Cogentrix Energy uses $50 million of asset sale proceeds to pay down bank debt

By Sara Rosenberg

New York, June 18 - Cogentrix Energy Inc. used $50 million of the proceeds from the sale of Green Country Energy, LLC to repay borrowings outstanding under its credit facility. This pay down was required under a recently obtained forbearance agreement.

Due to the maturity of $247.5 million in obligations outstanding under the credit facility in October 2003, the company's independent auditors expressed a going concern uncertainty in their report for the year ended Dec. 31, 2002, which triggered an event of default under the credit facility.

On May 29, the company entered into a forbearance agreement with lenders that is in effect through July 31. Under this agreement, the company not only agreed to the $50 million paydown from the asset sale proceeds, but also agreed to utilize any net proceeds of the litigation escrow to repay bank borrowings, restrict any subsidiaries from modifying or terminating any letter of credit issued under the credit facility and reduce the lenders' commitment under the corporate credit facility to $225 million from $250 million upon receipt of the $50 million repayment, according to a filing with the Securities and Exchange Commission.

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