SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 8-K
-------------------
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 1, 2002
Covanta Energy Corporation
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 1-3122 13-5549268
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
40 Lane Road, Fairfield, New Jersey 07004
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (973) 882-9000
Not Applicable
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
On April 1, 2002, Covanta Energy Corporation issued a press release, a
copy of which is attached hereto as Exhibit A.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of business acquired: Not applicable.
(b) Pro forma financial information: Not applicable.
(c) Exhibit: Not applicable.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereto duly authorized.
Date: April 2, 2002
COVANTA ENERGY CORPORATION
By: /s/ Timothy J. Simpson
----------------------
Name: Timothy J. Simpson
Title: Vice President, Associate
General Counsel and
Assistant Secretary
EXHIBIT A
COVANTA ENERGY Logo
FOR IMMEDIATE RELEASE
COVANTA ANNOUNCES FINANCIAL RESTRUCTURING
RESULTING FROM STRATEGIC REVIEW
-- Company Files Voluntary Chapter 11 Petition --
-- KKR Intends to Provide $225 Million in Equity Financing --
-- $463 Million Debtor-in-Possession Financing Arranged --
-- Announces Program to Focus on Core Energy and Water Operations --
FAIRFIELD, NJ, April 1, 2002 - Covanta Energy Corporation (NYSE: COV) today
announced a financial restructuring plan resulting from its comprehensive review
of strategic alternatives. As the first element of that plan, the Company has
filed a voluntary petition for Chapter 11 reorganization with the U.S.
Bankruptcy Court in the Southern District of New York. The Company's core energy
and water facilities will continue to operate in the normal course of business
and will be unaffected by the filing.
Results of Strategic Review
Today's announcement represents the culmination of the strategic review
conducted by the Company's Board and management, with outside financial
advisers, which was announced in December 2001. As a result of that review, the
Company:
o Determined that reorganization under Chapter 11 represents the most
viable venue to reorganize the Company's capital structure, complete the
disposition of its remaining non-core entertainment and aviation assets,
and protect the value of the Energy and Water franchise;
o Entered into a non-binding Letter of Intent with the investment firm of
Kohlberg Kravis Roberts & Co. (KKR) for a $225 million equity investment
under which a KKR affiliate would acquire the Company upon emergence
from Chapter 11; and
o Announced a strategic restructuring program to focus on the U.S. energy
and water market, expedite the disposition of non-core assets and, as a
result, reduce overhead costs.
In connection with the filing, Covanta obtained a commitment for $463 million of
debtor-in-possession (D-I-P) financing from its current bank group. This
financing, subject to approval by the Bankruptcy Court, will cover all of the
Company's ongoing cash needs and help ensure the continuation of the Company's
Letters of Credit, which are used to support the performance and payment
obligations of its core energy and water facilities.
Scott G. Mackin, Covanta President and Chief Executive Officer, stated, "We have
painstakingly reviewed and pursued all options outside of a Chapter 11 filing
for quite some time now. Our core businesses - Waste to Energy, Independent
Power Production and Water - are strong. However, the capital structure
impediments left over from the non-core, former Ogden Corporation businesses,
and the lack of access to the capital markets as means by which to deal with
them, have foreclosed other options. The exhaustive strategic review has
demonstrated that Chapter 11 represents the most viable venue for Covanta to
address those capital structure issues, expedite our restructuring and preserve
the value of our strong core businesses. When we emerge, we will do so with a
strong balance sheet and core businesses unencumbered by the problems we
inherited.
"We are gratified by the support of our bank group and KKR, which we believe
will allow us to complete the Chapter 11 process expeditiously. Our bank group,
particularly the Agents, has worked exceptionally hard to put together an
impressive D-I-P facility that will preserve our core businesses through this
process. And, the relationship we have formed with KKR over the past several
months is particularly exciting. Their expertise, business acumen and financial
resources will add significant value to Covanta's prospects, and their potential
investment affirms the strength of our core energy and water operations.
"We are working to obtain court approval of the substantial D-I-P package
quickly, but in the meantime, interim approval affords us access to ample cash
with which we will continue to operate our energy and water facilities as usual.
At this time, the Company has in excess of $55 million in its domestic accounts.
We intend to pay in full our post-petition obligations, including payments to
vendors. With our bank group and KKR, we look forward to working with our
creditors to develop a Plan of Reorganization that is fair and feasible and
positions us to realize the full potential of our core businesses," Mr. Mackin
said.
$225 Million Equity Investment by KKR
The non-binding Letter of Intent with KKR provides that the Company and its bank
group will work exclusively with KKR for up to 90 days. Upon completion of due
diligence, the negotiation and execution of definitive agreements satisfactory
to the Company, KKR, the bank group and other creditors, the confirmation of a
Plan of Reorganization by the Court and the satisfaction of other conditions,
KKR would acquire the Company upon its emergence from Chapter 11. The Agents of
the bank group providing the Company's D-I-P financing have signed the Letter of
Intent and support a transaction with KKR.
The rights of Covanta's creditors would be determined as part of the Plan of
Reorganization. Existing common equity and preferred shareholders are not
expected to participate in the new capital structure.
Scott Stuart, Member of KKR, said, "KKR has been working closely with Covanta's
management team for several months to determine the Company's optimal course for
the future. We are pleased that the Company has elected to partner with us after
its lengthy strategic review process. While this is an extremely complex
situation given the particular challenges of the Company's capital structure, we
are attracted to Covanta's core assets and strong management team. We look
forward to continuing to work closely with the Company, the bank group and other
creditors to implement a Plan of Reorganization that will best meet Covanta's
objectives now and over the long term."
$463 Million Debtor-in-Possession Financing Arranged by Existing Bank Group
The filing immediately enhanced Covanta's liquidity by enabling the Company to
restructure liabilities associated with its non-core entertainment and aviation
businesses. Moreover, the Company has obtained a commitment for $463 million in
debtor-in-possession (D-I-P) financing from its bank group, led by the Agents.
This financing, which is subject to definitive court approval, will cover all of
the Company's ongoing cash needs and helps ensure the continuation of the
Company's Letters of Credit that support the performance and payment obligations
of our core energy and water facilities.
Restructuring Program to Focus on Its Core Energy and Water Business
Covanta also announced a restructuring program to focus on the U.S. energy and
water industry, expedite the disposition of its non-core assets and, thereby
reduce overhead costs.
Further, the Company announced that it has completed the sale of its Thai energy
assets for $35 million to two consortia of co-investors. The sales included
Covanta's Saha and Rojana co-generation facilities, as well as its subsidiary
operating those plants.
Core Energy, Water Facilities Conducting Business in Ordinary Course
Covanta will continue to conduct business at its core energy and water
facilities. The Chapter 11 filing will have no effect on their operation, and
the Company intends to continue operating those facilities according to the same
high standards as always.
"Continued performance to our loyal customers, client communities, partners and
vendors is our paramount focus," said Mr. Mackin. "We value those relationships
and are committed to maintaining the same levels of service and performance that
they have come to expect from us. In particular, we are grateful to the many
clients who have gone out of their way to voice their support for us as we go
through this process.
"We will become predominately a domestic energy and water business allowing us
to more efficiently focus our resources on the current operations and the
expansion opportunities available to us in the U.S. The Chapter 11 process along
with KKR's continuing involvement will give us the ability to efficiently
accomplish this self-help program which we will begin immediately."
The Company's project debt is unaffected by the Chapter 11 filing. Project
bondholders should expect that all debt service payments will continue. In fact,
because Chapter 11 protects the value of the Company's core energy assets, the
filing will help ensure the projects' continued performance and associated
project debt payments.
The Company intends to maintain its qualified benefits programs for employees
and to continue the current payroll schedule.
"The foundation of Covanta is its employees," Mr. Mackin concluded. "Their
effort and dedication, particularly over the last two years, have put us in a
position to build on our core franchise to further strengthen the Company and
enhance its prospects for the future. We are grateful for their ongoing
support."
* * *
Covanta Energy Corporation is an internationally recognized designer, developer,
owner and operator of power generation projects and provider of related
infrastructure services. The Company's independent power business develops,
structures, owns, operates and maintains projects that generate power for sale
to utilities and industrial users worldwide. Its waste-to-energy facilities
convert municipal solid waste into energy for numerous communities,
predominantly in the United States. The Company also offers single-source
design/build/operate capabilities for water and wastewater treatment
infrastructures. Additional information about Covanta can be obtained via the
Internet at www.covantaenergy.com, or through the Company's automated
information system at 866-COVANTA (268-2682).
Certain statements included in this news release are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Forward-looking statements above
include, but are not limited to, expected earnings and future financial
performance. Although Covanta believes that its expectations are reasonable, it
can give no assurance that these expectations will prove to have been correct.
Factors that could cause Covanta's actual results to differ materially from
those contemplated in the forward-looking statements above include, among
others, the following:
o Economic, capital market and other business conditions affecting power
generation enterprises specifically and commerce generally including
interest, inflation and exchange rates; weather conditions;
creditworthiness of customers and suppliers, changes in fuel costs and
supply; unscheduled outages; environmental incidents; electric
transmission restraints and risks and uncertainties associated with the
recently deregulated energy industry;
o Trade, monetary, fiscal, taxation, energy regulation and environmental
policies of governments, agencies and similar organizations in
geographic areas where Covanta has a financial interest;
o Financial or regulatory accounting principles or policies imposed by the
Financial Accounting Standards Board, the Securities and Exchange
Commission, the Federal Energy Regulatory Commission and similar
entities with regulatory oversight, including without limitation the
impact of newly adopted FASB 133 relating to accounting for derivatives
which is effective beginning January 1, 2001. The impact of FASB 133
will vary between accounting periods based on changes in pricing of
various items bought and sold by the Company.
o Cost and other effects of legal and administrative proceedings,
settlements, investigations and claims;
o Limitations on Covanta's ability to control the development or operation
of projects in which Covanta has less than 100% interest;
o The lack of operating history at development projects provides only a
limited basis for management to project the results of future
operations.
# # #
Contacts:
For Covanta: Investor Relations:
Louis M. Walters 973-882-7260
Media Relations:
Eric Berman, David Lilly
Kekst & Company, 212-521-4800
For KKR:
Josh Pekarsky, Molly Morse
Kekst and Company, 212-521-4877/4826
josh-pekarsky@kekst.comjosh-pekarsky@kekst.com
molly-morse@kekst.com
# # #