FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For November 27, 2002
AES DRAX HOLDINGS LIMITED
18 Parkshot
Richmond
Surrey TW9 2RG
England
------------------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F X Form 40-F
--- ---
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No X
--- ---
AES DRAX HOLDINGS LIMITED
INDEX
Item
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1. Recent Developments -- Agreement in Principle on Standstill Agreement
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AES DRAX HOLDINGS LIMITED
Date: November 27, 2002 By: /s/ John Turner
--------------------------------
Name: John Turner
Title: Director
2
ITEM 1.
Recent Developments -- Agreement in Principle on Standstill Agreement
AES Drax Holdings Limited (AES Drax Holdings) has reached an agreement in
principle regarding certain standstill arrangements with the steering committee
representing the syndicate of banks (the Senior Lenders) which financed the
Eurobonds issued by AES Drax Holdings to finance the acquisition of the Drax
Power plant, and an ad hoc committee formed by holders of AES Drax Holdings'
Senior Bonds (the Senior Bondholders). The purpose of the standstill is to
provide AES Drax and its senior creditors with a period of stability during
which discussions regarding consensual restructuring of the project can take
place. It is a condition to AES Drax Holdings entering into the standstill
agreement that holders of a majority in principal amount of the Senior Bonds
outstanding (the Majority Senior Bondholders) enter into the standstill
agreement.
The standstill period would expire on May 31, 2003, unless extended. The
Senior Lenders and the Senior Bondholders would agree to waive certain events
of default under the Eurobonds or the Senior Bonds, as applicable, not to
accelerate payment of the obligations and would not seek to enforce security. A
summary of the terms of the standstill agreement are set forth below.
Summary of Principal Terms of the Standstill Arrangements
Standstill Period.................. Through May 31, 2002, unless extended.
Covenants of Senior Lenders
and Majority Bondholders........... o Not to accelerate payment of the
Eurobonds and Bonds.
o To rescind accelerations triggered by
bondholders not parties to the
Standstill Agreement.
o Not to take enforcement action.
o To waive temporarily certain defaults or
events of default which may arise during
the period of the Standstill Agreement
until the end of the Standstill period.
o To waive permanently certain defaults or
events of default
which may have occurred, including the
Event of Default triggered by
termination of the Hedging Agreement.
o To waive any defaults or events of
default which could arise as a result of
entering into the Standstill Agreement.
Interest........................... It is AES Drax Holdings' intention to pay
the interest due to the Senior Lenders
and the Senior Bondholders on December
31, 2002. Unless the Senior Lenders
agree to waive the step-up in their
coupon (80bps) due to them as a result
of the recent ratings downgrades and
accruing from January 1, 2003, the
Senior Bondholders will receive a fee of
80bps (accruing monthly from January 1,
2003 during the standstill period) to
match the Senior Lenders' step-up in
coupon accruing with the Senior Lenders'
stepped up interest, and payable at the
same time.
Liquidity Measures................. The Senior Lenders and Senior Bondholders
will agree to certain amendments and
waivers to their respective documents
which will permit AES Drax to have
access to at least (pound)30,000,000 of
funds currently unavailable under the
Group Account Agreement. These funds,
subject to certain consent rights of the
steering committee of the Senior Lenders
and the ad hoc committee of Senior
Bondholders, will be available to
provide credit support to electricity
counterparties and suppliers and for
working capital needs. In addition, the
principal amortization
payment due to the Senior Lenders on
December 31, 2002 will be deferred during
the standstill period.
AES Corporation
Covenants.......................... AES Corporation will agree to certain
covenants, including providing support to
the restructuring process including key
personnel.
AES Drax Holdings
Covenants.......................... AES Drax Holdings will agree to certain
covenants, including to present a
restructuring proposal in consultation with
the creditors by March 15, 2003.
Collateral Holding
Account............................ The Senior Lenders and the Majority
Bondholders will agree to establish a
collateral holding account into which any
Capacity Damages received from TXU Energy
Trading or TXU Europe in accordance with
the terms of the Hedging Contract or
Hedging Guarantee would be deposited and
released only with the consent of the
Majority Bondholders and Senior Lenders.
Termination........................ The occurrence of certain events could
result in termination of the Standstill
Agreement.
A copy of the complete term sheet for the Standstill Agreement is attached
as Exhibit A hereto.
Close Brothers, financial advisor to the ad hoc committee of Senior
Bondholders and Milbank, Tweed, Hadley & McCloy, legal advisor to the ad hoc
committee of Senior Bondholders, will host a conference call on Monday December
2, 2002 at 3pm (London time) to discuss with Senior Bondholders the contents of
the Standstill Agreement. The dial-in telephone number is +44 (0)870 240 3500,
with access code 5784387#. For further information Senior Bondholders should
contact Jason Granite (Close Brothers): +44-(0)20-7655-3748, Martin Gudgeon
(Close Brothers): +44-(0)20-7655-3171, or Phillip Fletcher (Milbank Tweed):
+44-(0)20-7448-3002.
EXHIBIT A
AES Drax
Standstill Agreement Term Sheet
The following represents an agreement in principle for a standstill agreement
to be entered into among the Parties referred to below. It is not intended to
represent all terms and conditions to be included in the definitive
documentation. Any definitive agreement in respect of the standstill is subject
to (a) the Parties reaching final agreement satisfactory to the Parties upon
terms, conditions, covenants and other provisions to be included in the
definitive documentation of the standstill and (b) final documentation
satisfactory to the Parties.
Capitalised terms used in this term sheet (this "Term Sheet") shall, unless
otherwise stated, have the meanings given to them in the Indenture (as amended
and restated) dated as of 2 August 2000 between, inter alia, AES Drax Holdings
Limited as Issuer and The Bank of New York as Senior Bond Trustee or the
InPower Credit Agreement (as amended and restated) originally dated 30 November
1999 between, inter alia, the Banks and InPower Limited, as applicable or the
AES Intercreditor Deed.
Parties The AES Corporation
AES Drax Holdings Limited
AES Drax Power Limited
AES Drax Limited
AES Drax Financing Limited
AES Drax Electric Limited
AES Drax Acquisition Limited
The beneficial holders of greater than 50%
in aggregate of the Sterling Equivalent of
the principal amount outstanding of the
Bonds (the "Majority Bondholders")
Eurobond Trustee
Senior Bond Trustee
Senior Agent
Intercreditor Agent
LC Finance Party
Standstill Period: From the date of execution and delivery of
the Standstill Agreement until 31 May 2003
(the "Initial Termination Date"), unless
terminated earlier in accordance with the
provisions of the Standstill Agreement.
The Standstill Period may be extended for
successive periods of 30 days each if:
(a) the Eurobond Trustee (acting upon the
instruction of Banks
whose participations represent at
least 67% of the Loan) provides notice
to the Senior Bond Trustee, the Senior
Agent and the Issuer;
(b) the Majority Bondholders provide
notice to the Eurobond Trustee, the
Senior Agent and the Issuer; and
(c) the Issuer (for itself and on behalf
of each Guarantor) provides notice to
the Eurobond Trustee, the Senior Agent
and the Senior Bond Trustee,
in each case, in writing, and consenting to
such an extension on the same terms and
conditions as set out in the Standstill
Agreement. If any such notice is not
received, then the parties' obligations
under the Standstill Agreement will be
treated as if a Termination Event had
occurred.
Termination: If:
(a) a Declaration of Intent in respect of
any Default not covered by the terms
of the Standstill Agreement or not
otherwise waived is delivered in
accordance with the AES Intercreditor
Deed; or
(b) any party (other than the Issuer, any
Guarantor or The AES Corporation)
breaches any of its obligations under
the Standstill Agreement; or
(c) the Issuer, any Guarantor or The AES
Corporation breaches any of its
obligations under the Standstill
Agreement and any such breach, if
capable of being cured, is not cured
within 10 business days of the
occurrence of such breach, provided
that, such breach will not be a
Termination Event (as defined below)
if it is caused by, or is due to:
(i) any insolvency proceedings
commenced in respect of The AES
Corporation (whether by itself or
otherwise); or
(ii) the High Yield Security Trustee
(as defined in the Drax Energy
Intercreditor Deed) enforcing the
High Yield Mortgage Over Shares
(as defined in the Drax Energy
Intercreditor Deed),
if the Issuer or any Guarantor can
demonstrate to the reasonable
satisfaction of the Senior Creditor
Committees, within 30 days of the
occurrence of such event or
circumstance, that (i) the then
current operation of the plant is not
materially adversely affected by such
event or circumstance and (ii) the
provision of key personnel obligation
under paragraph (a) of AES
Corporation's Covenants has not, and
shall not, be breached during the
Standstill Period, or that alternative
personnel with comparative
capabilities have been employed;
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(each such event, a "Termination
Event") then the provisions set out
below shall apply.
If a Termination Event has occurred, then,
upon delivery of notice from either the
Majority Bondholders or the Eurobond
Trustee (acting upon the instructions of
Banks whose participations represent at
least 67% of the Loan):
(a) the Majority Bondholders' shall, from
that time, be released from their
obligations under paragraphs (a) and
(b) of the Majority Bondholders'
Covenants;
(b) the Eurobond Trustee shall, from that
time, be released from its obligations
under paragraph (a) of the Eurobond
Trustee's Covenants;
(c) The AES Corporation shall, from that
time, be released from its obligations
under all of the AES Corporation's
Covenants; and (d) the Issuer and each
Guarantor shall, from that time, be
released from all of the Issuer and
Guarantor's Covenants.
Majority Bondholders' Covenants: Each Majority Bondholder agrees:
(a) during the Standstill Period:
(i) not to seek to enforce its
rights under the Senior Bond
Indenture (whether directly or
by instructing the Senior Bond
Trustee) to declare the
principal amount or any accrued
interest or Additional Amounts,
if any, due and payable
immediately;
(ii) to rescind any acceleration and
its consequences in accordance
with Section 6.02(b) of the
Indenture;
(iii) not to seek to cause the Senior
Bond Trustee to deliver any
notice to the Intercreditor
Agent instructing the
Intercreditor Agent to take any
Other Enforcement Action (as
defined in the AES Intercreditor
Deed), provided that, this
provision shall not apply in
relation to the transfer of
shares in AES Drax Holdings
Limited or any of its
subsidiaries (subject to any
charge over such shares) to a
third party purchaser in
accordance with paragraph (e) of
the AES Corporation's Covenants;
(iv) if any other Bondholders have
given any instruction to the
Senior Bond Trustee to take
Security Enforcement Action, to
give contrary directions to the
Senior Bond Trustee directing
the Senior Bond Trustee not to
act in accordance with such
instructions;
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(v) not to instruct the Senior Bond
Trustee to, and to procure that
the Senior Bond Trustee does
not, take any action under
Section 7.02(j) of the
Indenture;
(vi) not to seek to cause the Senior
Bond Trustee to deliver any
notice, referred to in Clauses
8.3(b), (c), (d) and (e) of the
Group Account Agreement that
could otherwise be given to the
Account Bank,
in each case, by reason of Defaults
arising:
(A) in connection with the Primary
Hedge Counterparty, the Primary
Hedge Counterparty Guarantor or
The AES Corporation, under
Sections 6.01(f), 6.01(g),
6.01(h), 6.01(i), 6.01(j) or
6.01(p) of the Indenture;
(B) in connection with any Relevant
Company (other than AES Drax
Power Limited), Drax Power
Finance Limited, Drax Energy,
Drax Energy II or Drax Power
Finance Holdings Limited, under
Clause (A) of Section 6.01(f)(i)
of the Indenture to the extent
any of them may be deemed
balance sheet insolvent under
the Insolvency Act 1986 (as
amended);
(C) in connection with any Relevant
Company, Drax Power Finance
Limited, Drax Energy, Drax
Energy II or Drax Power Finance
Holdings Limited, under Section
6.01(f)(ii) of the Indenture to
the extent any of them begins
negotiations with one or more of
its creditors or takes any steps
with a view to the readjustment,
rescheduling or deferral of any
of its Indebtedness or proposes
to take any of those steps;
(D) in connection with the
Designated Agreement
Counterparty to the RJB Coal
Sale Agreement, under Section
6.01(f), 6.01(g), 6.01(h),
6.01(i), 6.01(j), 6.01(p) or
6.01(q) of the Indenture; or
(E) under Section 6.01(d) of the
Indenture;
(b) during the Standstill Period, if a
sale or transfer of an interest in
Bonds by the Majority Bondholder would
result in the principal amount of
Bonds held by such Majority Bondholder
being less than the principal amount
of Bonds held at the time of execution
of the Standstill Agreement, to
procure that any purchaser or
transferee of an interest in Bonds
owned by such Majority Bondholder
agrees to be bound by the terms of the
Standstill Agreement;
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(c) to provide notice to the Senior Bond
Trustee confirming that such Majority
Bondholder has executed and delivered
the Standstill Agreement, such notice
to include the principal amount of
Senior Bonds held by such Majority
Bondholder and any other information
or instructions required by the Senior
Bond Trustee in order to give effect
to the Standstill Agreement;
(d) to waive, or procure the waiver of,
for the purposes of:
(i) releasing the amount standing to
the credit of the Insurance
Reserve Account (as defined in
the Group Account Agreement) for
transfer to the Proceeds Account;
and
(ii) releasing amounts standing to the
credit of the Debt Service
Reserve Account, sufficient to
make payment of interest on the
Loan under the InPower Credit
Agreement plus interest on the
Senior Bonds plus any Market
Currency Hedging Payments plus
payments required to be made
under any Market Interest Hedging
Agreements minus any amounts paid
to AES Drax Power Limited under
Market Currency Hedging
Agreements minus any amounts paid
to AES Drax Power Limited under
any Market Interest Hedging
Agreements due on or about 31
December 2002 (whereupon all such
amounts, but no amounts due in
respect of principal, shall
promptly be paid);
(iii) releasing amounts from the
Holding Account to the Debt
Service Reserve Account in
accordance with Schedule 5 to
the Group Account Agreement,
but only for those purposes, all
Defaults under the Senior Bonds;
(e) to amend, or procure or consent to the
amendment of, the Group Account
Agreement in order to give effect to
the provisions set forth under
"Collateral Financing Account" and
"Collateral Holding Account" below;
(f) to amend the definitions in the
Indenture of "Permitted Indebtedness"
and "Permitted Liens" and/or Sections
4.08 (Limitations on Incurrence of
Indebtedness) and 4.11 (Liens) in the
Indenture to the extent required in
order to permit AES Drax Power Limited
to enter into a new LC Facility and to
place cash collateral with a financial
institution (or directly to
counterparties, suppliers or other
parties relating to electricity
trading arrangements if approved by
the Senior Creditor Committees (acting
reasonably)) to provide credit support
for electricity trading arrangements
and to certain suppliers of AES Drax
Power Limited; and
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(g) to waive permanently Defaults arising
in connection with:
(i) the termination of the Primary
Hedge Agreement, under Sections
6.01(c) (by reason of any
breach of Section 4.18),
6.01(o) and 6.01(q) of the
Indenture;
(ii) the negotiation of, entering
into by the Issuer and each
Guarantor, and the performance
of its obligations under, and
compliance with the terms of,
the Standstill Agreement, under
Sections 6.01(g) and 6.01(j) of
the Indenture;
(iii) the deposit, or failure to
deposit, into the Liquidity
Account, or failure to withdraw
from, the Holding Account, the
amount standing to the credit
of the Holding Account on the
date of execution and delivery
of the Standstill Agreement;
(iv) failures during the Standstill
Period by the Issuer or a
Guarantor to provide
information to the Senior Bond
Trustee as required under the
first sentence of Section
4.03(d)(ii) of the Indenture,
if such information has not
otherwise been made public;
(v) transfers of funds in breach of
Section 4.07(c) of the
Indenture, if made in
accordance with the Group
Account Agreement and as
contemplated by the Standstill
Agreement;
(vi) encumbrances or restrictions
referred to in Section 4.09(a)
of the Indenture, to the extent
that any term or provision of
the Standstill Agreement could
be considered a breach of
Section 4.09(a) of the
Indenture;
(vii) a Lien created in early 2002 in
breach of Section 4.11 of the
Indenture, in respect of
(pound)300,000 of cash as
collateral with contractual
counterparties;
(viii) material amendments or
modifications entered into
during the Standstill Period to
the Electricity Contracting
Policy, the Hedging Policy or
any Market Hedging Agreement
for which no Rating Affirmation
is obtained under Section 4.18
of the Indenture, provided such
amendments or modifications are
consented to, in advance, by
the Senior Creditor Committee
for the Banks, in consultation
with the Senior Creditor
Committee for the Bonds;
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(ix) amendments, modifications,
termination or waiver of any
material right during the
Standstill Period under the RJB
Coal Sale Agreement which under
Section 4.18 of the Indenture
may not be made if it could
reasonably be expected to have
a Material Adverse Effect, if
approved by the Senior Creditor
Committee for the Banks, in
consultation with the Senior
Creditor Committee for the
Bonds;
(x) agreements entered into during
the Standstill Period relating
to sales of electricity or
capacity which, under Section
4.21(a)(iii) of the Indenture,
are not permitted by the
Electricity Contracting Policy
in effect on the date of the
Standstill Agreement but only
until such time as a revised
Electricity Contracting Policy
is agreed and approved by the
Majority Banks in consultation
with the Senior Creditor
Committee for the Bonds;
(xi) breaches during the Standstill
Period of Section 4.24 of the
Indenture, to the extent such
breaches are required or
permitted under the Standstill
Agreement;
(xii) breaches during the Standstill
Period of Section 4.27 of the
Indenture, to the extent such
breaches relate to fees
provided for or contemplated by
the Standstill Agreement;
(xiii) the performance by any AES Drax
Company of the transfer
obligations arising under
paragraph (e) of the AES
Corporation's Covenants below;
and
(xiv) to the extent not otherwise
identified above, the entry
into, performance of any
obligation and the
implementation of any
arrangement, under the
Standstill Agreement; and
(h) to permit and require the Security
Trustee to make, or procure the making
of, demands under any DSRA Letter of
Credit.
Eurobond Trustee's Covenants: The Eurobond Trustee agrees:
(a) during the Standstill Period
(i) not to seek to enforce its
rights under the Eurobonds to
cause the Eurobond Trustee to
take any of the actions set
forth in Condition 11(a), (b),
(c), (d) or (e) of the
Eurobonds;
(ii) not to take any action under
Condition 5.3.3(c) of the
Eurobonds; and
(iii) not to deliver any notice to the
Intercreditor Agent instructing
the Intercreditor Agent to take
any Other Enforcement Action (as
defined in the AES Intercreditor
Deed), provided that, this
provision shall not apply in
relation to the transfer of
shares in AES Drax Holdings
Limited (subject to any charge
over such shares) to a third
party purchaser in accordance
with paragraph (e) of the AES
Corporation's Covenants;
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(iv) not to provide to the Account
Bank a Payment Certificate (as
defined in the Group Account
Agreement);
in each case, by reason of Defaults
(as defined in the conditions of
the Eurobonds), arising:
(A) in connection with the Primary
Hedge Counterparty, Primary
Hedge Counterparty Guarantor or
The AES Corporation, under
Conditions 11.4.1(b), 11.4.2(b),
11.4.3, 11.4.5, 11.5 to 11.10,
11.11.1, 11.11.2(a), 11.11.4,
11.11.9, 11.22 and 11.23 of the
Eurobonds; or
(B) in connection with UK Coal plc
under Conditions 11.4 to 11.9 of
the Eurobonds or in connection
with any Relevant Company (other
than AES Drax Power Limited)
being balance sheet insolvent
under the Insolvency Act 1986
(as amended), under Conditions
11.4 to 11.9 of the Eurobonds;
(C) in connection with any disclosed
rescheduling of payment and
delivery under the Coal Supply
Agreement prior to the
Standstill Period, under
Condition 11.11 of the
Eurobonds;
(D) under Condition 11.1 (in
relation only to non-payment of
Coupons referable solely to the
scheduled amortisation of the
Loan on or about 31 December
2002), 11.18 and, for all
circumstances in existence and
events having occurred up to and
including the date of execution
and delivery of the Standstill
Agreement, 11.23 of the
Eurobonds;
(E) before the commencement of the
Standstill Period, under
Conditions 7.1 and 10.6(a) of
the Eurobonds;
(F) during the Standstill Period of
which notification in writing
has been provided (provided
other prompt notification is
given to the Eurobond Trustee),
under Condition 7.1 and 10.6(a)
of the Eurobonds;
(G) in relation to any disclosed
rescheduling of payment and
delivery under the Coal Supply
Agreement prior to the
Standstill Period, under
Condition 10.6(c) of the
Eurobonds;
(H) in relation to not requiring the
production of the Optimisation
Base Cost, Forecast, Operating
Budget or Capex Budget during
the Standstill Period, under
Conditions 7.2(j), 10.20, in
relation to the Capex Budget
only, 9.5.1(iv) and, in relation
to the Operating Budget only,
8.3.4 of the Eurobonds;
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(I) in connection with delivery of
audited accounts of TXU Group
companies to the Eurobond
Trustee, under Condition
6.1(a)(iii) of the Eurobonds;
(J) in connection with production of
the Annual Operating Plan in
respect of the Financial Year
commencing [01.01.03], under
Conditions 7.2(m) and 8.3.1(f)
of the Eurobonds;
(K) in connection with any new LC
Facility provided by Commerzbank
AG under Condition 9.3 of the
Eurobonds;
(L) in connection with operating the
Project Facilities with a view
to producing sufficient revenue
to meet the obligations of each
Relevant Company, under
Condition 8.3.1 of the
Eurobonds;
(M) in connection with any request
for amendment to the Coal Supply
Agreement, the Rail Carriage
Contracts, the Sidings Agreement
and the Docks Agreement, under
Condition 8.5.2(a) of the
Eurobonds;
(N) in connection with breaches of
the Coal Supply Agreement
occurring prior to the
Standstill Period, under
Condition 8.5.1 of the
Eurobonds;
(O) in connection with the placing
by AES Drax Power Limited of
(pound)300,000 of cash as
collateral with contractual
counterparties, under Condition
9.1 of the Eurobonds;
(P) in connection with any netting
arrangements entered into with
AEP or proposed to be entered
into with Innogy, under
Condition 8.5.2(a) and 11.2 of
the Eurobonds; and
(Q) in connection with a failure to
replace expiring interest rate
hedging arrangements to maintain
a forward rolling two year
hedge, under Condition 8.6.1 of
the Eurobonds;
(b) to waive, or procure the waiver of,
for the purposes of:
(i) releasing the amount standing to
the credit of the Insurance
Reserve Account (as defined in
the Group Account Agreement) for
transfer to the Proceeds
Account; and
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(ii) releasing amounts standing to
the credit of the Debt Service
Reserve Account, sufficient to
make payment of interest on the
Loan under the InPower Credit
Agreement plus interest on the
Senior Bonds plus any Market
Currency Hedging Payments plus
payments required to be made
under any Market Interest
Hedging Agreements minus any
amounts paid to AES Drax Power
Limited under Market Currency
Hedging Agreements minus any
amounts paid to AES Drax Power
Limited under any Market
Interest Hedging Agreements due
on or about 31 December 2002
(whereupon all such amounts, but
no amounts due in respect of
principal, shall promptly be
paid);
(iii) releasing amounts from the
Holding Account to the Debt
Service Reserve Account in
accordance with Schedule 5 to
the Group Account Agreement,
but only for those purposes, all
Defaults (as defined in the
conditions of the Eurobonds)
under the Eurobonds; and
(c) to waive permanently Defaults (as
defined in the conditions of the
Eurobonds) under the Eurobonds arising
in connection with:
(i) the transfer of the ordinary
shares in AES Drax Limited to
AES Drax Electric Limited;
(ii) the failure to deposit into the
Liquidity Account, or failure to
withdraw from, the Holding
Account, the amount standing to
the credit of the Holding
Account on the date of execution
and delivery of the Standstill
Agreement;
(iii) the entry into, performance of
any obligation and/or the
implementation of any
arrangement under the Standstill
Agreement;
(iv) the performance by any AES Drax
Company of the transfer
obligations arising under
paragraph (e) of the AES
Corporation's Covenants below;
(d) in relation to the failure to make
prepayment on receipt of Capacity
Damages, permanently to agree not to
take Security Enforcement Action based
solely upon such failure;
(e) to waive, in respect of the agreed
deficiencies in the Insurances, under
Conditions 11.2 (by reason of
Condition 8.7 or 10.16) and 11.16 of
the Eurobonds, or
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(f) to amend the definition in the
Condition of the Eurobond of
"Permitted Security Interest" and/or
amend Conditions 9.2 (Transactions
similar to security) and 9.3
(Borrowings) and 9.4.3 (Loans, credit
and third party guarantees) of the
Eurobond to the extent required in
order to permit AES Drax Power Limited
to enter into a new LC Facility and to
place cash collateral with a financial
institution (or directly to
counterparties, suppliers or other
parties relating to electricity
trading arrangements if approved by
the Senior Creditor Committees (acting
reasonably)) providing credit support
for electricity trading arrangements
and to certain suppliers of AES Drax
Power Limited;
(g) to consent that any amount paid by the
Primary Hedge Counterparty, the
Primary Hedge Counterparty Guarantor
(or any Affiliate thereof) that would
otherwise be applied in accordance
with Clause 7.9(c) of the InPower
Credit Agreement shall be credited to
the Collateral Holding Account (as
defined below);
(h) to procure that any default interest
that accrues on unpaid amounts will be
subject to a six month interest
period; and
(i) to permit and require the Security
Trustee to make, or procure the making
of, demands under any DSRA Letter of
Credit.
AES Corporation's Covenants: The AES Corporation agrees:
(a) to act in good faith in providing
support to the restructuring process
and any restructuring proposal,
including the provision of key
personnel (including J Brandt, G
Levesley, J Turner and R Santoroski)
for the Drax power station and the
restructuring process but excluding
any further debt or equity
contributions. For the avoidance of
doubt, for so long as The AES
Corporation is not in breach of
paragraph (b) below, no disposal of
share capital shall be deemed to be a
failure to provide support;
(b) to retain a direct or indirect holding
of a majority of the share capital of
each AES Drax Company unless otherwise
required pursuant to paragraph (e)
below;
(c) not to prevent any AES Drax Company
from approving a restructuring plan
acceptable to the requisite majority
of Bondholders and Banks, provided
that no AES Drax Company shall be
required to approve any restructuring
plan solely on the basis that it is
acceptable to the Bondholders or the
Banks;
(d) not to give directions to the Issuer
or any Guarantor to breach any of the
Issuer and Guarantors' Covenants,
provided that any action taken by
representatives of The AES Corporation
in their role as officers or directors
of any AES Drax Company shall not,
under any circumstances, be deemed to
be an action of The AES Corporation;
and
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(e) subject to the fiduciary duties of the
directors of the relevant AES Drax
Companies, and to the obligations,
terms and restrictions under, and all
security interests arising under, the
Financing Documents, to transfer, or
to procure that any AES Drax Company
wholly owned, or controlled, directly
or indirectly by it transfers, the
shares in AES Drax Holdings Limited
and any of its subsidiaries owned by
The AES Corporation or by any such AES
Drax Company to a third party
purchaser designated by each of the
Majority Banks and the Majority
Bondholders.
For the avoidance of doubt, the Senior
Creditors party to the Standstill Agreement
agree that the only recourse for breach of
these covenants shall be the termination of
the Standstill Agreement and no other claim
may be made and no other remedy may be
sought against The AES Corporation by any
person whatsoever in connection with any
such breach save that the Senior Creditors
may seek and/or obtain injunctive relief
from any court of competent jurisdiction to
prevent a breach by The AES Corporation of
the covenant set out in paragraph (b)
above.
Issuer and Guarantors' Covenants: The Issuer and each Guarantor agrees:
(a) to provide notice at the earliest
practicable time prior to and, if
reasonably practicable, not less than
30 days prior to any proposal, in
relation to any proposed insolvency
proceeding of the Issuer or any
Guarantor and consult in good faith
with, the Senior Creditor Committees
(defined below) in relation to such
proposal;
(b) to enter into, and to procure the
entering into, of good faith
negotiations relating to a
restructuring proposal;
(c) to present a business plan on or
before February 14, 2003 and to
procure the presentation of a
restructuring proposal in consultation
with the Senior Creditor Committees,
and an updated business plan, no later
than March 15, 2003;
(d) to provide access to the draft of any
financial model prepared in relation
to the restructuring;
(e) to procure that all written material
relating to the restructuring process
that is provided to either:
(i) the ad hoc committee of
Bondholders or its
representatives; or
(ii) the steering group of Banks or
its representatives,
(each, a "Senior Creditor Committee")
will be provided to the other Senior
Creditor Committee;
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(f) not to pay, prior to the Initial
Termination Date, any fees to any
Senior Bondholder, Eurobondholder,
Swap Creditor, Couponholder or Hedging
Bank, including in relation to the
providing of any consent, waiver or
amendment that may be required under
any Finance Document, other than those
fees set forth in the fee letter of
even date herewith;
(g) to provide to both Senior Creditor
Committees twice-weekly cash flow
reports and accounts, such reports and
accounts to be prepared in
consultation with
PricewaterhouseCoopers;
(h) to approve changes to the terms of
engagement (including the payment by
the Issuer or any Guarantor of
reasonable fees) of
PricewaterhouseCoopers as reasonably
required by the Senior Creditors
Committees in relation to the
restructuring.
Issuer and Guarantors'
Representations: The Issuer and each Guarantor will represent
and warrant:
(a) as to due incorporation, valid
existence, authority, validity and
binding nature of obligations;
(b) other than those specified in
paragraphs (a) and (g) of the Majority
Bondholders' Covenants and paragraphs
(a), (c) and (e) of the Eurobond
Trustee's covenants, to its actual
knowledge, after due inquiry, no
Default is outstanding.
Indemnity: The Issuer and each Guarantor (each an
"Indemnifying Party") shall indemnify each
member of the Senior Creditor Committee for
the Bonds (each an "Indemnified Party") for
any loss, claim, liability or judgement
arising in connection with or as a
consequence of the Indemnified Parties
granting any consent or approval under
paragraph (f) of "Majority Bondholders'
Covenants", paragraph (f) of "Eurobond
Trustee's Covenants" or paragraph (d) of
"Collateral Financing Account" (or any
other provision in the Standstill Agreement
requiring the consent or approval of either
Senior Creditor Committee), with the
following conditions:
(a) no Majority Bondholder shall take or
commence or acquiesce to any action
against an Indemnified Party;
(b) an Indemnifying Party shall assume the
defence of any action commenced
against any Indemnified Party, and
(c) no Indemnified Party shall settle any
claim without the consent of the
Indemnifing Parties (such consent not
to be unreasonably withheld), and
provided that, no Indemnifying Party shall
be liable to any Indemnified Party for any
such loss, claim, liability or judgement if
caused by the gross negligence or wilful
misconduct of any Indemnified Party.
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Equalisation Fee: The Parties agree that an equalisation fee
of(pound)266,666.67 shall accrue monthly
starting from and including 1 January 2003
and shall accrue during each month falling
within the Standstill Period (and pro rata
in respect of any month in which a
Termination of the Standstill Agreement
occurs), and shall be paid to all the
beneficial holders of Bonds (for the
account of such holders pro rata to the
Sterling Equivalent of the principal amount
of Bonds held by them) on each date on
which the Banks shall receive interest with
a Margin in excess of the Margin in effect
on 13 October 2002 ("Excess Margin").
This fee shall be reduced pro rata to the
extent that during any period falling after
1 January 2003 and during the Standstill
Period, the interest due and payable on the
Loan does not accrue with an interest rate
including the Excess Margin.
Deemed Declaration of Intent: If, following the expiration of the
Standstill Period, any class of Senior
Creditors delivers a Declaration of Intent
to the Intercreditor Agent, that
Declaration of Intent shall be deemed to
have been delivered on the later of the
date of the Standstill Agreement and the
first day upon which it could have been
given following the Event of Default or
"Event of Default", as defined in the
conditions of the Eurobonds, as the case
may be.
Collateral Financing Account: The parties shall procure (including, where
necessary and within their power, by
amending the relevant Financing Documents)
that:
(a) a new account shall be established
(the "Collateral Financing Account")
in the name of AES Drax Power Limited
under and pursuant to the Group
Account Agreement;
(b) any funds released from the Insurance
Reserve Account and credited to the
Proceeds Account shall be deposited as
a Permitted Payment (as amended) to
the Collateral Financing Account;
(c) any funds released from the Debt
Service Reserve Account by way of Debt
Service Reserve Release shall be
deposited in the Proceeds Account to
be transferred as a Permitted Payment
(as amended) to the Collateral
Financing Account;
(d) any amount standing to the credit of
the Collateral Financing Account may,
as reasonably agreed between the
Senior Creditor Committees in
consultation with the relevant AES
Drax Companies, and consistent with
the power sales strategy and liquidity
requirements of AES Drax Power
Limited, as approved by the Senior
Creditor Committees, be used:
(i) if there are insufficient funds
standing to the credit of the
Proceeds Account, to make
Permitted Payments; and
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(ii) to permit AES Drax Power Limited
to place cash collateral with a
financial institution providing
credit support for electricity
trading arrangements and to
certain suppliers of AES Drax
Power Limited;
(iii) to permit AES Drax Power Limited
to place cash collateral with
counterparties and suppliers (if
so approved by the Senior
Creditor Committees (acting
reasonably)); and
(iv) if there are insufficient funds
standing to the credit of the
Proceeds Account, to make
payments on the Combined Senior
Debt (other than amounts payable
under the Coupons or the AES
Drax Swap representing principal
on the Loan), and
(e) the definition of "Permitted Payments"
shall be amended to allow withdrawals
to be made from the Proceeds Account
to the Collateral Financing Account.
Collateral Holding Account: The parties shall procure that:
(a) a new segregated account shall be
established (the "Collateral Holding
Account") in the joint names and
control of the Eurobond Trustee and
the Senior Bond Trustee, in a manner
and form to be agreed;
(b) without prejudice to the rights and
claims of any Combined Senior Creditor
in relation thereto, any funds
received by AES Drax Power Limited
representing Capacity Damages shall be
deposited to the Collateral Holding
Account; and
(c) at any time prior to the date of
consummation of a financial
restructuring of the Issuer and, if
relevant, the Guarantors acceptable to
the requisite majority of the
Bondholders and Banks, no funds may be
withdrawn from the Collateral Holding
Account without the consent of the
Majority Bondholders and the Eurobond
Trustee (acting upon the instruction
of Banks whose participations
represent at least 67% of the Loan).
Debt Service Reserve Account: The Eurobond Trustee and the Majority
Bondholders shall procure that the Security
Trustee shall, upon instruction:
(a) make a demand for payment under any
letters of credit standing to the
credit of the Debt Service Reserve
Account in accordance with such
instructions; and
(b) agree, pursuant to Clause 4.6(j) of
the Group Account Agreement, that
funds standing to the credit of the
Debt Service Reserve Account, in an
aggregate amount up to
(pound)15,000,000 (or such other
amounts available (with the approval
of the Majority Bondholders and
Eurobond Trustee) may be withdrawn
from the Debt Service Reserve Account
(such withdrawal a "Debt
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Service Reserve Release") for deposit in
the Collateral Financing Account.
Holding Account: Without prejudice to the foregoing, the
parties shall co-operate in good faith to
explore and implement further releases of
funds standing to the credit of the Holding
Account.
Banks' Agreement: It shall be a condition to the parties
entering into the Standstill Agreement that
evidence satisfactory to the parties is
provided to show that the Banks and InPower
Limited have entered into an agreement
which shall:
(a) contain substantially similar
obligations upon the Banks as those
contained in the Eurobond Trustee's
Covenants;
(b) contain identical terms as to
termination as the Standstill
Agreement;
(c) contain terms that confirm that no
action will be taken with respect to
enforcement under the InPower
Intercreditor and Security Trust Deed;
and
(d) give, approve or consent to the giving
of, directions to the Eurobond Trustee
to enable the Eurobond Trustee
(including any indemnity so required
by the Eurobond Trustee in connection
with the entering into of the
Standstill Agreement) to execute and
deliver the Standstill Agreement.
Amendments: It shall be a condition to the Standstill
Agreement becoming effective that the Banks
and InPower Limited shall amend the CALFA
and such other Transaction Documents as
required to give effect to the arrangements
contemplated by the Standstill Agreement.
It shall be a condition to the Standstill
Agreement becoming effective that a
cashflow forecast showing the period until
31 May 2003 has been provided.
Payment of Fees: It shall be a condition to the Standstill
Agreement becoming effective that:
(a) the fee letter referred to in
paragraph (f) of the Issuer and
Guarantors' Covenants shall have been
duly executed and delivered by the
parties thereto; and
(b) the fees of each Senior Creditor
Committee and each of their advisers
and of each of the advisers to any
other Finance Party party hereto shall
be paid up to, and including, the date
of execution and delivery of the
Standstill Agreement.
Recognition of Indebtedness: The Eurobond Trustee confirms that the
principal amount of the Loan outstanding to
InPower Limited on the date hereof is
(pound)842,555,000. The current interest
period runs from 28th June, 2002 to 30th
December, 2002 during which scheduled
interest is accruing on the
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Loan at a rate of 6.537 per cent. per
annum.
The Majority Bondholders confirm that the
principal amount of the Senior Bonds is
(pound)200,000,000 and $302,400,000.
The parties hereto acknowledge that Clause
14 Third of the AES Intercreditor and
Security Trust Deed provides that relevant
proceeds of enforcement are generally
applied, subject to prior ranking claims,
pari passu among the Combined Senior
Creditors in respect of the Combined Senior
Debt (other than the principal amount of
the Eurobonds and any Senior Bonds which
are defeased). The Combined Senior Debt
includes, without limitation (a) the Senior
Bonds, (b) the unmatured Coupons on the
Eurobond (which, if the Eurobond is
accelerated, shall immediately become due
and payable at their NPV Coupon Amount) and
(c) the Hedging Debt.
The parties hereto acknowledge that Clause
3.1(A) of the Calculation Agency Agreement
provides that it is the intent of the
parties to that agreement that:
"in the event of an Early Termination Date
under the Swap Transactions, the aggregate
of (i) the aggregate NPV Coupon Amount in
respect of all unmatured Coupons on the
Early Termination Date plus (ii) any other
amount due and payable to InPower under the
Eurobond Documents (which, for the
avoidance of doubt, does not include any
Early Redemption Amount) plus (iii) the net
amount due and payable to InPower (if any)
under the Terminated Transactions to which
InPower and Harich are party minus (iv) the
net amount due and payable by InPower and
Harich (if any) under the Terminated
Transactions to which InPower and Harich
are party will be approximately equal to
(but not less than) the amount due and
payable by InPower under the Facility
Agreement on such date".
The parties hereto acknowledge that Clause
3.3 of the Calculation Agency Agreement
provides that:
"The Calculation Agent shall make all
determinations and calculations pursuant to
the Swap Transaction Documents and this
Agreement in a manner which ensures that
the intention referred to in Clause 3.1 is
carried out and, to that end, the
Calculation Agent shall on behalf of all
parties to this Agreement modify the
provisions of the Swap Transaction
Documents and this Agreement so far (but
only so far) as is necessary to ensure the
same".
Governing Law: English
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