TXU plans $2.38 billion in refinancing through capital markets, banks

By Ronda Fears

Nashville, Tenn., Oct. 9 - TXU Corp. said in a conference call Wednesday it plans a $2.38 billion refinancing and is confident its bank lenders will agree to remove a cross-default provision tied to its three-year, $500 million revolver.

"We're definitely not talking about levering up the company or adding any more net debt to the company," said Mike McNally, TXU chief financial officer, said on the call.

"It's just a matter of refinancing existing securities that we have."

McNally said the company would tap the capital markets or its banks for the refinancing, designed to boost liquidity.

Currently, liquidity in North American operations totals $1.56 billion and $2.48 billion companywide, the company said. After the financing, liquidity in North American operations would be $3.94 billion and $4.86 billion companywide.

In its third call in four trading days aimed at allaying investor concerns, TXU executives also said it is asking its banks to drop a provision on an outstanding credit line that would trigger repayment if its European unit defaults on its debt.

McNally said three of six banks have agreed to waive the provision and that he was confident that the remaining banks would also agree.

Moody's Investors Service Wednesday downgraded the senior unsecured debt ratings of the European units to Baa3 from Baa1, and kept the ratings on review for further downgrade, but affirmed TXU Corp.'s Baa3 senior unsecured rating with a negative outlook.

The affirmation assumes that further deterioration in the rating at TXU Europe will not impact the U.S. operations, Moody's said.

That assumption, Moody's said, is premised on additional equity not being sent to TXU Europe from TXU Corp. and that no further cross-default or cross-collateral language exists other than that in the $500 million working capital revolver.

A Fitch Ratings downgrade of TXU Europe's debt to junk raised many of the questions about cross-defaults and rating triggers.

McNally said the company is looking at the situation and will respond in the next week or so about the extent of the impact of the downgrades to the European units.

McNally said TXU was prepared to provide up to $700 million to its European unit to restructure power purchase agreements, which have become a concern to credit analysts.

Largely due to troubles at European operations, TXU on Friday slashed its profit outlook for next year, which immediately raised questions about TXU's cash position.

McNally said the company estimates cash flow in 2002 at $5.38 billion, including $2.3 billion from asset sales and $1.08 billion in equity issuance. After debt reductions of some $2.85 billion and dividends of $680 million, the company puts available cash flow at yearend at $1.85 billion.

In 2003, the company estimates cash flow at $3.24 billion, the bulk of which would be the $2.3 billion in cash from operations. After debt reductions in 2003 of about $950 million and $710 in dividends, available cash flow is estimated at $1.58 billion.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.