Cogentrix in talks with lenders, seeks waivers on potential financial restatements, filing delay

By Sara Rosenberg

New York, March 11 - Cogentrix Energy Inc. is in talks with bank lenders regarding a possible restatement of previous financial statements and is seeking a waiver of any covenants that may be breached due to this restatement and related delay in issuing audited financial statements, according to an 8-K filed with the Securities and Exchange Commission on Thursday.

The company is also seeking waivers from holders of its 8.75% senior notes due 2008 for any breach caused by a delay in the filing of the 10-K report.

Depending on the outcome of discussion with lenders, the company may not be able to use credit facility borrowings to fund the repayment of about $40 million of 8.10% senior notes that mature on March 15 and its commitment to fund approximately $50 million of obligations of Cogentrix Eastern America Inc. and Cogentrix Mid-America Inc. by March 22.

However, if these obligations are not funded with bank loan borrowings, the company anticipates obtaining loans or equity contributions from The Goldman Sachs Group Inc., which acquired Cogentrix last year, to pay off the debt.

The potential restatement of previous financial reports would reflect a change in the accounting treatment for two long-term power contracts. Because the contracts were amended in 1997 and 1998, Cogentrix's new independent auditor, PricewaterhouseCoopers LLP, believes that the revenues from these contracts need to be recognized generally on a straight-line basis over the term of the contract rather than recognized when billed as under prior accounting rules, the filing explained.

The change in accounting treatment would, based on the company's preliminary work, increase consolidated revenues and net income for 2003, and reduce consolidated revenues and net income for 2002 and prior years.

Cogentrix is a Charlotte, N.C., power company.

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