SECURITIES AND EXCHANGE
COMMISSION
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: October 22,
2002
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(Exact Name of Registrant as Specified in its Charter)
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(State or other
Jurisdiction
(Commission (IRS Employer
of
Incorporation)
File Number) Identification No.)
PG&E Corporation
One Market, Spear Tower, Suite 2400
San Francisco, California 94105
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(Address of principal executive offices) (Zip Code)
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(Registrant's telephone number, including area code)
On
October 18, 2002, PG&E Corporation entered into a Second
Amended and Restated Credit Agreement (Credit Agreement), with the
lenders party thereto, Lehman Commercial Paper Inc., as
Administrative Agent, and others, pursuant to which the existing
$420 million Tranche B loan previously made by certain of the
lenders has been modified (as modified, the “Tranche B
loan”) and certain of the lenders have made new incremental
loans in the aggregate principal amount of $300 million (New Loans)
with the same terms and conditions as those applicable to the
Tranche B Loan. The Tranche B loan and the New Loans are
collectively referred to herein as the “Loans.”
The New Loans have been funded into a separate escrow account and
will be released to PG&E Corporation on January 17, 2003,
unless a bankruptcy proceeding has been commenced by or against
PG&E Corporation. The Loans are payable in a single
installment on September 2, 2006, unless prepaid earlier in
accordance with the Credit Agreement.
The
Tranche B loan and the New Loans are senior, unsubordinated
obligations of PG&E Corporation, which are pari passu with each
other. Notwithstanding the foregoing, so long as the options
granted to certain lenders of PG&E Corporation to purchase
shares of PG&E National Energy Group, Inc. (NEG, Inc.) pursuant
to the Amended and Restated Option Agreement entered into on June
25, 2002 (Option Agreement) remain outstanding, the obligations of
PG&E Corporation in respect of such options are senior to its
obligations in respect of the Loans to the extent provided in the
Intercreditor Agreement previously entered into on June 25, 2002,
among the lenders party to the Amended and Restated Credit
Agreement dated as of June 25, 2002. So long as the options
remain outstanding, the Intercreditor Agreement will remain in
effect to define the extent to which the obligations of PG&E
Corporation in respect of such options are senior to its
obligations in respect of the Loans. GPSF-F Inc. (GPSF), an
affiliate of General Electric Capital Corporation, the Tranche A
lender under the Amended and Restated Credit Agreement dated as of
June 25, 2002, has exercised its put option under the Option
Agreement, and GPSF and PG&E Corporation are in the process of
conducting the appraisal process provided under the Option
Agreement. PG&E Corporation and PG&E National Energy
Group, LLC, (LLC), a subsidiary of PG&E Corporation which owns
100% of the common stock of NEG, Inc., have agreed with the other
holders of options under the Option Agreement that they may
exercise their put option on the same terms as those received by
GPSF within 45 days after the closing of the put option of GPSF,
and, that if not exercised within such 45-day period, the put
option is exercisable during any time prior to March 1, 2003.
All
obligations of PG&E Corporation with respect to the Loans are
secured by a perfected first priority security interest in 100% of
the equity interests in LLC and 100% of the common stock of NEG,
Inc., and all proceeds thereof (NEG Collateral); such security
interests secure equally and ratably the portions of the Loans held
by each lender. PG&E Corporation is not permitted to
dispose of the NEG Collateral except under certain
circumstances. Any proceeds of a permitted disposition of the
NEG Collateral must be applied to prepay the Loans. PG&E
Corporation may spin off the NEG Collateral only with the consent
of lenders holding more than 50.1% of the aggregate outstanding
principal amount of the Loans.
In
addition, all obligations of PG&E Corporation with respect to
the Loans are secured by a perfected first priority security
interest in the outstanding common stock of PG&E
Corporation’s subsidiary, Pacific Gas and Electric Company
(Utility), and all proceeds thereof. With respect to 35% of
such common stock pledged for the benefit of the lenders, the
lenders have customary rights of a pledgee of common stock,
provided that certain regulatory approvals may be required in
connection with any foreclosure on such stock. With respect
to the remaining 65%, such common stock has been pledged for the
benefit of the lenders, but the lenders have no ability to control
such common stock under any circumstances and do not have any of
the typical rights and remedies of a secured creditor.
However, the lenders do have the right to receive any cash proceeds
received upon a disposition of such common stock.
In
connection with the consummation of the Utility’s proposed
plan of reorganization (PG&E Plan) in the Utility’s
bankruptcy proceeding pending in the U.S. Bankruptcy Court for the
Northern District of California, the Utility has formed a new
corporation (Newco) to hold the equity interests in three limited
liability companies (Reorganization Subsidiaries) formed to hold
certain assets of the Utility. The PG&E Plan contemplates
that, after the transfer of such assets to the Reorganization
Subsidiaries, the Utility will distribute the common stock of Newco
to PG&E Corporation (the “Newco Spin”) and PG&E
Corporation will distribute the common stock of the Utility to the
shareholders of PG&E Corporation (collectively, the
“Spin”). Pursuant to the Credit Agreement and the
Pledge Agreements pledging the common stock of the Utility,
PG&E Corporation may substitute common stock of Newco for the
common stock of the Utility in connection with the consummation of
the PG&E Plan.
Finally,
all obligations of PG&E Corporation with respect to the Loans
are secured by a perfected first priority security interest in
substantially all other personal property assets of PG&E
Corporation with certain exceptions, including, without limitation,
deposit accounts, securities accounts and cash equivalents (other
than proceeds of other collateral).
PG&E
Corporation is required to make an offer to prepay the Loans
(including prepayment premiums) upon a change in control of
PG&E Corporation. PG&E Corporation also is required
to make an offer to prepay the Loans (including prepayment
premiums), at least 45 days before (1) a spin-off under any
plan of reorganization: (a) to the shareholders of PG&E
Corporation of (i) all or any portion of Utility, Newco or any of
the Reorganization Subsidiaries or (ii) any of the material assets
that are contemplated by the PG&E Plan to be transferred to
Newco or any Reorganization Subsidiary or retained by the Utility
(Material Reorganization Assets), or (b) to PG&E Corporation of
(i) all or any portion of Newco or any of the Reorganization
Subsidiaries or (ii) any Material Reorganization Assets or
(2) the sale or issuance of more than 15% of the capital stock
of the Utility pursuant to a plan of reorganization.
In
addition, if on the date 31 days after confirmation of any plan of
reorganization that does not involve a spin-off or sale of more
than 15% of the capital stock of the Utility or on the first day of
any calendar quarter thereafter, the ratio of (i) the aggregate
market value of the common stock of PG&E Corporation for the
preceding 30 trading days to (ii) the aggregate outstanding
amount of the Loans is less than 5.0:1.0, then PG&E Corporation
is required to make an offer to prepay the Loans (including
prepayment premiums) on the date 30 days thereafter.
PG&E
Corporation is required to maintain an interest reserve account of
at least $130 million until September 2, 2005, and thereafter, an
amount equal to the lesser of $130 million or the interest to
accrue on the Loans through maturity.
The
Credit Agreement continues to contain certain limitations on the
ability of PG&E Corporation and certain of its subsidiaries to
grant liens, consolidate, merge, purchase or sell assets, declare
or pay dividends, incur indebtedness, or make advances, loans
and investments. However, the Credit Agreement does
not limit (1) the ability of LLC, NEG, Inc., or their respective
subsidiariesto grant liens or incur debt and (2) PG&E
Corporation’s and the Utility’s ability to consummate
the transactions contemplated in the PG&E Plan. The
Credit Agreement generally permits LLC, NEG, Inc. and their
respective subsidiaries to enter into sales and other disposition
of assets in the ordinary course of business and in certain
qualified transactions. In addition, in connection with
certain sales and debt restructuring transactions of NEG, Inc. and
its subsidiaries, PG&E Corporation is permitted to make
investments funded from existing cash and future earnings in NEG,
Inc. and its subsidiaries or in entities that acquire such assets
from NEG, Inc. and its subsidiaries in such transactions. The
amount of such investments is limited to 75% of the net cash tax
savings (less certain costs and expenses) actually received by
PG&E Corporation after October 1, 2002 as a result of certain
transactions of NEG, Inc. and its subsidiaries. PG&E
Corporation also is permitted to make investments funded from
existing cash and future earnings in NEG, Inc. and its
subsidiaries, and pay obligations of NEG, Inc. and its subsidiaries
(including, without limitation, any obligations for which PG&E
Corporation becomes a surety or a guarantor) up to a cumulative
amount not to exceed $15 million, provided that no default or event
of default has occurred under the Credit Agreement, and provided
further that LLC and NEG, Inc, are not in bankruptcy. The
proceeds of the New Loans may not be used to make investments in
LLC or NEG, Inc. or any of their Subsidiaries.
The
Credit Agreement has been amended to delete provisions that
required NEG, Inc. to maintain certain credit ratings and required
that a certain ratio of fair market value of NEG, Inc. to the
aggregate amount of the outstanding Loans be maintained.
Further, the Credit Agreement no longer provides that a default or
event of default under agreements of NEG, Inc. or its subsidiaries
constitutes a cross-default under the Credit Agreement.
Among
other events, the Credit Agreement provides that an event of
default occurs if PG&E Corporation fails to pay any
indebtedness of $100 million or more when due, if the holders of
PG&E Corporation indebtedness of $100 million or more become
entitled to accelerate such indebtedness, or if any PG&E
Corporation indebtedness of $100 million or more is accelerated.
Upon the occurrence of an event of default, the lenders may declare
the Loans immediately due and payable.
The
Loans may be prepaid upon payment of a prepayment fee equal to (1)
if such prepayment is made on or prior to October 1, 2003, the
discounted present value of 2.50% of the principal amount of such
prepayment plus the aggregate amount of interest that would accrue
on the principal amount of such prepayment from the date of such
prepayment to October 1, 2003, (2) if such prepayment is made after
October 1, 2003 and on or prior to October 1, 2004, 2.5% of the
principal amount prepaid, and (3) if such prepayment is made after
October 1, 2004, 0.5% of the principal amount prepaid.
The
Credit Agreement also generally requires mandatory prepayments of
the Loans with the net cash proceeds from (1) incurrence of
indebtedness, (2) issuance or sale of equity by PG&E
Corporation or the Utility, (3) sales of assets by PG&E
Corporation, NEG, Inc., LLC, or any subsidiary of NEG, Inc. (with a
carve-out for proceeds retained by NEG), (4) the receipt of
condemnation or insurance proceeds, (5) and distributions or
dividends paid to PG&E Corporation or LLC. PG&E
Corporation must also pay a prepayment fee upon mandatory
prepayment.
PG&E
Corporation also has agreed to issue to the lenders additional
warrants to purchase shares of common stock of PG&E Corporation
with a value equal to 3.5% of the aggregate principal amount of the
Loans ($25.2 million). The actual number of warrants to be
issued will be calculated by dividing such value by the average of
the volume weighted average price of PG&E Corporation common
stock as reported on the New York Stock Exchange for each of the 10
trading days beginning on October 10, 2002 and ending October 24,
2002. The terms and provisions of the warrants, including a
warrant exercise price of $0.01 per share, are substantially
identical to the warrants previously issued to the Tranche B
lenders on June 25, 2002. PG&E Corporation has agreed to provide,
following consummation of a plan of reorganization of the Utility,
registration rights in connection with the
shares issuable upon exercise of these warrants.
The
net proceeds of the New Loans will be used to fund corporate
working capital and general corporate purposes and may not be used
to make investments in LLC or NEG, Inc. or any of their respective
subsidiaries or, except as required by applicable law or the
conditions adopted by the California Public Utilities Commission
with respect to holding companies, in the Utility.
PG&E
Corporation’s 7.50% Convertible Subordinated Notes due 2007
in the aggregate principal amount of $280 million issued on June
25, 2002 (Notes) and the Indenture relating to the Notes have been
amended to delete certain cross-default provisions which provided
that a non-payment or an acceleration of indebtedness of NEG, Inc.
or any of its subsidiaries, or a bankruptcy event with respect to
NEG, Inc. or any of its subsidiaries, constituted a default or
event of default under the Notes and the Indenture. Further,
the Indenture and the Notes have been amended, among other things,
to increase the interest rate on the Notes to 9.5% from 7.5%, to
extend the maturity of the Notes to June 30, 2010, from June 30,
2007, and to provide the holder of the Notes with a one-time right
to require PG&E Corporation to repurchase the Notes on June 30,
2007 at a purchase price equal to the principal amount plus accrued
and unpaid interest (including any liquidated damages and
pass-through dividends, if any).
Item 7. Financial Statements, Pro Forma Financial Information, and
Exhibits
Exhibit No.
Description
of Exhibit
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99.1 |
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Second and Amended Restated Credit Agreement, dated as of
October 18, 2002, among PG&E Corporation, the lenders party
thereto, Lehman Commercial Paper Inc., as Administrative Agent, and
other parties |
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99.2 |
Utility Stock Pledge Agreement
(35%)óContinued Tranche B Loan, dated as of October 18,
2002 |
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99.3 |
Utility Stock Pledge Agreement (35%)—New
Tranche B Loan, dated as of October 18, 2002 |
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99.4 |
Utility Stock Pledge Agreement
(65%)—Continued Tranche B Loan, dated as of October 18,
2002 |
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99.5 |
Utility Stock Pledge Agreement (65%)—New
Tranche B Loan, dated as of October 18, 2002 |
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SIGNATURE |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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PG&E CORPORATION |
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By: CHRISTOPHER P. JOHNS |
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CHRISTOPHER P. JOHNS Senior Vice President
and Controller |
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
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99.1 |
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Second and Amended Restated Credit Agreement, dated as of
October 18, 2002, among PG&E Corporation, the lenders party
thereto, Lehman Commercial Paper Inc., as Administrative Agent, and
other parties |
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99.2 |
Utility Stock Pledge Agreement
(35%)óContinued Tranche B Loan, dated as of October 18,
2002 |
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99.3 |
Utility Stock Pledge Agreement (35%)—New
Tranche B Loan, dated as of October 18, 2002 |
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99.4 |
Utility Stock Pledge Agreement
(65%)—Continued Tranche B Loan, dated as of October 18,
2002 |
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99.5 |
Utility Stock Pledge Agreement (65%)—New
Tranche B Loan, dated as of October 18, 2002 |
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