New York: Leading international law firm Clifford Chance advised four Panamanian subsidiaries (the Operating Companies) of The AES Corporation, a US Fortune 500 power company, on the refinancing of an aggregate US$1.485 billion in existing debt and capital expenditures. The transaction, which closed on Friday, August 14, involved the creation of a Panamanian finance affiliate (the Finance Company), to issue US$1.38 billion worth of 10-year notes at 4.375% (the Notes) and obtain a US$105 million three-year loan (the Loan Facility), and a US$50 million revolving credit facility (the Liquidity Facility). This is the largest bond issuance made by private entity in Panama and the greater Central American and Caribbean region.
The proceeds of the Notes and the Loan Facility were applied to refinance existing debt and fund capital expenditures for the development of renewable energy projects, permitting AES’s subsidiaries in Panama to execute their strategy of providing clean and affordable energy solutions. Payments from the Operating Companies to the Finance Company will be applied to make payments under the Notes, the Loan Facility and, if applicable, the Liquidity Facility.
This landmark transaction features a number of credit-enhancing mechanisms. First, the Liquidity Facility provides liquidity support to the Finance Company in the event of delays or shortfalls in payment from the Operating Companies, providing a layer of protection to holders of the Notes and lenders under the Loan Facility. In addition, the Notes are secured, among other things, by AES’s equity interest in each of the Operating Companies and the dividends payable to AES by the Operating Companies. Â If there is a shortfall in payments from the Operating Companies to the Finance Company, certain dividends payable by the Operating Companies to AES can be applied to make payments on the Notes and the Loan Facility.
The channeling of refinancing debt through a finance affiliate, the Liquidity Facility and the collateral package, provide credit support and permit the Notes to achieve a more favorable credit rating and allowed the Operating Companies to borrow at an investment grade rate, significantly reducing their debt expense.
The cross-practice, cross-office Clifford Chance team was led by New York Capital Markets partner Jon Zonis and also included:
- New York: partners Avrohom Gelber (Tax), Paul Koppel (ERISA) and associates Mariana Estévez (Capital Markets), Jaime Turcios, Dan Borchert (Tax), Atul Jain (ERISA), and law clerk Matthew Cramer;
- Washington, DC: partner Fabricio Longhin and associates Jessica Springsteen, Greg Jehle, Pablo Fekete (Banking & Finance);
- Amsterdam: partner Ilse van Gasteren, associates Amin Tamaddoni and Hugo Van Der Molen (Banking & Finance), and transactional support lawyer Shaun Campbell.
