Business Context and Reporting Period
This Form 8-K, dated March 9, 2012, reports the creation of direct financial obligations by Entergy Corporation and its subsidiaries: Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, and Entergy Texas, Inc. The filing details the execution of new five-year unsecured revolving credit and letter of credit facilities to replace existing credit agreements.
Key Financial Metrics and Facility Details
| Entity | Facility Size | Letter of Credit Capacity | Outstanding Loans (as of 3/9/12) | Outstanding LCs (as of 3/9/12) | Commitment Fee | Interest Rate |
|---|---|---|---|---|---|---|
| Entergy Corporation | $3.5 billion (expandable to $4.0 billion) | $1.75 billion | $1.605 billion | $8 million | 0.275% | 2.14% (variable) |
| Entergy Arkansas | $150 million | $75 million | Not disclosed | Not disclosed | 0.225% | Variable |
| Entergy Gulf States Louisiana | $150 million | $75 million | Not disclosed | Not disclosed | 0.225% | Variable |
| Entergy Louisiana | $200 million | $100 million | Not disclosed | Not disclosed | 0.225% | Variable |
| Entergy Texas | $150 million | $75 million | Not disclosed | Not disclosed | 0.275% | Variable |
All facilities mature on March 9, 2017, with options to extend in one-year increments up to two times. Proceeds from the Entergy Corporation facility were used to repay amounts outstanding under its previous credit facility.
Material Changes Versus Prior Period
- Entergy Corporation: Terminated an existing approximately $3.5 billion credit facility dated August 2, 2007, and replaced it with a new $3.5 billion facility (expandable to $4 billion).
- Entergy Arkansas: Terminated an existing $100 million credit facility dated August 2, 2007, and replaced it with a new $150 million facility.
- Entergy Gulf States Louisiana: Terminated an existing $100 million credit facility dated August 2, 2007, and replaced it with a new $150 million facility.
- Entergy Louisiana: Terminated an existing $200 million credit facility dated August 2, 2007, and replaced it with a new $200 million facility.
- Entergy Texas: Terminated an existing $100 million credit facility dated August 2, 2007, and replaced it with a new $150 million facility.
Covenants, Risks, and Management Commentary
Covenants: All agreements contain customary covenants, including restrictions on pledging assets and restrictions on certain asset sales (excluding the disposition of transmission businesses to ITC Holdings Corp). A key financial covenant requires each entity to maintain a consolidated debt ratio of 65% or less of total capitalization.
Events of Default: Obligations may be accelerated upon non-payment, breach of covenant, cross-default, bankruptcy, material judgments, ERISA events, or a change of control. For the subsidiaries, a change of control also includes Entergy ceasing to own 100% of the subsidiary's common stock or equity.
Variable Costs: Interest rates and commitment fees fluctuate based on the senior unsecured debt rating of the respective entities.
Investor Verification Checklist
- Verify the current senior unsecured debt ratings for Entergy Corporation and its subsidiaries to confirm the applicable interest rates and commitment fees.
- Confirm the consolidated debt ratio for each entity to ensure compliance with the 65% covenant threshold.
- Review the status of the "ITC Transaction" (disposition of transmission business) to ensure it remains excluded from asset sale restrictions.
- Monitor the utilization of the $1.75 billion letter of credit capacity under the Entergy Corporation facility.
- Check for any subsequent amendments regarding the extension options for the credit facilities.