Market conditions and an improved credit profile have enabled The AES Corp. to amend its $650 million credit facility to extend the maturity and cut the spread. "This is a continued affirmation by the market that our credit continues to improve and we're making great steps to increase our credit rating and our general access to financial markets," said Chip Hoagland, the company's v.p. and treasurer.
The company looked at various refinancing options, but the amendment seemed like the lowest cost option, he noted. There was no fee to amend the term loan, which is still prepayable at par, but the company paid a 1/8% upfront fee to amend the revolver. "The cost of doing the amendment was relatively low and the market is obviously good. We have recently gotten recognition from the rating agencies that we are on the right track," Hoagland explained. "In light of that and the progress we have made, we thought the old pricing was based on our old credit situation and not our new credit situation. The amended pricing reflects the current market for our credit quality. Any time we can pay less, it seems like a good thing to do."
The credit was originally put into place in July 2003. In May, AES increased the size by $200 million from $450 million. Hoagland said AES monitors the market. "We know that the term loan market was certainly pricing comparable credit more aggressively than what we did a year ago," he added. "The general market improved, plus our credit improved." The $450 million revolver and $200 million term loan are now priced at LIBOR plus 2 1/2% and LIBOR plus 2 1/4%, respectively. Both were previously priced at LIBOR plus 4%. The term loan maturity date was extended four years to 2011, but the amendment did not change the tenor of the revolver which is due in 2007.
Citibank serves as administrative agent on the credit and handled the amendment. Other banks on the credit are Banc of America Securities, Deutsche Bank, Union Bank of California, Lehman Brothers, UBS, Société Générale and Credit Lyonnias, now known as Calyon.