Long-term debt | 3 Months Ended |
Mar. 31, 2014 |
Long-term debt | ' |
Long-term debt | ' |
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4. Long-term debt |
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Long-term debt consists of the following: |
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| | March 31, | | December 31, | | Interest Rate |
2014 | 2013 |
Recourse Debt: | | | | | | | | |
Senior secured term loan facility, due 2021 | | $ | 600 | | $ | — | | LIBOR(1) plus 3.8% |
Senior unsecured notes, due 2018(2) | | | 319.9 | | | 460 | | 9.00% |
Senior unsecured notes, due June 2036 (Cdn$210.0) | | | 190 | | | 197.4 | | 6.00% |
Senior unsecured notes, due July 2014(3) | | | — | | | 190 | | 5.90% |
Series A senior unsecured notes, due August 2015(3) | | | — | | | 150 | | 5.90% |
Series B senior unsecured notes, due August 2017(3) | | | — | | | 75 | | 6.00% |
Non-Recourse Debt: | | | | | | | | |
Epsilon Power Partners term facility, due 2019 | | | 29.2 | | | 30.5 | | LIBOR plus 3.1% |
Cadillac term loan, due 2025 | | | 34.9 | | | 35.4 | | 6.0% – 8.0% |
Piedmont term loan, due 2018(4) | | | 68.5 | | | 76.6 | | 5.20% |
Meadow Creek term loan, due 2024 | | | 169.8 | | | 169.8 | | 2.9% – 5.6% |
Rockland term loan, due 2027 | | | 85.3 | | | 85.3 | | 6.40% |
Other long-term debt | | | 0.9 | | | 1 | | 5.5% – 6.7% |
Less: current maturities | | | (24.6 | ) | | (216.2 | ) | |
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Total long-term debt | | $ | 1,473.90 | | $ | 1,254.80 | | |
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Current maturities consist of the following: |
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| | March 31, | | December 31, | | Interest Rate |
2014 | 2013 |
Current Maturities: | | | | | | | | |
Senior secured term loan facility, due 2021 | | $ | 6 | | $ | — | | LIBOR(1) plus 3.8% |
Senior unsecured notes, due July 2014(3) | | | — | | | 190 | | 5.90% |
Epsilon Power Partners term facility, due 2019 | | | 5 | | | 5 | | LIBOR plus 3.1% |
Cadillac term loan, due 2025 | | | 2.1 | | | 2 | | 6.0% – 8.0% |
Piedmont term loan, due 2018(4) | | | 4.9 | | | 12.6 | | 5.20% |
Meadow Creek term loan, due 2024 | | | 4.9 | | | 4.9 | | 2.9% – 5.6% |
Rockland term loan, due 2027 | | | 1.5 | | | 1.5 | | 6.40% |
Other short-term debt | | | 0.2 | | | 0.2 | | 5.5 – 6.7% |
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Total current maturities | | $ | 24.6 | | $ | 216.2 | | |
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-1 |
LIBOR cannot be less than 1.00%. On May 5, 2014 we entered into interest rate swap agreements to mitigate the exposure to changes in LIBOR for $199.0 million notional amount of the $600.0 million outstanding aggregate borrowings. See Note 6, Accounting for derivative instruments and hedging activities for further details. |
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-2 |
We repurchased approximately $140.1 million aggregate principal amount of the 9.0% Notes in March 2014 with a portion of the proceeds from the New Senior Secured Credit Facilities and cash on hand, as further described below. |
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-3 |
The Curtis Palmer Notes due July 2014, Series A senior guaranteed notes due August 2015 and Series B senior guaranteed notes due August 2017 were retired on February 26, 2014 with proceeds from the New Senior Secured Credit Facilities described below. |
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-4 |
On February 14, 2014, we paid down $8.1 million of principal on the Piedmont construction loan and converted the remaining $68.5 million to a term loan due August 2018. |
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New Senior Secured Credit Facilities |
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On February 24, 2014, Atlantic Power Limited Partnership ("the Partnership"), our wholly-owned indirect subsidiary, entered into a new senior secured term loan facility (the "New Term Loan Facility"), comprising of $600 million in aggregate principal amount, and a new senior secured revolving credit facility (the "New Revolving Credit Facility") with a capacity of $210 million (collectively, the "New Senior Secured Credit Facilities"). Borrowings under the New Senior Secured Credit Facilities are available in U.S. dollars and Canadian dollars and bear interest at a rate equal to the Adjusted Eurodollar Rate (LIBOR), the Base Rate or the Canadian Prime Rate, each as defined in the credit agreement governing the New Senior Secured Credit Facilities (the "Credit Agreement"), as applicable, plus an applicable margin between 2.75% and 3.75% that varies depending on whether the loan is a Eurodollar Rate Loan, Base Rate Loan, or Canadian Prime Rate Loan. The applicable margin for term loans bearing interest at the Adjusted Eurodollar Rate and the Base Rate is 3.75% and 2.75% respectively and was 3.75% at March 31, 2014. The Adjusted Eurodollar Rate cannot be less than 1.00% (1.00% at March 31, 2014). As further described in Note 6, the Partnership entered into interest rate swap agreements on May 5, 2014 to mitigate the exposure to changes in the Adjusted Eurodollar Rate for a portion of the New Term Loan Facility. |
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In connection with the funding of the New Senior Secured Credit Facilities, we terminated our prior revolving credit facility on February 26, 2014. |
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The New Term Loan Facility matures on February 24, 2021. The revolving commitments under the New Revolving Credit Facility terminate on February 24, 2018. Letters of credit are available to be issued under the revolving commitments until 30 days prior to the Letter of Credit Expiration Date under, and as defined in, the Credit Agreement. The Partnership is required to pay a commitment fee with respect to the commitments under the New Revolving Credit Facility equal to 0.75% times the average of the daily difference between the revolving commitments and all outstanding revolving loans (excluding swing line loans) plus amounts available to be drawn under letters of credit and all outstanding reimbursement obligations with respect to drawn letters of credit. |
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The New Senior Secured Credit Facilities are secured by a pledge of the equity interests in the Partnership and its subsidiaries, guaranties from the Partnership subsidiary guarantors and a limited recourse guaranty from the entity that holds all of the Partnership equity, a pledge of certain material contracts and certain mortgages over material real estate rights, an assignment of all revenues, funds and accounts of the Partnership and its subsidiaries (subject to certain exceptions), and certain other assets. The New Senior Secured Credit Facilities are not otherwise guaranteed or secured by us or any of our subsidiaries (other than the Partnership subsidiary guarantors). The New Senior Secured Credit Facilities have a debt service reserve account, which is required to be funded and maintained at the debt service reserve requirement, equal to six months of debt service. The debt service reserve requirement was funded with a $15.8 million letter of credit. |
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The Partnership's existing Cdn$210 million aggregate principal amount of 5.95% Medium Term Notes due June 23, 2036 (the "MTNs") prohibit the Partnership (subject to certain exceptions) from granting liens on its assets (and those of its material subsidiaries) to secure indebtedness, unless the MTNs are secured equally and ratably with such other indebtedness. Accordingly, in connection with the execution of the Credit Agreement, the Partnership has granted an equal and ratable security interest in the collateral package securing the New Senior Secured Credit Facilities under the indenture governing the MTNs for the benefit of the holders of the MTNs. |
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The Credit Agreement contains customary representations, warranties, terms and conditions, and covenants. The covenants include a requirement that the Partnership and its subsidiaries maintain a Leverage Ratio (as defined in the Credit Agreement) ranging from 5.50:1.00 in 2014 to 4.00:1.00 in 2021, and an Interest Coverage Ratio (as defined in the Credit Agreement) ranging from 2.50:1.00 in 2014 to 3.25:1.00 in 2021. In addition, the Credit Agreement includes customary restrictions and limitations on the Partnership's and its subsidiaries' ability to (i) incur additional indebtedness, (ii) grant liens on any of their assets, (iii) change their conduct of business or enter into mergers, consolidations, reorganizations, or certain other corporate transactions, (iv) dispose of assets, (v) modify material contractual obligations, (vi) enter into affiliate transactions, (vii) incur capital expenditures, and (viii) make dividend payments or other distributions, in each case subject to customary carve-outs and exceptions and various thresholds. |
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Under the Credit Agreement, if a change of control (as defined in the Credit Agreement) occurs, unless the Partnership elects to make a voluntary prepayment of the term loans under the New Senior Secured Credit Facilities, it will be required to offer each electing lender to prepay such lender's term loans under the New Senior Secured Credit Facilities at a price equal to 101% of par. In addition, in the event that the Partnership elects to repay, prepay or refinance all or any portion of the term loan facilities within one year from the initial funding date under the Credit Agreement, it will be required to do so at a price of 101% of the principal amount so repaid, prepaid or refinanced. |
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The Credit Agreement also contains a mandatory amortization feature and customary mandatory prepayment provisions, including: (i) from proceeds of assets sales, insurance proceeds, and incurrence of indebtedness, in each case subject to applicable thresholds and customary carve-outs; and (ii) the payment of 50% of the excess cash flow, as defined in the Credit Agreement, of the Partnership and its subsidiaries. |
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Under certain conditions the lending commitments under the Credit Agreement may be terminated by the lenders and amounts outstanding under the Credit Agreement may be accelerated. Such events of default include failure to pay any principal, interest or other amounts when due, failure to comply with covenants, breach of representations or warranties in any material respect, non-payment or acceleration of other material debt of the Partnership and its subsidiaries, bankruptcy, material judgments rendered against the Partnership or certain of its subsidiaries, certain ERISA or regulatory events, a change of control of the Partnership, or defaults under certain guaranties and collateral documents securing the New Senior Secured Credit Facilities, in each case subject to various exceptions and notice, cure and grace periods. |
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On February 26, 2014, $600 million was drawn under the New Term Loan Facility, and letters of credit in an aggregate face amount of $144.1 million at March 31, 2014 were issued (but not drawn) pursuant to the revolving commitments under the New Revolving Credit Facility and used to (i) fund a debt service reserve in an amount equivalent to six months of debt service (approximately $15.8 million) and (ii) support contractual credit support obligations of the Partnership and its subsidiaries and of certain other of our affiliates. |
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We and our subsidiaries have used the proceeds from the New Term Loan Facility under the New Senior Secured Credit Facilities to: |
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redeem in whole, at a price equal to par plus $31.1 million of accrued interest and make-whole premiums (i) the $150 million aggregate principal amount outstanding of 5.87% Senior Guaranteed Notes, Series A, due 2015 (the "Series A Notes") and the $75 million aggregate principal amount outstanding of 5.97% Senior Guaranteed Notes, Series B, due 2017 (the "Series B Notes") issued by Atlantic Power (US) GP, and (ii) the $190 million aggregate principal amount outstanding of 5.9% Senior Notes due 2014 issued by Curtis Palmer LLC; |
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pay transaction costs and expenses of approximately $40.0 million including banking, legal and consulting fees which were capitalized as deferred financing costs; and |
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make a distribution to us in the amount of $122 million which was used, in addition to cash on hand, to repurchase $140.1 million aggregate principal amount of the 9.0% Notes (as defined below) of Atlantic Power Corporation, make $15.7 million in accrued interest and premium payments as part of the aggregate repurchase price, and $0.1 million in commission fees associated with the repurchases. |
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In connection with the termination of our prior credit facility, we terminated the interest rate swap at Epsilon Power Partners, a wholly owned subsidiary, a portion of our natural gas swaps at Orlando and foreign exchange forward contracts at the Partnership. As a result of the termination of these contracts, we recorded $2.6 million of interest expense, $4.0 million of fuel expense and $0.4 million of foreign exchange loss, respectively, in the three months ended March 31, 2014. |
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The prior credit facility contained certain guaranties, which were terminated in connection with the termination of the prior credit facility. In addition, the terms of the 9.0% Notes provide that the guarantors of the prior credit facility guarantee the 9.0% Notes. As a result, upon termination of our prior credit facility and its related guaranties, the guaranties under the 9.0% Notes were cancelled and the guarantors of the 9.0% Notes were automatically released from all of their obligations under such guaranties. |
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Notes of Atlantic Power Corporation |
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On November 5, 2011, we completed a private placement of $460.0 million aggregate principal amount of 9.0% senior notes due 2018 (the "9.0% Notes") to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and to non-U.S. persons outside of the United States in compliance with Regulation S under the Securities Act. The 9.0% Notes were issued at an issue price of 97.471% of the face amount of the Atlantic Notes for aggregate gross proceeds to us of $448.0 million. |
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On March 25, 2014, we agreed, in privately-negotiated transactions, to repurchase approximately $140.1 million aggregate principal amount of the 9.0% Notes from certain holders. We paid $15.7 million in accrued interest and premiums as part of the aggregate repurchase price, paid $0.1 million in commission fees associated with the repurchases, and wrote off $5.3 million of deferred financing costs related to the repurchase. The premiums, accrued interest and write-off of deferred financing costs were recorded to interest expense in the three months ended March 31, 2014. |
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As previously disclosed with respect to the impact of the New Senior Secured Credit Facilities in our Current Report on Form 8-K filed on January 30, 2014 and in our Annual Report on Form 10-K for the year ended December 31, 2013, due to the aggregate impact of the up-front costs resulting from the prepayments on our indebtedness described above, including the premium payment and charges for unamortized debt discount and fee expenses and premiums as part of the overall purchase price in respect of the repurchases of the 9.0% Notes (all such up-front costs, collectively, the "Prepayment Charges"), which are reflected as interest expense in our 2014 first quarter results, we no longer satisfy the fixed charge coverage ratio test included in the restricted payments covenant of the indenture governing the 9.0% Notes. The fixed charge coverage ratio must be at least 1.75 to 1.00 and is measured on a rolling four quarter basis, including after giving effect to certain pro forma adjustments. As a consequence, further dividend payments, which are declared and paid at the discretion of our board of directors, in the aggregate cannot exceed the covenant's "basket" provision of the greater of $50 million and 2% of consolidated net assets (approximately $63 million at March 31, 2014) until such time that we satisfy the fixed charge coverage ratio test. The dividends paid in February, March, and April 2014 were subject to the basket provision. |
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For the trailing twelve months ended March 31, 2014, dividend payments to our shareholders totaled approximately Cdn$48 million, reflecting the lower Cdn$0.03333 per common share monthly dividend first declared in March 2013. The Prepayment Charges would no longer be reflected in the calculation of the fixed charge coverage ratio test after the passage of four additional successive quarters following the quarter in which the Prepayment Charges are incurred. In addition, any similar prepayment charges incurred in connection with any further debt reduction would also be reflected in the calculation of the fixed charge coverage ratio test on a rolling four quarter basis, beginning with the quarter in which such charges are incurred, as would any associated reduction in interest expense. |
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Separately, we expect to be in compliance with the financial maintenance covenants in the agreements governing our indebtedness for at least the next twelve months. |
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Non-Recourse Debt |
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Project-level debt of our consolidated projects is secured by the respective project and its contracts with no other recourse to us. Project-level debt generally amortizes during the term of the respective revenue generating contracts of the projects. The loans have certain financial covenants that must be met. At March 31, 2014, all of our projects were in compliance with the covenants contained in project-level debt. |
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