8-KMaterial AgreementsFinancial EventsExhibits & Filings

FIRSTENERGY CORP 8-K Report, Material Agreement (Jun 16, 2005)

Filed June 16, 2005For Securities:FE

Summary

FirstEnergy Corp. (FE) and its subsidiaries have entered into a new $2 billion syndicated credit facility, effective June 14, 2005. This new facility replaces several existing credit agreements and provides increased borrowing capacity, with the potential to extend to $2.5 billion. The funds are intended for working capital and general corporate purposes, indicating a strategic move to consolidate and enhance liquidity. The facility includes various borrowing sub-limits for different subsidiaries, subject to regulatory and charter limitations, and offers flexible borrowing options through Alternate Base Rate and Eurodollar Rate Advances, as well as swing line loans and letters of credit. The terms of the new credit facility include interest rates tied to debt ratings, with provisions for utilization and facility fees. Key financial covenants mandate a consolidated debt to total capitalization ratio of no more than 0.65 to 1.00 for most entities, and FirstEnergy must maintain a fixed charge ratio of at least 2.00 to 1.00 until its senior unsecured debt ratings improve to BBB- (S&P) or Baa3 (Moody's). The company's current ratings are BB+ (S&P) and Baa3 (Moody's), highlighting a focus on maintaining financial flexibility while addressing potential rating improvements.

Key Highlights

  • 1FirstEnergy Corp. and subsidiaries secured a new $2 billion syndicated credit facility, replacing older agreements.
  • 2The facility has an option to increase the total commitments to $2.5 billion.
  • 3Borrowing capacity is available until June 14, 2010, with a possible one-year extension.
  • 4Proceeds are designated for working capital and general corporate purposes.
  • 5The agreement includes specific borrowing sub-limits for various subsidiaries.
  • 6Interest rates are variable, tied to the company's senior unsecured debt ratings and benchmark rates (Alternate Base Rate or LIBOR).
  • 7Key financial covenants include a debt-to-capitalization ratio limit of 0.65 and a fixed charge ratio requirement of 2.00 for FirstEnergy, contingent on its debt ratings.

Frequently Asked Questions

The primary purpose of the new $2 billion syndicated credit facility is to provide FirstEnergy Corp. and its subsidiaries with enhanced liquidity for working capital and general corporate purposes. It also serves to consolidate and replace several previous, smaller credit agreements.

The new credit facility is initially set at $2 billion, with the potential for the total commitments to be increased up to $2.5 billion at the borrowers' request.

Key financial covenants include maintaining a consolidated debt-to-total capitalization ratio of no more than 0.65 to 1.00 for most borrowers. FirstEnergy is also required to maintain a fixed charge ratio of at least 2.00 to 1.00 unless its senior unsecured debt ratings improve to BBB- (S&P) or Baa3 (Moody's) or higher.

Interest rates are variable and depend on whether the borrowing is an Alternate Base Rate Advance or a Eurodollar Rate Advance. Eurodollar Rate Advances will bear interest at LIBOR plus an applicable margin, which is determined by the borrower's senior unsecured debt ratings. A utilization fee may also apply if total outstanding credits exceed half of the aggregate commitments.