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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[X] Soliciting Material Pursuant to Rule 14a-12
EL PASO CORPORATION
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(Name of Registrant as Specified in its Charter)
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EL PASO CORPORATION COMPLETES IMPORTANT STEP IN ITS PLAN TO ENHANCE
LIQUIDITY AND FINANCIAL FLEXIBILITY;
EXTENDS MATURITY OF $3-BILLION REVOLVING CREDIT FACILITY TO JUNE 2005
HOUSTON, TEXAS, APRIL 16, 2003--El Paso Corporation (NYSE:EP) today
announced that it has completed an important objective of its 2003
operational and financial plan by refinancing and restructuring its major
bank facilities.
"We are pleased with the support provided by our bank group that allowed
for the completion of this important step in our operational and financial
plan well ahead of schedule," said Ronald L. Kuehn, Jr., chairman and chief
executive officer of El Paso Corporation. "These facilities provide
significant value to all of our stakeholders as they further improve the
company's liquidity position while simplifying and strengthening our
balance sheet. They are designed to provide the company with the
flexibility to aggressively reduce our leverage with our cash flow from
operations and the proceeds from our asset sales program over the remainder
of 2003 and 2004."
New Credit Facilities
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The company has entered into a $3-billion revolving credit facility due
June 2005, which replaces the company's previous $3-billion facility that
had a one-year term-out option to May 2004. El Paso's existing $1-billion
revolving facility, which matures in August 2003, and approximately $1
billion of other bank facilities (including leases, letters of credit and
other facilities) will remain in place with no change in maturity. However,
the key financial covenants of these facilities have been conformed to the
$3-billion facility and they will share in the collateral being provided to
that facility.
In addition, the company restructured its approximately $750-million
remaining outstanding Clydesdale preferred interests as a term loan that
will amortize in equal quarterly amounts over the next two years. The term
loan is secured by the assets currently supporting the Clydesdale
transaction, consisting of a production payment from El Paso, various
natural gas and oil properties, and El Paso's equity ownership in Colorado
Interstate Gas Company.
The $3-billion facility and the other bank facilities are secured by El
Paso's equity interests in all of its 100-percent-owned pipelines (with the
exception of Southern Natural Gas), the common and Series C units in El
Paso Energy Partners that are currently owned by El Paso Corporation, and
the equity interests in the El Paso subsidiaries that own the property
securing the term loan. All of the facilities have a borrowing cost of
LIBOR plus 350 basis points and letter of credit fees of 350 basis points.
The key financial covenant in the facilities is a requirement for the
company to maintain debt to total capitalization not in excess of 75
percent, as defined in the facilities.
Next Steps of El Paso's Operational and Financial Plan
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"With the completion of this new bank facility, our recent agreement in
principle to resolve the principal claims arising from the Western energy
crisis, and the continuing progress of our 2003 non-core asset sale
program, we have made significant strides toward the completion of the
repositioning of El Paso," Mr. Kuehn added. "We are now focusing on the
critical next steps of our operational and financial plan, including
aggressive cost reductions, recovery of significant portions of our cash
collateral, debt reduction, and other actions."
These actions include:
o Targeting at least $250 million of additional pre-tax cost
savings and business efficiencies beyond the $150 million
previously announced by the end of 2004;
o Working to recover as promptly as practicable cash collateral
currently committed to the company's trading, petroleum,
refining, and other businesses; and
o Reducing the company's obligations senior to common stock by at
least $2.5 billion by the end of 2003.
El Paso's Board of Directors has formed a strategic planning committee to
ensure that El Paso maximizes all opportunities inherent in its core
businesses as the company moves forward with the 2003 operational and
financial plan.
"Our Board of Directors is committed to continuing the progress we have
made under our plan in order to enhance the value of El Paso," Mr. Kuehn
continued. "As we move beyond the repositioning phase of our plan, we will
quickly and aggressively take actions to maximize value for all our
shareholders."
Financing Activity Update
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In order to further simplify its balance sheet, since year-end 2002 El Paso
has:
o Refinanced the Clydesdale and Trinity River preferred interests
of consolidated subsidiaries and restructured the related cash
restrictions;
o Issued $700 million in senior unsecured notes at Southern Natural
Gas Company and ANR Pipeline Company;
o Issued a $1.2-billion two-year guaranteed term loan secured by
certain of the company's natural gas and oil properties;
o Repaid the $1-billion Limestone Notes in March; and
o Extended the maturity of its $3-billion revolving credit facility
through mid-year 2005.
To continue that process, the company expects to:
o Purchase the third-party equity in its Electron investment for
$175 million in the second quarter of 2003, resulting in the
consolidation of the assets and liabilities within that entity;
o Purchase the third-party equity in our Gemstone investment for
$50 million in the second quarter of 2003, resulting in the
consolidation of the assets and liabilities within that entity;
and
o Repay the $1.2-billion two-year term loan issued in February 2003
through the issuance of longer-term debt in the capital markets
in the second or third quarter of this year to eliminate the
amortization requirements of that financing in 2004 and 2005.
"We have significantly improved our liquidity over the last several
months," said D. Dwight Scott, executive vice president and chief financial
officer of El Paso Corporation. "While we will continue to manage our
liquidity carefully, our focus in the coming months will be on implementing
the additional steps of our plan that will strengthen our financial
position and reduce debt at the company."
Greater detail on El Paso's new bank facility is attached to this release.
In addition, the company will file the credit agreements and related
documents with the SEC later today in a Form 8-K.
El Paso Corporation is the leading provider of natural gas services and the
largest pipeline company in North America. The company has core businesses
in pipelines, production, midstream services, and power. El Paso
Corporation, rich in assets and fully integrated across the natural gas
value chain, is committed to developing new supplies and technologies to
deliver energy. For more information, visit www.elpaso.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This release includes forward-looking statements and projections, made in
reliance on the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The company has made every reasonable effort to ensure
that the information and assumptions on which these statements and
projections are based are current, reasonable, and complete. However, a
variety of factors could cause actual results to differ materially from the
projections, anticipated results or other expectations expressed in this
release, including, without limitation, our ability to attract and retain
qualified members of the Board of Directors; the successful recruitment and
retention of a qualified CEO; the successful implementation of the 2003
operational and financial plan; the successful implementation of the
settlement related to the Western Energy Crisis; material and adverse
impacts from our proxy contest with Selim Zilkha/Oscar Wyatt; actions by
the credit rating agencies; the successful close of financing transactions,
including an extension of our bank facilities; our ability to successfully
exit the energy trading business; our ability to divest of certain non-core
assets; changes in commodity prices for oil, natural gas, and power;
general economic and weather conditions in geographic regions or markets
served by El Paso Corporation and its affiliates, or where operations of
the company and its affiliates are located; the uncertainties associated
with governmental regulation; political and currency risks associated with
international operations of the company and its affiliates; inability to
realize anticipated synergies and cost savings associated with
restructurings and divestitures on a timely basis; difficulty in
integration of the operations of previously acquired companies,
competition, and other factors described in the company's (and its
affiliates') Securities and Exchange Commission filings. While the company
makes these statements and projections in good faith, neither the company
nor its management can guarantee that anticipated future results will be
achieved. Reference must be made to those filings for additional important
factors that may affect actual results. The company assumes no obligation
to publicly update or revise any forward-looking statements made herein or
any other forward-looking statements made by the company, whether as a
result of new information, future events, or otherwise.
ADDITIONAL IMPORTANT INFORMATION
On April 9, 2003, El Paso Corporation filed a preliminary proxy statement
relating to its 2003 annual meeting with the Securities and Exchange
Commission. Prior to the annual meeting, El Paso will furnish a definitive
proxy statement to its shareholders, together with a WHITE proxy card.
Shareholders are strongly advised to read El Paso's proxy statement as it
contains important information.
Shareholders may obtain a copy of El Paso's preliminary proxy statement,
any amendments or supplements to the proxy statement and any other
documents filed by El Paso with the Securities and Exchange Commission for
free at the Internet Web site maintained by the Securities and Exchange
Commission at www.sec.gov. Copies of the preliminary proxy statement and
any amendments and supplements are available for free at El Paso's Internet
Web site at www.elpaso.com or by writing to El Paso Corporation, Investor
Relations, P.O. Box 2511, Houston, TX 77252. In addition, copies of El
Paso's proxy materials may be requested by contacting El Paso's proxy
solicitor, MacKenzie Partners, Inc. at (800) 322-2885 Toll-Free or by email
at proxy@mackenziepartners.com.
To the extent that individual customers, independent industry researchers,
financial analysts, or El Paso commissioned research, are quoted in this
document, it is El Paso's policy to use reasonable efforts to verify the
source and accuracy of the quote. El Paso has not, however, sought or
obtained the consent of the quoted source to the use of such quote as proxy
soliciting material. This document may contain expressions of opinion and
belief. Except as otherwise expressly attributed to another individual or
entity, these opinions and beliefs are the opinions and beliefs of El Paso.
Information regarding the names, affiliation and interests of individuals
who may be deemed participants in the solicitation of proxies of El Paso's
shareholders is contained in El Paso's preliminary proxy statement.
CONTACTS
Communications and Government Affairs
Norma F. Dunn, Senior Vice President
Office: (713) 420-3750
Fax: (713) 420-3632
Investor Relations
Bruce L. Connery, Vice President
Office: (713) 420-5855
Fax: (713) 420-4417
Alternate Contacts
Joele Frank/Dan Katcher
Joele Frank, Wilkinson Brimmer Katcher
Office: (212) 355-4449
Fax: (212) 355-4554
ATTACHMENTS
EL PASO
$3 BILLION REVOLVING CREDIT FACILITY
SUMMARY
TRANSACTION: A $3 billion secured revolving credit
facility with a $1.5 billion Letter of Credit
sublimit.
MATURITY: June 30, 2005.
PURPOSE: This transaction refinances the existing $3
billion 364-day revolving credit facility.
BORROWERS: There are four borrowers under the new
revolving credit documents:
o El Paso Corporation
o ANR Pipeline Company
o El Paso Natural Gas Company
o Tennessee Gas Pipeline Company
GUARANTORS: o Guarantee by El Paso and the Subsidiary
Guarantors (which include American Natural
Resources Company, El Paso CNG Company,
L.L.C., El Paso Tennessee Pipeline Co.,
and the legal entities that directly own
the pledged equity interest)
o Pipeline Company Borrowers are only liable
for the amount each Pipeline Company
Borrower borrows.
o El Paso Natural Gas Company and Tennessee
Gas Pipeline Company will continue as
joint and several guarantors for
approximately 120 days post closing and
until completion of certain conditions.
COLLATERAL: The Secured Obligations to be equally and
ratably secured by the Collateral listed on
Annex I.
OPTIONAL PREPAYMENTS: Permitted.
MANDATORY COMMITMENT Mandatory commitment reductions and/or
REDUCTIONS/PREPAYMENTS: prepayments will be required with respect
to (i) the sale or disposition of the Series
A Common Units and Series C Units of El Paso
Energy Partners, L.P. that are pledged as
Collateral (collectively, the "EPN Units")
(ii) the sale or disposition of pledged
equity interests and (iii) subject to
materiality thresholds and the failure to
reinvest proceeds in FERC-regulated assets
with respect to the Pipeline Company
Borrowers within specified time periods, the
sale or disposition of assets of the
designated subsidiaries that are related to
the subsidiary Guarantors.
FEES: Commitment fees of 75 bps per annum.
APPLICABLE RATE: The applicable rate on all borrowings and
issued LC's is LIBOR plus 350 bps.
KEY FINANCIAL COVENANTS: El Paso shall not permit the ratio of
consolidated Debt and Guaranties of El Paso
and its consolidated Subsidiaries (without
duplication and determined as to all of the
foregoing entities on a consolidated basis)
to Capitalization of El Paso and its
consolidated Subsidiaries (without
duplication and determined as to all of the
foregoing entities on a consolidated basis)
to exceed 75%.
Each Pipeline Company Borrower shall not, and
shall not permit its consolidated
Subsidiaries to, incur Debt or liabilities
under Guaranties if, after giving effect
thereto, the ratio of consolidated Debt and
Guaranties of such Pipeline Company Borrower
and its consolidated Subsidiaries to EBITDA
would exceed 5 to 1. The proceeds of any such
Debt or Guaranties are to be used only for
maintenance and expansion expenditures or
investments in other FERC-regulated assets
(other than acquisitions of other companies
or business divisions).
ANNEX I
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COLLATERAL FOR THE SECURED OBLIGATIONS
The equity interest in each of the Subsidiaries of El Paso as
described below, together with the EPN Units, will be pledged as Collateral
for the $3 Billion Facility and the other Secured Obligations:
Tennessee Gas Pipeline Related Collateral
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Pledge of 100% of the outstanding equity interests in Tennessee Gas
Pipeline Company.
Bear Creek Storage Related Collateral
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Pledge of 100% of the outstanding equity interests in Tennessee
Storage Company, which owns 50% of the outstanding equity interests in
Bear Creek Storage Company.
Pledge of 100% of the outstanding equity interests in Southern Gas
Storage Company, which owns 50% of the outstanding equity interest in
Bear Creek Storage Company.
ANR Pipeline Related Collateral
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Pledge of 100% of the outstanding equity interests in (i) ANR Pipeline
Company and (ii) ANR Storage Company.
EPNG Pipeline Related Collateral
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Pledge of 100% of the outstanding equity interests in El Paso Natural
Gas Company.
Mojave Pipeline Company Related Collateral
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Pledge of 100% of the outstanding equity interests in El Paso Mojave
Pipeline Company, which owns 50% of the outstanding equity interests
in Mojave Pipeline Company.
Pledge of 100% of the outstanding equity interests in EPNG Mojave
Inc., which owns 50% of the outstanding equity interests in Mojave
Pipeline Company.
Wyoming Interstate Related Collateral
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Pledge of 100% of the outstanding equity interests in (i) CIG Gas
Supply Company, which owns the sole general partner interest in
Wyoming Interstate Company Ltd.; and (ii) Wyoming Gas Supply Inc.,
which owns the sole limited partner interest in Wyoming Interstate
Company Ltd.
Mustang (Clydesdale) Related Collateral (CIG Pipeline)
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Pledge of 100% of the outstanding equity interests in Noric Holdings
III, L.L.C., which is the owner of 100% of the outstanding equity
interests in Colorado Interstate Gas Company.
Mustang (Clydesdale) Related Collateral (Non-CIG Pipeline)
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Pledge of 100% of the outstanding equity interests in Noric Holdings
I, L.L.C. and Noric Holdings IV, L.L.C., which owns directly 100% of
the outstanding equity interests in the entities that hold the natural
gas and oil assets and production payments within the Mustang
structure.
El Paso Energy Partners, L.P. Units
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Pledge of 11,674,245 Series A Common Units and 10,937,500 Series C
Units issued by El Paso Energy Partners, L.P.
EL PASO
$753 MILLION TERM LOAN
SUMMARY
TRANSACTION: A $753 million amortizing secured term loan.
MATURITY: February 7, 2005
PURPOSE: To refinance the remaining $753 million
Clydesdale preferred interests.
BORROWERS: There are four borrowers:
o Noric Holdings, LLC
o Noric Holdings I, LLC
o Noric Holdings III, LLC
o Noric Holdings IV, LLC
GUARANTOR: El Paso Corporation.
COLLATERAL: The loan is equally and ratably secured by
the assets pledged in the existing Clydesdale
transaction which consist of a production
payment from El Paso, various oil and natural
gas properties, and El Paso's equity
ownership interest in Colorado Interstate Gas
Company.
OPTIONAL PREPAYMENTS: Permitted.
AMORTIZATION: $100,000,000 due quarterly through November,
2004. Remaining amounts are due on the final
payment date, February 7, 2005.
APPLICABLE RATE: At closing, the applicable rate all
borrowings is LIBOR plus 396 bps
COVENANTS: Similar to existing Clydesdale Covenants and
modified, as it relates to El Paso, to
conform to El Paso's $3 billion revolving
credit facility.