Atlantic Power not in compliance with fixed charge coverage covenant

By Angela McDaniels

Tacoma, Wash., Aug. 7 – Atlantic Power Corp. is not in compliance with the fixed charge coverage ratio test included in the restricted payments covenant of the indenture governing its 9% senior notes due 2018, according to the company’s earnings release for the second quarter.

The fixed charge coverage ratio must be at least 1.75 to 1.00.

The company said the non-compliance is due to the aggregate impact of the upfront costs resulting from prepayments and repurchases of debt made in the first quarter. Atlantic Power reported $54 million of debt refinancing and repurchase costs for the first half of the year.

The ratio is measured on a rolling four-quarter basis, so the costs associated with first-quarter debt prepayments and repurchases would no longer be included in the calculation beginning in the second quarter of 2015.

As a result of the non-compliance, common dividend payments cannot exceed the restricted payments basket provision of the greater of $50 million and 2% of consolidated net assets (about $61 million as of June 30) until the fixed charge coverage ratio test is met.

The company said it has declared seven monthly dividends in January through July totaling about $25.6 million that are subject to the basket provision.

Atlantic Power is a Boston-based owner and operator of power generation assets.

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