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EPE LETTERS OF CREDIT DRAWN BY BENEFICIARIES; EPE CONTINUES TO ASSESS ALL ALTERNATIVES

 EPE LETTERS OF CREDIT DRAWN BY BENEFICIARIES;
 EPE CONTINUES TO ASSESS ALL ALTERNATIVES
 EL PASO, Texas, Dec. 27 /PRNewswire/ -- El Paso Electric Company announced that beneficiaries holding seven of the eight letter of credit issued on the account of the company in connection with the company's Palo Verde Unit 2 sale/leasebacks, yesterday drew and were paid in full available amount of such letters of credit, approximately $181.7 million. The beneficiary holding the remaining Unit 2 letter of credit has drawn and has been paid today on its letter of credit of approximately $26.2 million.
 Replacement letters of credit were required to be provided beginning Dec. 1. As reported Dec. 24, the company was unable to complete its restructuring on Dec. 23, which would have provided for the issuance of the required replacement letters of credit. The company had expected one beneficiary to draw $36.2 million on its letter of credit yesterday. The company believes, however, that it had an agreement with the other beneficiaries that, if the beneficiaries were given an appropriate extension of their existing letters of credit, the beneficiaries could be expected not to draw on their letters of credit pending satisfactory progress by the company and the bank group to complete the comprehensive financial restructuring by early- to mid-January. The company believes that the appropriate extension discussed with the beneficiaries was timely obtained and offered to the beneficiaries.
 The company is obligated to reimburse the funding banks of the letters of credit within five business days of the payment under the letters of credit in the case of the seven letters credit drawn yesterday. The reimbursement obligation on the eighth letter of credit is due and payable on Dec. 31, 1991. Failure to pay the reimbursement obligations to the banks when due would constitute a payment default by the company. The terms and conditions of the facility leases for the sale/leasebacks provide for an event of default if replacement letters of credit are not put in place by the specified date. Events of default under the facility leases entitle the lessors to various remedies under the leases, including recisison or termination of the leases. Cross defaults and acceleration of other company indebtedness and obligations (including draws of approximately $78.5 million by the beneficiaries of letters of credit issued in connection with the company's Unit 3 sale/leasebacks) could occur as a result of lease defaults or if payment defaults occur under the company's reimbursement obligations or other credit agreements.
 The company's fully-borrowed revolving credit facility of $150 million and the company's fuel oil financing facility of $5.7 million have been extended to Dec. 31. Approximately $35 million of other debt matures Dec. 31 through Jan. 2, 1992. Lease payments of $20 million are due on the Unit 2 and 3 leases on Jan. 2, 1992. The company would not be able to meet any of these obligations as they come due, nor the reimbursement obligations to the funding banks of the letters of credit, without new financing and extensions or modifications of existing credit agreements.
 As a result of the draws yesterday on the letters of credit, the restructuring plan which the company was attempting to complete cannot be finalized as presently structured. There can be no assurance that the restructuring can be modified to an extent to permit a modified restructuring to be completed in the appropriate time frame, nor can there be any assurance that any other new financing can be arranged. The company will continue to assess all alternatives, which could include being forced to file for protection under federal bankruptcy laws.
 El Paso Electric Company (NASDAQ: ELPA) is an electric utility serving approximately 248,000 customers in El Paso, Texas and the Rio Grande Valley in Texas and New Mexico. The company has a 15.8 percent interest in each of the three 1,270-megawatt nuclear units at the Palo Verde Nuclear Generating Station located near Phoenix, Ariz.
 -0- 12/27/91
 /CONTACT: William Johnson of El Paso Electric, 915-543-5843/
 (ELPA) CO: El Paso Electric Company ST: Texas IN: UTI SU:


JT -- NY034 -- 5571 12/27/91 18:51 EST
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Publication:PR Newswire
Date:Dec 27, 1991
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