SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: June 26 2002
PG&E Corporation
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(Exact Name of Registrant as Specified in its Charter)
California 1-12609 94-3234914
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(State or other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
PG&E Corporation
One Market, Spear Tower, Suite 2400
San Francisco, California 94105
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(Address of principal executive offices) (Zip Code)
(415) 267-7000
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(Registrant's telephone number, including area code)
Item 5. Other Events
As previously disclosed, in November 2001 and March 2002, PG&E Corporation
amended its March 1, 2001 Credit Agreement (as amended, the "Old Credit
Agreement") with General Electric Capital Corporation ("GECC") and Lehman
Commercial Paper Inc. ("LCPI") and their assignees (collectively, the "Existing
Lenders"). The amendments provided PG&E Corporation the option to extend the
original $1 billion aggregate term loan credit facility for two one-year periods
so that the maturity date could be extended until as late as March 2, 2006,
contingent upon PG&E Corporation making a principal repayment of $308 million by
June 3, 2002. On June 3, 2002, PG&E Corporation made the principal repayment of
$308 million, utilizing current working capital and reducing the principal
balance outstanding under the Old Credit Agreement to $692 million.
On June 25, 2002, PG&E Corporation entered into an Amended and Restated
Credit Agreement (the "New Credit Agreement") with GECC (the "Tranche A Lender")
and LCPI, and the lenders party thereto (collectively, the "Tranche B Lenders")
which amended and restated the Old Credit Agreement. The New Credit Agreement
provides for loans in two tranches. The Tranche A has a principal amount of $600
million (the "Tranche A Loan"), representing the $692 million outstanding under
the Old Credit Agreement less $92 million that has been converted to a Tranche B
Loan. The Tranche B consists of the $92 million converted loan plus $328 million
of new borrowings, for a total of $400 million (the "Tranche B Loan"). The
Tranche A Loan will continue to have the same maturity date and extension
provisions as the Old Credit Agreement. The Tranche B loan will mature on the
earlier of (1) September 2, 2006, or (2) the date of any spin-off of the shares
of PG&E National Energy Group, Inc. ("NEG, Inc."), by its indirect parent, PG&E
Corporation. The Tranche A Loan and the Tranche B Loan are collectively referred
to as the "Loans."
The Tranche A Loan continues to be secured by a first priority lien on (1)
PG&E Corporation's equity interest in PG&E National Energy Group, LLC, a
Delaware limited liability company ("NEG LLC"and together with its direct and
indirect subsidiaries, the "NEG Group"), (2) NEG LLC's equity interest in NEG,
Inc., and (3) certain cash interest reserves. The Tranche B Loan is secured by a
second priority lien on the equity interests in NEG LLC and NEG, Inc. and by a
first priority lien on certain other cash interest reserves. In addition, the
Tranche B Loan is subordinated to the Tranche A Loan.
PG&E Corporation issued to the lenders warrants to purchase approximately
2.4 million shares of common stock of PG&E Corporation at an exercise price of
$0.01 per share ("Warrants").
As previously disclosed, in connection with the Old Credit Agreement,
affiliates of the Existing Lenders received an option to purchase 3 percent of
the shares of NEG, Inc., determined on a fully diluted basis, at an exercise
price of $1.00. The option may be exercised at any time until 45 days after the
full repayment of the Tranche A Loan. In addition, under the Old Credit
Agreement, PG&E Corporation's exercise of each of its one-year extensions of the
loan was
conditioned upon NEG LLC granting affiliates of the Existing Lenders an
additional option to purchase one percent of the common stock of NEG, Inc.,
determined on a fully-diluted basis, at an exercise price of $1.00 per share. As
a result of the New Credit Agreement, the one percent has been reduced to
approximately .87 percent of the common stock of NEG, Inc. (reflecting the
reduction in the principal amount of the Tranche A Loan to $600 from the $692
million in loans outstanding under the Old Credit Agreement). The option may be
exercised at any time from the relevant extension date until 45 days after full
repayment or maturity of the Tranche A Loan.
NEG LLC has the right to call the option after repayment of the Tranche A
Loan in full at a cash purchase price equal to the fair market value of the
underlying shares, or, at the election of NEG LLC if an initial public offering
of the shares of NEG, Inc. ("IPO") has occurred, by delivering the underlying
shares. If an IPO has not occurred prior to repayment of the Tranche A Loan in
full, the holders of the option have the right to require NEG LLC or PG&E
Corporation to repurchase the option at a purchase price equal to the fair
market value of the underlying shares (the "Put Price"), which right is
exercisable at any time after the earlier of full repayment of the Tranche A
Loan or 45 days before expiration of the option. In addition to the grant of the
additional option, PG&E Corporation must pay a fee of 3 percent of the
then-outstanding balance of the Tranche A Loan as a condition for PG&E
Corporation's exercise of each of the one-year extensions.
The New Credit Agreement contains certain limitations on the ability of
PG&E Corporation and certain of its subsidiaries to grant liens, consolidate,
merge, purchase or sell assets, declare or pay dividends, incur indebtedness or
make advances, loans and investments. However, the New Credit Agreement does not
limit (1) PG&E Corporation's ability to spin-off its subsidiary, Pacific Gas and
Electric Company (the "Utility"), substantially in accordance with the Utility's
plan of reorganization proposed in the Utility's bankruptcy case pending in the
U.S. Bankruptcy Court for the Northern District of California, (2) the ability
of the members of the NEG Group to grant liens, purchase or sell assets, make
investments and incur indebtedness in accordance with NEG, Inc.'s business plan,
or (3) PG&E Corporation's ability to make investments in the Utility to the
extent required by law or regulatory requirements.
The New Credit Agreement also generally requires mandatory prepayments of
the Loans with the net cash proceeds from incurrence of indebtedness, issuance
or sale of equity and sales of assets, the receipt of condemnation or insurance
proceeds, and distributions or dividends paid to PG&E Corporation; provided
however, that (1) PG&E Corporation may make investments in the Utility with cash
proceeds from equity sales or issuances to the extent required by law or
regulatory requirements, (2) the NEG Group may use such proceeds, or hold such
proceeds in cash, to purchase assets or make investments in accordance with NEG
Inc.'s business plan, except that proceeds of an IPO must be used to the extent
required to repay the Tranche A Loan. Any mandatory prepayments of the Loans
will be applied first to the principal amount of the Tranche A Loan, and after
the Tranche A Loan is paid in full, to the principal amount of the Tranche B
Loan.
The New Credit Agreement also requires PG&E Corporation to maintain an
interest reserve account for each of the Tranche A Loan and the Tranche B Loans
in an amount equal to one year's interest.
A breach of any covenants would entitle the lenders to declare the Loans to
be due and payable. The covenants include requirements that (1) NEG, Inc.'s
unsecured long term debt have a credit rating of at least BBB - by Standard &
Poor's or Baa3 by Moody's Investors Service, Inc., (2) the ratio of fair market
value of NEG, Inc. to the aggregate amount of principal then outstanding under
the Loans be not less than 2 to 1, and (3) PG&E Corporation maintain cash or
cash equivalents (including amounts held in the interest reserves) of either 15
percent or 10 percent (depending upon when applicable) of the total principal
amount of the Loans outstanding plus the principal amount of the Notes (as
described below).
Concurrent with the refinancing described above, on June 25, 2002, PG&E
Corporation issued $280 million aggregate principal amount of 7.50% Convertible
Subordinated Notes due June 30, 2007 ("Notes"), in a private offering. The Notes
are unsecured and are subordinate to the Loans. PG&E Corporation will pay
interest on the Notes semi-annually at a rate of 7.50 percent per year. PG&E
Corporation has the right, subject to certain limitations, to pay interest by
issuing additional Notes in lieu of paying cash. The New Credit Agreement
prohibits PG&E Corporation from paying interest on the Notes (1) for 240 days
after receipt by the Note trustee of notice delivered by the administrative
agent or the Tranche A Lender stating that a default that would permit
acceleration has occurred under the New Credit Agreement or (2) if, after such
interest payment, PG&E Corporation's cash and cash equivalents are less than 20
percent of the total principal amount of the Loans outstanding plus the
principal amount of the Notes, or 15 percent of such amount upon any extension
of the Loans.
In addition to interest, if PG&E Corporation pays cash dividends to holders
of its common stock, Note holders are entitled to receive cash equal to the
dividends that would have been paid with respect to the number of shares that
the holder would be entitled to receive if the Notes had been converted on the
dividend record date. The Notes may be converted by the holders into shares of
PG&E Corporation's common stock at a conversion price equal to 119 percent of
the volume-weighted average price of the common stock of PG&E Corporation over a
43-day period beginning three days after the closing of the transaction. The
conversion price is subject to adjustment under certain circumstances, including
upon consummation of any spin off transaction of the Utility as proposed in its
plan of reorganization or a spin off of the shares of NEG, Inc.
Following a Change of Control of PG&E Corporation, as such term is defined
in the Note indenture, a Note holder has the right to require PG&E Corporation
to repurchase the Note holder's Notes for cash at a price equal to 100 percent
of the principal amount of the Notes to be repurchased, plus any accrued and
unpaid interest.
PG&E Corporation has agreed to provide, following consummation of a plan of
reorganization of the Utility, registration rights in connection with the shares
issuable upon conversion of the Notes and exercise of the Warrants.
The net proceeds of the Loans and the Note issuance will be used to fund
corporate working capital, repay certain indebtedness, and fund two interest
reserve accounts.
Item 7. Financial Statements, Pro Forma Financial Information, and Exhibits
Exhibit No. Description of Exhibit
99.1 Indenture, dated as of June 25, 2002, between PG&E Corporation
and U.S. Bank, N.A., as Trustee.
99.2 Purchase Agreement, dated as of June 25, 2002, between PG&E
Corporation and Lehman Brothers Inc., Jackson Investment Fund
Ltd., Citadel Credit Trading Ltd. and Citadel Equity Fund Ltd.,
as the Purchasers.
99.3 Equity Registration Rights Agreement, dated as of June 25, 2002,
between PG&E Corporation, as Issuer, and LB I Group Inc. and each
other entity named as the signature pages thereto, as Initial
Holders.
99.4 Amended and Restated Credit Agreement, dated as of June 25, 2002,
among PG&E Corporation, as Borrower, the Lenders party thereto,
Lehman Commercial Paper Inc., as Administrative Agent and Lehman
Brothers Inc., as Lead Arranger and Book Manager.
99.5 Amended and Restated LLC Pledge Agreement, dated as of June 25,
2002, by and among PG&E Corporation, as Pledgor, PG&E National
Energy Group, LLC, as Issuer, Lehman Commercial Paper Inc., as
Administrative Agent and Deutsche Bank Trust Company Americas, as
Collateral Agent for the benefit of the Lenders as Pledgee.
99.6 Amended and Restated Stock Pledge Agreement, dated as of June 25,
2002 by and among PG&E National Energy Group, LLC, as Pledgor,
PG&E National Energy Group, Inc., as Issuer and Lehman Commercial
Paper Inc., as Administrative Agent and Deutsche Bank Trust
Company Americas, as Collateral Agent for the benefit of the
Lenders as Pledgee.
99.7 Amended and Restated Option Agreement, dated as of June 25, 2002,
by and among PG&E National Energy Group, Inc., PG&E Corporation,
as Borrower, PG&E National Energy Group LLC and GPSF-F Inc. and
LB I Group Inc., as the Initial Holders and each entity named on
the signature pages thereto as the Subsequent Holders.
99.8 Intercreditor and Subordination Agreement, dated as of June 25,
2002.
99.9 Warrant Agreement, dated as of June 25, 2002, by and among PG&E
Corporation, LB I Group Inc. and each other entity named on the
signature pages thereto.
99.10 Resale Registration Rights Agreement, dated as of June 25, 2002,
between PG&E Corporation as Issuer and the Purchasers identified
on the signature pages thereto.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
PG&E CORPORATION
By: /s/ LINDA CHENG
__________________________
LINDA Y.H. CHENG
Corporate Secretary
Dated: June 26, 2002
EXHIBIT INDEX
Exhibit No. Description of Exhibit
99.1 Indenture, dated as of June 25, 2002, between PG&E Corporation
and U.S. Bank, N.A., as Trustee.
99.2 Purchase Agreement, dated as of June 25, 2002, between PG&E
Corporation and Lehman Brothers Inc., Jackson Investment Fund
Ltd., Citadel Credit Trading Ltd. and Citadel Equity Fund Ltd.,
as the Purchasers.
99.3 Equity Registration Rights Agreement, dated as of June 25, 2002,
between PG&E Corporation, as Issuer, and LB I Group Inc. and each
other entity named as the signature pages thereto, as Initial
Holders.
99.4 Amended and Restated Credit Agreement, dated as of June 25, 2002,
among PG&E Corporation, as Borrower, the Lenders party thereto,
Lehman Commercial Paper Inc., as Administrative Agent and Lehman
Brothers Inc., as Lead Arranger and Book Manager.
99.5 Amended and Restated LLC Pledge Agreement, dated as of June 25,
2002, by and among PG&E Corporation, as Pledgor, PG&E National
Energy Group, LLC, as Issuer, Lehman Commercial Paper Inc., as
Administrative Agent and Deutsche Bank Trust Company Americas, as
Collateral Agent for the benefit of the Lenders as Pledgee.
99.6 Amended and Restated Stock Pledge Agreement, dated as of June 25,
2002 by and among PG&E National Energy Group, LLC, as Pledgor,
PG&E National Energy Group, Inc., as Issuer and Lehman Commercial
Paper Inc., as Administrative Agent and Deutsche Bank Trust
Company Americas, as Collateral Agent for the benefit of the
Lenders as Pledgee.
99.7 Amended and Restated Option Agreement, dated as of June 25, 2002,
by and among PG&E National Energy Group, Inc., PG&E Corporation,
as Borrower, PG&E National Energy Group LLC and GPSF-F Inc. and
LB I Group Inc., as the Initial Holders and each entity named on
the signature pages thereto as the Subsequent Holders.
99.8 Intercreditor and Subordination Agreement, dated as of June 25,
2002.
99.9 Warrant Agreement, dated as of June 25, 2002, by and among PG&E
Corporation, LB I Group Inc. and each other entity named on the
signature pages thereto.
99.10 Resale Registration Rights Agreement, dated as of June 25, 2002,
between PG&E Corporation as Issuer and the Purchasers identified on the
signature pages thereto.