8-KMaterial AgreementsExhibits & Filings

DTE ENERGY CO 8-K Report, Material Agreement (Jan 17, 2007)

Filed January 17, 2007For Securities:DTEDTKDTBDTGDTW

Summary

DTE Energy Company, through its subsidiary The Detroit Edison Company, filed a Current Report (8-K) on January 17, 2007, detailing material definitive agreements entered into on January 10, 2007. These agreements involve amendments to two of Detroit Edison's existing five-year unsecured revolving credit facilities. The primary purpose of these amendments is to clarify the calculation of Detroit Edison's debt-to-capitalization ratio and to exclude the non-cash effects of adopting FASB Statement No. 158 (Accounting for Defined Benefit Pension and Other Postretirement Plans) from this ratio. These amendments are significant for investors as they impact how a key financial covenant (debt-to-capitalization) is measured, potentially affecting the company's ability to meet its debt obligations and its financial flexibility. By excluding the non-cash impact of FASB 158, the company aims to present a more stable and operationally reflective view of its leverage, particularly important given the accounting changes introduced by the standard.

Key Highlights

  • 1Detroit Edison amended its $68.75 million and $206.25 million five-year unsecured revolving credit agreements.
  • 2The amendments were made effective January 10, 2007.
  • 3The core purpose of the amendments is to clarify the calculation of Detroit Edison's debt-to-capitalization ratio.
  • 4A key change is the exclusion of non-cash effects from the implementation of FASB Statement No. 158 (on pension accounting) from the debt-to-capitalization ratio calculation.
  • 5Barclays Bank PLC, Citibank, N.A., and JPMorgan Chase Bank, N.A. are involved as Administrative Agent and Co-Syndication Agents.
  • 6These amendments are considered material definitive agreements filed as exhibits to the 8-K.

Frequently Asked Questions

The main impact is on how Detroit Edison's debt-to-capitalization ratio is calculated. The amendments clarify this calculation and specifically exclude the non-cash accounting effects of implementing FASB Statement No. 158, which pertains to pension and postretirement benefit accounting.

FASB 158 introduced significant non-cash adjustments to balance sheets related to pension obligations. By excluding these non-cash effects from the debt-to-capitalization ratio, the company presents a measure of leverage that is more closely tied to its operational debt and less influenced by accounting standard changes, potentially making its financial covenants appear more robust.

The amendments involve The Detroit Edison Company as the borrower, with Barclays Bank PLC acting as the Administrative Agent, and Citibank, N.A. and JPMorgan Chase Bank, N.A. serving as Co-Syndication Agents. Lenders party to the original agreements are also involved.

The two credit facilities being amended have original amounts of $68,750,000 and $206,250,000, respectively. Both are five-year unsecured revolving credit agreements dated October 17, 2005.