Summary
American Electric Power Company, Inc. (AEP) filed an 8-K report on July 26, 2011, announcing significant changes to its credit facilities. The company terminated its $1.5 billion Second Amended and Restated Credit Agreement dated March 31, 2008, previously managed by Barclays Bank PLC. Concurrently, AEP entered into two new credit agreements to bolster its liquidity and financial flexibility. These new agreements include a $1.75 billion 5-year credit facility also with Barclays Bank PLC as Administrative Agent, which replaces the terminated agreement. Additionally, AEP secured a $1.5 billion 4-year Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A. as Administrative Agent, updating a previous agreement from June 2010. These actions signal AEP's proactive management of its debt structure and access to capital. The new facilities are subject to customary terms and covenants, including a debt-to-total capitalization ratio not exceeding 67.5%, and contain provisions for events of default, such as acceleration of other significant debt obligations.
Key Highlights
- 1AEP terminated its $1.5 billion Second Amended and Restated Credit Agreement originally dated March 31, 2008.
- 2The company entered into a new $1.75 billion 5-year Credit Agreement with Barclays Bank PLC as Administrative Agent.
- 3AEP also entered into a $1.5 billion 4-year Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A. as Administrative Agent.
- 4These new credit facilities increase AEP's overall borrowing capacity to $3.25 billion ($1.75B + $1.5B).
- 5The agreements include a covenant requiring AEP to maintain its percentage of debt to total capitalization at or below 67.5%.
- 6Events of default under these new agreements can be triggered by acceleration of other debt obligations exceeding $50 million.
- 7The credit agreements do not permit lenders to refuse a draw on either facility if a material adverse change occurs.