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Item 1.01
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Entry into a Material
Definitive Agreement
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On
May 27, 2020, The AES Corporation (the “Company” or “AES”) completed its previously announced offering
of $900,000,000 aggregate principal amount of its 3.300% Senior Secured First Lien Notes due 2025 (the “2025 Notes”)
and $700,000,000 aggregate principal amount of 3.950% Senior Secured First Lien Notes due 2030 (the “2030 Notes”,
and together with the 2025 Notes, the “New Notes”) pursuant to the terms of the purchase agreement, dated May 15,
2020 (the “Purchase Agreement”), among AES and the representatives of the initial purchasers named therein (the “Initial
Purchasers”).
The public offering price of
the 2025 Notes and the 2030 Notes was 99.972% and 99.579% of the principal amount, respectively. AES intends to use the net proceeds
from the offering to fund purchases of up to $1.584 billion aggregate purchase amount of its 4.000% Senior Notes due 2021 (the
“2021 Notes”), 4.875% Senior Notes due 2023 (the “4.875% 2023 Notes”) and 4.500% Senior Notes due 2023
(the “4.500% 2023 Notes”, and together with the 4.875% 2023 Notes and the 2021 Notes, the “Outstanding Notes”)
in tender offers (the “Tender Offers”) and to pay certain related fees and expenses. If any net proceeds from this
offering remain after completion of the Tender Offers, AES intends to use such proceeds to retire certain of its outstanding indebtedness
and for general corporate purposes. In conjunction with the Tender Offers, AES is soliciting consents to the adoption of certain
proposed amendments to the indentures governing the Outstanding Notes to substantially remove all the restrictive covenants and
events of default, as well as to alter the notice requirements for optional redemption with respect to each series of Outstanding
Notes.
The New Notes were issued on
May 27, 2020 pursuant to an indenture, dated as of May 27, 2020 (the “Indenture”), between AES and Deutsche Bank Trust
Company Americas, as Trustee.
Interest on the 2025 Notes accrues
at a rate of 3.300% per annum, and interest on the 2030 Notes accrues at a rate of 3.950% per annum. Interest on each series of
New Notes is payable on January 15 and July 15 of each year, beginning January 15, 2021. The 2025 Notes will mature on July 15,
2025, and the 2030 Notes will mature on July 15, 2030.
The
Notes are secured by a first priority security interest in the same collateral that is pledged for the benefit of the lenders
under AES’ senior secured credit facility, which collateral consists of certain of AES’ assets, including the pledge
of capital stock of many of AES’ directly held subsidiaries and the directly held subsidiaries of AES’ subsidiary,
AES International Holdings II, LTD. The collateral securing the Notes will be released if AES obtains an investment grade rating
from two out of the three rating agencies, subject to reversion if such rating agencies withdraw AES’ investment grade rating
or downgrade AES’ rating below investment grade.
AES may redeem all or a part
of the 2025 Notes, at any time prior to June 15, 2025, on any one or more occasions, at a redemption price equal to the greater
of (i) 100% of the principal amount of the 2025 Notes to be redeemed (ii) the sum of the present values of the principal amount
of the 2025 Notes to be redeemed and the remaining scheduled payments of interest on the 2025 Notes from the redemption date to
June 15, 2025, discounted from the scheduled payment dates to the redemption date semiannually (assuming a 360-day year consisting
of twelve 30-day months) at a discount rate equal to the Treasury Rate (as defined in the Indenture) plus 50 basis points. AES
may redeem all or a part of the 2030 Notes, at any time prior to April 15, 2030, on any one or more occasions, at a redemption
price equal to the greater of (i) 100% of the principal amount of the 2030 Notes to be redeemed and (ii) the sum of the present
values of the principal amount of the 2030 Notes to be redeemed and the remaining scheduled payments of interest on the 2030 Notes
from the redemption date to April 15, 2030, discounted from the scheduled payment dates to the redemption date semiannually (assuming
a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Rate (as defined in the 2030 notes)
plus 50 basis points.
Upon the occurrence of a Change
of Control Triggering Event (as defined in the Indenture), AES must offer to repurchase the each series of New Notes at a price
equal to 101.00% of their principal amount, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.
The Indenture also contains covenants, subject to certain exceptions, restricting the ability of AES to incur debt secured by
any Principal Property (as defined in the Indenture) or by the debt or capital stock of any subsidiary held by the AES; to enter
into any sale-lease back transactions involving any Principal Property; or to consolidate, merge, convey or transfer substantially
all of its assets; as well as other covenants that are customary for debt securities like the New Notes. In addition, the Indenture
contains customary events of default.
The New Notes were sold to
the Initial Purchasers for resale to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as
amended (the “Securities Act”), and to persons outside the United States under Regulation S of the Securities
Act.
The New Notes were issued in
a transaction exempt from registration under the Securities Act or any state securities laws. Therefore, the New Notes
may not be offered or sold in the United States absent registration or an applicable exemption from the registration
requirements of the Securities Act and any applicable state securities laws. This current report on Form 8-K and
the Exhibits hereto do not constitute an offer to sell any securities or a solicitation of an offer to purchase any
securities.
The foregoing description of
the Indenture and the New Notes is qualified in its entirety by reference to the Indenture and the forms of New Notes. The Indenture,
the form of the 2025 Notes and the form of the 2030 Notes are attached to this Current Report on Form 8-K as Exhibit 4.1, Exhibit
4.2 and Exhibit 4.3, respectively.