AES Corp. begins exchange offer for '02, '03 notes

The AES Corp. (Ba3/B+) said Thursday (Oct. 3) that it had begun an offer to exchange a combination of cash and new senior secured securities for up to $500 million of senior notes scheduled to come due in 2002 and 2003. The Arlington, Va.-based global independent power producer is seeking to exchange the cash and new debt for its $300 million of outstanding 8¾% senior notes due 2002 and its $200 million of outstanding 7 3/8% remarketable and redeemable securities ("ROARS") due 2013, which are putable in 2003.

AES is offering to exchange $500 in cash and $500 principal amount of a new issue of 10% senior secured notes due 2005 per $1,000 principal amount of the existing 2002 notes, and is offering $1,000 principal amount of the new 10% notes per $1,000 principal amount of the ROARS. It is additionally offering an early tender bonus payment of $15 per $1,000 principal amount of the 2002 notes tendered and $5 per $1,000 principal amount of the ROARS tendered to holders who tender their notes prior to Oct. 25 and who do not subsequently withdraw such securities, assuming the exchange offer is consummated.

The exchange offer will expire at 5 p.m. ET on Nov. 8, subject to possible extension. Tenders of the 2002 notes and the ROARs may be withdrawn at any time prior to the later of Oct. 25 and the time that AES announces that it has received valid and unwithdrawn tenders representing at least 75% in aggregate principal amount of the 2002 notes and the ROARS on a combined basis. In no event shall the latter time be later than the announced expiration date.

The company said that consummation of the exchange offer is subject to a number of significant conditions, including (but not limited to) that valid and unwithdrawn tenders are received representing at least 75% in aggregate outstanding principal amount of the 2002 Notes and the ROARs on a combined basis; AES' concurrent entry into a new senior secured credit facility; the valid amendment of certain documentation executed in connection with the issuance of the ROARS in order to permit the completion of the exchange offer; and the absence of certain adverse legal and market developments.

AES said that the new senior secured notes that will be offered to the holders of the 2002 notes and the ROARS will be secured equally and ratably with all debt outstanding under the new senior secured credit facilities, by first-priority liens, subject to certain exceptions and permitted liens, on all of the capital stock of domestic subsidiaries owned directly by AES and 65% of the capital stock of certain foreign subsidiaries owned directly by AES and on certain inter-company receivables, inter-company notes and inter-company tax sharing agreements owed to AES by its subsidiaries. In addition, the new senior secured notes will be subject to a mandatory offer to repurchase with a portion of the net cash proceeds received from certain asset sales by AES.

The offering of the new senior secured notes in the exchange offer is being made only to "qualified institutional buyers" and "persons other than a U.S. person" located outside the United States under the definitions contained in Rule 144A and Regulation S of the Securities Act of 1933, as amended.

AES further said that concurrently, it is also launching a new multi-tranche $1.6 billion senior secured credit facility, which will be secured equally and ratably with the new senior secured notes. Consummation of the new senior secured facility is subject to a number of conditions, including the completion of the exchange offer for the bonds and participation of all of its existing lenders.

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