8-KMaterial AgreementsExhibits & Filings

CENTERPOINT ENERGY INC 8-K Report, Material Agreement (Nov 19, 2008)

Filed November 19, 2008For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) announced on November 18, 2008, an amendment to its $1.2 billion bank credit facility, effective November 18, 2008. The primary purpose of this amendment was to temporarily increase a key financial covenant, specifically the ratio of consolidated indebtedness to EBITDA, from 5 times to 5.5 times. This modification is designed to provide the company with increased financial flexibility during a period of significant storm restoration costs. The increased covenant ratio is set to expire on December 31, 2009, or earlier if CenterPoint Energy Houston Electric, LLC (CenterPoint Houston) successfully issues storm recovery bonds to recoup expenses incurred from Hurricane Ike. The amendment also clarifies that debt issued through this planned storm recovery securitization will not count towards the covenant calculation, further supporting the company's ability to manage its debt obligations while addressing hurricane-related recovery efforts.

Key Highlights

  • 1Amendment to $1.2 billion credit facility became effective on November 18, 2008.
  • 2Financial covenant (consolidated indebtedness to EBITDA) temporarily increased from 5x to 5.5x.
  • 3Increase in covenant ratio provides greater flexibility for incurring additional debt.
  • 4Temporary increase in covenant ratio is in effect until December 31, 2009, or until storm recovery bonds are issued.
  • 5CenterPoint Energy Houston Electric, LLC expects to seek authorization for storm recovery bonds in 2009 to recover Hurricane Ike restoration costs.
  • 6Debt incurred from storm recovery securitization will not count towards the covenant calculation.
  • 7Conforming amendment also approved for CenterPoint Houston's credit facility.

Frequently Asked Questions

CenterPoint Energy amended its credit facility to temporarily increase the permitted ratio of consolidated indebtedness to EBITDA from 5 times to 5.5 times. This change provides the company with greater financial flexibility to manage potential additional debt, particularly in light of costs incurred for restoring electric service after Hurricane Ike.

The increased covenant ratio of 5.5 times will be in effect until the earlier of December 31, 2009, or the date when CenterPoint Energy Houston Electric, LLC receives proceeds from the issuance of storm recovery bonds.

Storm recovery bonds are a mechanism that CenterPoint Energy Houston Electric, LLC plans to seek legislative and regulatory authorization for in 2009. The purpose is to recover the costs it incurred in restoring electric service following Hurricane Ike. The amendment to the credit facility is structured to accommodate the financial implications of this potential bond issuance, ensuring that the debt incurred from these bonds does not count against the covenant calculation.

The amendment provides the company with the *ability* to incur more debt by adjusting a key financial covenant. It is directly linked to the expected costs of Hurricane Ike restoration and the potential future issuance of storm recovery bonds. The amendment itself doesn't signify immediate new debt but rather provides flexibility should the company need to finance these recovery efforts.