Business Context and Reporting Period
This Form 8-K, filed on November 14, 2012, reports on Ameren Corporation and its subsidiaries (Union Electric Company, Ameren Illinois Company, and Ameren Energy Generating Company). The filing details the entry into new material definitive credit agreements and the simultaneous termination of prior credit facilities to secure substantial liquidity for general corporate purposes.
Key Financial Metrics and Liquidity
- Total Credit Facility: $2.1 billion in cumulative credit provided through November 14, 2017.
- Facility Structure:
- 2012 Missouri Credit Agreement: $1.0 billion senior unsecured revolving credit.
- 2012 Illinois Credit Agreement: $1.1 billion senior unsecured revolving credit.
- Borrowing Sublimits:
- Missouri Facility: Ameren ($500 million), Ameren Missouri ($800 million).
- Illinois Facility: Ameren ($300 million), Ameren Illinois ($800 million).
- Expansion Option: Ameren may increase the Missouri facility to $1.2 billion and the Illinois facility to $1.3 billion.
- Interest Margins (at closing):
- Eurodollar: 1.275% for Ameren Illinois/Missouri; 1.475% for Ameren.
- Commitment Fees: 0.225% for Ameren Illinois/Missouri; 0.275% for Ameren.
- Outstanding Borrowings: None at closing.
Material Changes Versus Prior Period
The company terminated three prior credit agreements dated September 10, 2010 (the 2010 Missouri, 2010 Illinois, and 2010 Genco Credit Agreements) contemporaneously with the execution of the new 2012 Credit Agreements. The new agreements replace the old facilities, extending the maturity date to November 14, 2017 (with potential extensions to 2019), whereas the prior agreements were set to expire sooner. The new structure maintains unsecured status but introduces specific cross-default provisions and financial covenants.
Guidance, Covenants, and Risks
- Financial Covenants:
- Debt-to-Capitalization: Borrowers must maintain consolidated indebtedness of no more than 65% of consolidated total capitalization.
- Interest Coverage: Ameren must maintain a ratio of consolidated funds from operations plus interest expense to consolidated interest expense of 2.0 to 1.
- Regulatory Approvals: Ameren Missouri and Ameren Illinois intend to seek regulatory approval to extend their borrowing sublimit maturities to November 14, 2017. Without such approval, sublimits expire November 13, 2013, subject to 364-day extensions.
- Default Provisions: Defaults include failure to meet financial covenants, bankruptcy, or judgments exceeding $50 million. Cross-defaults apply between the Missouri and Illinois agreements for Ameren, but defaults by subsidiaries do not automatically trigger defaults for Ameren under the other agreement unless specific conditions are met.
- Use of Proceeds: General corporate purposes, working capital, refinancing indebtedness, and funding intercompany loans.
Investor Verification Checklist
- Verify the current credit ratings of Ameren, Ameren Missouri, and Ameren Illinois to confirm applicable interest rate margins.
- Confirm the status of regulatory approvals required to extend the borrowing sublimits for Ameren Missouri and Ameren Illinois beyond November 2013.
- Review the most recent quarterly financial statements to ensure compliance with the 65% debt-to-capitalization and 2.0x interest coverage covenants.
- Monitor for any judgments against the company exceeding $50 million that could trigger a default event.