Item 1.01 Entry into a Material Definitive Agreement
On May 27, 2020, The AES Corporation (the "Company" or "AES") completed its
previously announced offering of $900,000,000 aggregate principal amount of its
3.300% Senior Secured First Lien Notes due 2025 (the "2025 Notes") and
$700,000,000 aggregate principal amount of 3.950% Senior Secured First Lien
Notes due 2030 (the "2030 Notes", and together with the 2025 Notes, the "New
Notes") pursuant to the terms of the purchase agreement, dated May 15, 2020 (the
"Purchase Agreement"), among AES and the representatives of the initial
purchasers named therein (the "Initial Purchasers").
The public offering price of the 2025 Notes and the 2030 Notes was 99.972% and
99.579% of the principal amount, respectively. AES intends to use the net
proceeds from the offering to fund purchases of up to $1.584 billion aggregate
purchase amount of its 4.000% Senior Notes due 2021 (the "2021 Notes"), 4.875%
Senior Notes due 2023 (the "4.875% 2023 Notes") and 4.500% Senior Notes due 2023
(the "4.500% 2023 Notes", and together with the 4.875% 2023 Notes and the 2021
Notes, the "Outstanding Notes") in tender offers (the "Tender Offers") and to
pay certain related fees and expenses. If any net proceeds from this offering
remain after completion of the Tender Offers, AES intends to use such proceeds
to retire certain of its outstanding indebtedness and for general corporate
purposes. In conjunction with the Tender Offers, AES is soliciting consents to
the adoption of certain proposed amendments to the indentures governing the
Outstanding Notes to substantially remove all the restrictive covenants and
events of default, as well as to alter the notice requirements for optional
redemption with respect to each series of Outstanding Notes.
The New Notes were issued on May 27, 2020 pursuant to an indenture, dated as of
May 27, 2020 (the "Indenture"), between AES and Deutsche Bank Trust Company
Americas, as Trustee.
Interest on the 2025 Notes accrues at a rate of 3.300% per annum, and interest
on the 2030 Notes accrues at a rate of 3.950% per annum. Interest on each series
of New Notes is payable on January 15 and July 15 of each year, beginning
January 15, 2021. The 2025 Notes will mature on July 15, 2025, and the 2030
Notes will mature on July 15, 2030.
The Notes are secured by a first priority security interest in the same
collateral that is pledged for the benefit of the lenders under AES' senior
secured credit facility, which collateral consists of certain of AES' assets,
including the pledge of capital stock of many of AES' directly held subsidiaries
and the directly held subsidiaries of AES' subsidiary, AES International
Holdings II, LTD. The collateral securing the Notes will be released if AES
obtains an investment grade rating from two out of the three rating agencies,
subject to reversion if such rating agencies withdraw AES' investment grade
rating or downgrade AES' rating below investment grade.
AES may redeem all or a part of the 2025 Notes, at any time prior to June 15,
2025, on any one or more occasions, at a redemption price equal to the greater
of (i) 100% of the principal amount of the 2025 Notes to be redeemed (ii) the
sum of the present values of the principal amount of the 2025 Notes to be
redeemed and the remaining scheduled payments of interest on the 2025 Notes from
the redemption date to June 15, 2025, discounted from the scheduled payment
dates to the redemption date semiannually (assuming a 360-day year consisting of
twelve 30-day months) at a discount rate equal to the Treasury Rate (as defined
in the Indenture) plus 50 basis points. AES may redeem all or a part of the 2030
Notes, at any time prior to April 15, 2030, on any one or more occasions, at a
redemption price equal to the greater of (i) 100% of the principal amount of the
2030 Notes to be redeemed and (ii) the sum of the present values of the
principal amount of the 2030 Notes to be redeemed and the remaining scheduled
payments of interest on the 2030 Notes from the redemption date to April 15,
2030, discounted from the scheduled payment dates to the redemption date
semiannually (assuming a 360-day year consisting of twelve 30-day months) at a
discount rate equal to the Treasury Rate (as defined in the 2030 notes) plus 50
basis points.
Upon the occurrence of a Change of Control Triggering Event (as defined in the
Indenture), AES must offer to repurchase the each series of New Notes at a price
equal to 101.00% of their principal amount, plus accrued and unpaid interest, if
any, to, but not including, the date of repurchase. The Indenture also contains
covenants, subject to certain exceptions, restricting the ability of AES to
incur debt secured by any Principal Property (as defined in the Indenture) or by
the debt or capital stock of any subsidiary held by the AES; to enter into any
sale-lease back transactions involving any Principal Property; or to
consolidate, merge, convey or transfer substantially all of its assets; as well
as other covenants that are customary for debt securities like the New Notes. In
addition, the Indenture contains customary events of default.
The New Notes were sold to the Initial Purchasers for resale to qualified
institutional buyers under Rule 144A of the Securities Act of 1933, as amended
(the "Securities Act"), and to persons outside the United States under
Regulation S of the Securities Act.
The New Notes were issued in a transaction exempt from registration under the
Securities Act or any state securities laws. Therefore, the New Notes may not
be offered or sold in the United States absent registration or an applicable
exemption from the registration requirements of the Securities Act and any
applicable state securities laws. This current report on Form 8-K and the
Exhibits hereto do not constitute an offer to sell any securities or a
solicitation of an offer to purchase any securities.
The foregoing description of the Indenture and the New Notes is qualified in its
entirety by reference to the Indenture and the forms of New Notes. The
Indenture, the form of the 2025 Notes and the form of the 2030 Notes are
attached to this Current Report on Form 8-K as Exhibit 4.1, Exhibit 4.2 and
Exhibit 4.3, respectively.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of Registrant
The information set forth under Item 1.01 above is hereby incorporated into this
Item 2.03 by reference.
Safe Harbor Disclosure
This Current Report on Form 8-K contains forward-looking statements within the
meaning of the Securities Act of 1933 and of the Securities Exchange Act of
1934. Forward-looking statements are not intended to be a guarantee of future
results, but instead constitute AES' current expectations based on reasonable
assumptions. Such forward-looking statements include, but are not limited to,
the proposed use of proceeds of the New Notes and other expected effects of the
offering of the New Notes.
Actual results could differ materially from those projected in AES'
forward-looking statements due to risks, uncertainties and other factors.
Important factors that could affect actual results include the aggregate amount
of Outstanding Notes tendered pursuant to the Tender Offers (which could lead to
retirement or repayment of other existing debt) and other risks and
uncertainties discussed in the Offering Memorandum related to the New Notes, as
well as in AES' filings with the SEC, including, but not limited to, the risks
discussed under Item 1A "Risk Factors" and Item 7: "Management's Discussion &
Analysis of Financial Condition and Results of Operations" in AES' 2019 Annual
Report on Form 10-K, and in subsequent reports filed with the SEC. Readers are
encouraged to read AES' filings to learn more about the risk factors associated
with AES' business. AES undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
Anyone who desires a copy of AES' 2019 Annual Report on Form 10-K filed February
27, 2020 with the SEC may obtain a copy (excluding Exhibits) without charge by
addressing a request to the Office of the Corporate Secretary, The AES
Corporation, 4300 Wilson Boulevard, Arlington, Virginia 22203. Exhibits also may
be requested, but a charge equal to the reproduction cost thereof will be made.
A copy of the Form 10-K may be obtained by visiting AES' website at www.aes.com.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
4.1 Indenture, dated May 27, 2020, between AES and Deutsche Bank Trust
Company Americas, as Trustee.
4.2 Form of 3.300% Senior Secured First Lien Notes due 2025 (included in
Exhibit 4.1)
4.3 Form of 3.950% Senior Secured First Lien Notes due 2030 (included in
Exhibit 4.1)
101 Inline XBRL Document Set for the Cover Page from this Current Report
on Form 8-K, formatted as Inline XBRL.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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