AES Drax fails to make payments on notes

By Carlise Newman

Chicago, Feb. 28 - AES Drax Energy Ltd. announced in a 6K filing that it would not make the required interest payments of $11.5 million and £7,593,750 to high yield noteholders due Feb. 28.

AES Drax's high-yield note debt service reserve accounts are funded at $22,142.02 and £40,643.91, resulting in a significant shortfall. The failure to make payments constitutes an event of default, but is subject to a 15-day grace period. However, under inter-creditor arrangements, the high-yield noteholders have no enforcement rights until 90 days following the delivery of required notices.

The company had previously announced that certain of the debt service cover ratios, as of June 30, 2002, were below the level required to permit subsidiary AES Drax Holdings Ltd. to make any distributions of available cash to AES Drax Energy at that time. The company also said it did not expect any improvements in the ratios as of Dec. 31, 2002 as that would depend on a favorable change in the forward curve for electricity prices during the period from June 30 to Dec. 31, 2002.

Those changes did not occur, and the company said that debt service cover ratios as at year-end 2002 would again be below the required level. As part of the standstill arrangements among AES Drax Holdings and its senior lenders, the ratios on Dec. 31, 2002 were not calculated by the bank group. As a consequence, AES Drax Holdings was not permitted to make any distributions to AES Drax Energy to permit the company to make the required interest payments due Feb. 28.

AES Drax Energy is an energy company based in Surrey, England.

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