European Power Acquisition financing of the year
The £1.86 billion ($2.96 billion) Drax power station buyout from
National Power ? the UK's biggest power financing of its kind ? has
broken new levels of deal complexity and size.
Lead arrangers Chase Manhattan, Deutsche Bank and Industrial Bank of Japan closed the underwriting phase of the £1.3 billion credit facility for InPower, a UK subsidiary of AES Corp, that bought out special purpose company National Power Drax Limited earlier in the year. The deal signed on November 30.
Eight banks signed up as co-arrangers: Abbey National, Bank of Scotland, Bank of Tokyo-Mitsubishi, Bankgesellschaft Berlin, Fortis Bank, MeesPierson, HSBC, National Australia Bank and Rabobank.
The deal also received early commitments from 11 banks ? Bank of Montreal, Banque Nationale de Paris, Bayerische Hypo-und Vereinsbank, Bayerische Landesbank, Commerzbank, DG Bank, Dresdner Bank, ING Barings, Royal Bank of Scotland, Toronto-Dominion and Westdeutsche Landesbank ? each of which came on board as arrangers.
Among the lead banks, Chase took the roles of book manager, ratings advisor and modelling bank. Deutsche Bank is the loan documentation bank, technical bank and facility agent. Industrial Bank of Japan (IBJ) is the project documents and insurance bank. IBJ, in its role as advisor to AES, appointed the lead banks.
The credit facility is structured as a 15-year amortizing term loan. Pricing is based on a grid tied to the borrower's ratings and ranges from a floor of Libor-plus 165bp to a ceiling of Libor-plus 180bp. Co-arrangers were offered an underwriting fee of 35bp for a commitment of $50 million apiece. An additional fee of 55bp will be paid upon final take.
The project benefits from fixed capacity payments from Eastern Electric until 2007 when 46% of the senior debt will be amortized. The deal also comes with tax advantages co-arranged by Chase and Deutsche.
Cashflow for the loan's average life of 8.4 years is stabilised through an interest rate hedging agreement. The means of hedging has yet to be finalized, but at least 50% of the term loan principal will be hedged on a 5-year rolling forward basis within three months of financial close.
InPower is also planning to issue high-yield bonds to take out a $250 million subordinated bridge loan provided by Goldman Sachs and Donaldson Lufkin & Jenrette.
Proceeds from both the non-recourse credit facility and the subordinated bridge financing fund the acquisition of the 3960MW Drax Power station complete with flue gas desulfurization, located in North Yorkshire. Drax is the largest coal-fired plant in Europe and generates around 8% of UK electricity.
AES completed the purchase of the facility from National Power Drax Ltd, a special purpose vehicle set up by National Power PLC, in August 1999. AES is also providing equity in the total $3 billion transaction.
The deal has a complicated ownership structure that includes an intermediate Cayman Islands holding company ? AES Drax Ltd. Another holding company ? AES Drax Holdings ? is the issuer of £1.725 billion of 15.5 year bonds to be listed on the Luxembourg stock exchange which have been subscribed to by InPower. As dividends are upstreamed from the operating company AES Drax Power, InPower will receive revenues to service its debt from AES Drax Holdings at the fixed rate coupon on the bond.
Legal counsel on the deal came from Allen & Overy for the leads on the senior bank loans. Norton Rose acted for AES. Linklaters & Alliance acted for National Power and Milbank Tweed are representing the subordinated debt.
The deal was rated BBB- by Standard & Poor's.
Lead arrangers Chase Manhattan, Deutsche Bank and Industrial Bank of Japan closed the underwriting phase of the £1.3 billion credit facility for InPower, a UK subsidiary of AES Corp, that bought out special purpose company National Power Drax Limited earlier in the year. The deal signed on November 30.
Eight banks signed up as co-arrangers: Abbey National, Bank of Scotland, Bank of Tokyo-Mitsubishi, Bankgesellschaft Berlin, Fortis Bank, MeesPierson, HSBC, National Australia Bank and Rabobank.
The deal also received early commitments from 11 banks ? Bank of Montreal, Banque Nationale de Paris, Bayerische Hypo-und Vereinsbank, Bayerische Landesbank, Commerzbank, DG Bank, Dresdner Bank, ING Barings, Royal Bank of Scotland, Toronto-Dominion and Westdeutsche Landesbank ? each of which came on board as arrangers.
Among the lead banks, Chase took the roles of book manager, ratings advisor and modelling bank. Deutsche Bank is the loan documentation bank, technical bank and facility agent. Industrial Bank of Japan (IBJ) is the project documents and insurance bank. IBJ, in its role as advisor to AES, appointed the lead banks.
The credit facility is structured as a 15-year amortizing term loan. Pricing is based on a grid tied to the borrower's ratings and ranges from a floor of Libor-plus 165bp to a ceiling of Libor-plus 180bp. Co-arrangers were offered an underwriting fee of 35bp for a commitment of $50 million apiece. An additional fee of 55bp will be paid upon final take.
The project benefits from fixed capacity payments from Eastern Electric until 2007 when 46% of the senior debt will be amortized. The deal also comes with tax advantages co-arranged by Chase and Deutsche.
Cashflow for the loan's average life of 8.4 years is stabilised through an interest rate hedging agreement. The means of hedging has yet to be finalized, but at least 50% of the term loan principal will be hedged on a 5-year rolling forward basis within three months of financial close.
InPower is also planning to issue high-yield bonds to take out a $250 million subordinated bridge loan provided by Goldman Sachs and Donaldson Lufkin & Jenrette.
Proceeds from both the non-recourse credit facility and the subordinated bridge financing fund the acquisition of the 3960MW Drax Power station complete with flue gas desulfurization, located in North Yorkshire. Drax is the largest coal-fired plant in Europe and generates around 8% of UK electricity.
AES completed the purchase of the facility from National Power Drax Ltd, a special purpose vehicle set up by National Power PLC, in August 1999. AES is also providing equity in the total $3 billion transaction.
The deal has a complicated ownership structure that includes an intermediate Cayman Islands holding company ? AES Drax Ltd. Another holding company ? AES Drax Holdings ? is the issuer of £1.725 billion of 15.5 year bonds to be listed on the Luxembourg stock exchange which have been subscribed to by InPower. As dividends are upstreamed from the operating company AES Drax Power, InPower will receive revenues to service its debt from AES Drax Holdings at the fixed rate coupon on the bond.
Legal counsel on the deal came from Allen & Overy for the leads on the senior bank loans. Norton Rose acted for AES. Linklaters & Alliance acted for National Power and Milbank Tweed are representing the subordinated debt.
The deal was rated BBB- by Standard & Poor's.
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