennsylvania (pĕnsəlvā`nyə), one of the Middle Atlantic states of the United States. It is bordered by New Jersey, across the Delaware River (E), Delaware (SE), Maryland (S), West Virginia (SW), Ohio (W), and Lake Erie and New York , Virginia Virginia, state, United States Virginia, state of the south-central United States. It is bordered by the Atlantic Ocean (E), North Carolina and Tennessee (S), Kentucky and West Virginia (W), and Maryland and the District of Columbia (N and NE). , and West Virginia West Virginia, E central state of the United States. It is bordered by Pennsylvania and Maryland (N), Virginia (E and S), and Kentucky and, across the Ohio R., Ohio (W). Facts and Figures Area, 24,181 sq mi (62,629 sq km). Pop. ; and a business offering fiber-optic and data services. More information about the Company is available at www.alleghenyenergy.com. Certain statements contained herein constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. with respect to Allegheny Energy, Inc. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of Allegheny Energy to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors may affect Allegheny Energy's operations, markets, products, services, prices, capital expenditures, development activities, and future plans. Such factors include, among others, the following: changes in general, economic, and business conditions; changes in the price of electricity and natural gas; changes in industry capacity; changes in technology; changes in financial and capital market conditions; changes in political and social conditions, deregulation Deregulation The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry. Notes: Traditional areas that have been deregulated are the telephone and airline industries. activities and the movement toward competition in the states served by our operations; the effect of regulatory and legislative decisions; regulatory approvals and conditions; the loss of any significant customers; litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. ; and changes in business strategy or business plans.
Summary Terms and Conditions of New and Restructured Credit Facilities
Allegheny Energy, Inc. Facilities
---------------------------------
Amount: $330 million
Maturity: April 18, 2005
Security: None
Purpose: To refinance existing debt and letters
of credit
Interest Rate: LIBOR + 500 bps
Amortization: $7.5 million quarterly
Allegheny Energy Supply Facilities
----------------------------------
Refinancing Facility
--------------------
Amount: $988 million
Maturity: April 18, 2005
Security: Initially 90.5% secured by substantially
all assets of Allegheny Energy Supply,
except for the Springdale generation
project
Purpose: To refinance existing debt and letters
of credit comprised of $895 million
outstanding under revolving credit
facilities, $57 million of bilateral
facilities, and $36 million of St.
Joseph synthetic lease B&C Notes.
Interest Rate: LIBOR + 600 bps, 550 bps, and 500 bps,
assuming credit ratings of BB- or lower,
BB, and BB+ or higher, respectively. If
the unsecured portion is not secured by
July 31, 2003, the rate on the unsecured
portion increases to 12.5% retroactive
to the closing date.
Scheduled Amortization: $30 million - September 30, 2004
$150 million - December 31, 2004
New Money Facility
------------------
Amount: $470 million ($420 million drawn; $50
million committed)
Maturity: September 30, 2004
Security: 100% secured by substantially all assets
of Allegheny Energy Supply, except for
the Springdale generation project
Purpose: General corporate purposes
Interest Rate: LIBOR + 600 bps
Scheduled Amortization: $250 million - December 31, 2003
Balance - September 30, 2004
Springdale Facility
-------------------
Amount: $269 million
Maturity: April 18, 2005
Security: $150 million secured by the Springdale
generation project. The balance shares
pro rata in security with the
Refinancing Facility.
Purpose: To refinance the Springdale synthetic
lease
Interest Rate: LIBOR + 600 bps, 550 bps, and 500 bps,
assuming credit ratings of BB- or lower,
BB, and BB+ or higher, respectively.
If the unsecured portion is not secured
by July 31, 2003, the rate on the
unsecured portion increases to 12.5%
retroactive to the closing date.
Scheduled Amortization: Pro rata with the Refinancing Facility
St. Joseph Synthetic Lease A-Notes
----------------------------------
Amount: $380 million
Maturity: November 15, 2007
Security: Initially secured by substantially all
assets of Allegheny Energy Supply,
except for the Springdale generation
project, pro rata with the Refinancing
Facility
Purpose: To refinance existing debt
Interest Rate: 10.25%. If the unsecured portion is not
secured by July 31, 2003, the rate on
the unsecured portion increases to 13%
retroactive to the closing date.
Mandatory Repayments: -- 75% of Allegheny Energy, Inc. (or its subsidiaries other than Allegheny Energy Supply) net asset sale proceeds up to $400 million and 100% thereafter will be used to prepay Allegheny Energy, Inc. debt; -- 75% of Allegheny Energy Supply net asset sale proceeds up to $800 million and 100% thereafter (100% of sale proceeds from the Springdale generation project at all times) will be used to prepay Allegheny Energy Supply and Allegheny Energy, Inc. debt proportionately; -- 100% of net proceeds from the issuance of debt will be used to prepay Allegheny Energy, Inc. and Allegheny Energy Supply debt proportionately; -- 100% of net proceeds from the issuance of equity in excess of $250 million will be used to prepay Allegheny Energy, Inc. and Allegheny Energy Supply debt proportionately; -- 50% of excess cash flow of Allegheny Energy Supply will be used to prepay Allegheny Energy Supply debt; and -- 50% of consolidated excess cash flow of Allegheny Energy, Inc. (excluding Allegheny Energy Supply) will be used to prepay Allegheny Energy, Inc. debt. |
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