AES will withdraw support for Drax restructuring unless International Power out of picture

By Carlise Newman

Chicago, July 28 - AES Corp. is asking AES Drax creditors to back its plan for restructuring the U.K. power company's debt - and to reject a bid by International Power to get involved.

AES is asking the banks and bondholders to confirm their commitment to the original restructuring plan by Aug. 5. If not, AES said it will pull out.

As previously reported, AES Srax received a letter from International Power on July 24, in which it offered to buy some of the debt to be issued in AES Drax's restructuring process.

International Power described its offer as a "substantial" improvement on the cash-out option included in the current restructuring plan.

International Power is offering to provide up to £80 million as opposed to the £60 million proposed by AES Drax to fund the cash-out option. It is also proposing that the discount price for a senior finance party's participation in the A-2 debt will be 55% of its principal amount as opposed to the 47% proposed by AES.

But AES said Monday that International Power has been interested in becoming involved in the Drax restructuring process for the past nine months. On each occasion representatives of the senior creditor groups contacted International Power, and on each occasion International Power failed to follow through with anything promising enough for the senior creditors to pursue, AES said.

International Power was also included among the companies which the senior creditors approached last March to solicit interest in either acquiring the Drax power station or participating in its restructuring. On the basis of International Power's response to inquiries from the bank and bondholder committees, the committees did not pursue further discussions with International Power.

After the letter from International Power, AES said Monday that it wanted to make clear to the senior creditors committees AES's position with respect to its continued support of the restructuring.

AES said it will withdraw its support for the restructuring proposal unless by no later than Aug. 5 each member of the bank steering committee and the bondholder committee has provided written confirmation to AES that it continues to support and recommend the restructuring in the June 30 proposal; that it has obtained corporate and internal credit approval for participation in the restructuring; that it has considered and rejected the International Power proposal; and that it agrees to the terms of the long-term standstill arrangements.

AES is proposing a revised standstill agreement which includes confirmation that the majority banks and consenting bondholders support the restructuring.

The revised standstill would also bar creditors from discussing or negotiating with anyone over: the sale of the Drax power station or of any shares in or assets of AES Drax Cos. other than as described in the restructuring proposal or standstill agreement, the appointment or engagement with any person other than AES as the operator or technical services provider of the Drax power station, or any person's participation in the restructuring, including funding the cash-out option or the purchase of any of the restructured debt.

The standstill would also include a confirmation from the eurobond trustee and each consenting bondholder that it will vote in favor of the restructuring proposal in the schemes of arrangements to be proposed by AES Drax.

AES said within its own restructuring proposal, the parties involved had conceived that a long-term standstill arrangement would be put in place by Aug. 14, when the third standstill agreement expires, to enable the restructuring proposal to be implemented.

AES said it stands by its original offer, which includes the commitment of new money for the cash out option, which commitment has been approved by the AES' board of directors.

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