PG&E's waiver of National Energy ratings requirement shortened

New York, Aug. 26 - PG&E Corp. said the waiver of the requirement that its PGE& National Energy Group, Inc. maintain investment-grade ratings has been revised, shortening the period of the waiver.

The waiver had previously been extended to Oct. 21, 2002. Now it expires on Aug. 30.

The waiver applies to PG&E Corp.'s credit agreement with General Electric Capital Corp. and other lenders as amended and restated on June 25.

Included in the loan - and now subject to a waiver - was a requirement that PG&E National Energy maintain investment-grade ratings with either Standard & Poor's or Moody's Investors Service.

Standard & Poor's downgraded PG&E National Energy to junk on July 31 and Moody's Investors Service followed on Aug. 5.

PG&E said the waiver was amended in response to recent amendments to PG&E National Energy's $1.25 billion credit facility. As previously announced, these amendments extended the maturity date of one revolving tranche to Oct. 21, 2002 from Aug. 22, 2002 and reduced its size to $500 million from $750 million. Immediate availability was cut to the current outstanding debt level of $431 million. The second revolving tranche will still mature on Aug. 22, 2003 but was frozen at its outstanding debt level of $279 million. JP Morgan Chase Bank is the administrative agent for the syndicate.

As part of the waiver on its loan, PG&E Corp. agreed that unless it obtains consent from its lenders it will not allow National Energy to sell any of its material assets, except for certain sales in the ordinary course of business, or to incur additional debt, except for draws under its current credit facilities, hedging and guarantees of hedging in the ordinary course of business, and other indebtedness incurred in the ordinary course of business up to $75 million.

The revised waiver also requires PG&E Corp. to maintain cash in two interest reserve accounts equal to 15% of the now outstanding principal amount of the $1.02 billion in term loans or $153 million. That is an increase from the requirement in the previous waiver that two years' worth of interest or $117 million be held.

PG&E added that during the current waiver it intends to negotiate for a further extension and for the elimination of the credit rating covenant or an amendment to avoid a default of that requirement.

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