Exhibit G-2
RESTRICTIONS ON INDEBTEDNESS IN CNP GROUP BANK FACILITIES
CenterPoint Energy, Inc. ("CenterPoint"), CenterPoint Energy Houston Electric
(the "T&D Utility") and CenterPoint Energy Resources Corp. ("GasCo") are each
subject to provisions in their bank facilities that limit their ability to raise
additional debt.
A. CenterPoint
In the $3,850,000,000 Amended and Restated Credit Agreement, dated as
of October 10, 2002, among CenterPoint, the banks and other financial
institutions from time to time parties thereto, Citibank, N.A., as syndication
agent and JPMorgan Chase Bank, as administrative agent, as amended by the First
Amendment to Credit Agreement, dated December 5, 2002, and the Second Amendment
to Credit Agreement, dated February 28, 2003 (the "CNP Credit Agreement"),
CenterPoint is subject to restrictions on additional group indebtedness in the
form of a coverage ratios covenant and a mandatory prepayment obligation. In
addition, under the CNP Credit Agreement, aggregate indebtedness at Texas Genco
Holdings, Inc. and its subsidiaries (the "Texas Genco entities") is limited by
means of a negative covenant setting a maximum aggregate amount of debt that may
be outstanding at any time.
1. Coverage Ratios Covenant
Under the coverage ratios covenant, CenterPoint must not permit at any
time (i) the ratio of Consolidated Indebtedness for Borrowed Money at such time
to Consolidated EBITDA for the most recently ended twelve-month period to exceed
3.75:1.00 or (ii) the ratio of Consolidated EBITDA for the most recently ended
twelve-month period to Adjusted Interest Expense for such period to be less than
1.75:1.00.
"Consolidated Indebtedness" means, as of any date of determination, the
sum of (i) the total Indebtedness as shown on the consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries, determined without duplication
of any Guarantee of Indebtedness of the Borrower by any of its Consolidated
Subsidiaries or of any Guarantee of Indebtedness of any such Consolidated
Subsidiary by the Borrower or any other Consolidated Subsidiary of the Borrower,
plus (ii) any Mandatory Payment Preferred Stock, less (iii) the amount of
Indebtedness described in clause (i) attributable to amounts then outstanding
under receivables facilities or arrangements to the extent that such amounts
would not have been shown as Indebtedness on a balance sheet prepared in
accordance with GAAP prior to January 1, 1997, less (iv) the aggregate amount of
liabilities in respect of any Indexed Debt Securities as shown on the
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries,
less (v) the present value of the projected recovery, pursuant to applicable
legislation and agreement, of the (a) net amount of stranded costs, (b) the
market value of generating assets and (c) certain power market price and fuel
cost recovery true-ups, determined in a manner substantially consistent with the
calculations set forth on a schedule to the CNP Credit Agreement.
"Borrowed Money" of any Person means any Indebtedness of such Person
for or in respect of money borrowed or raised by whatever means (including
acceptances, deposits, lease obligations under Capital Leases, Mandatory Payment
Preferred Stock and synthetic leases);
provided, however, that Borrowed Money shall not include (a) any guarantees that
may be incurred by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business or similar transactions, (b) any
obligations or guarantees of performance of obligations under a franchise,
performance bonds, franchise bonds, obligations to reimburse drawings under
letters of credit issued in accordance with the terms of any safe harbor lease
or franchise or in lieu of performance or franchise bonds or other obligations
incurred in the ordinary course of business that do not represent money borrowed
or raised, in each case to the extent that such reimbursement obligations are
payable in full within ten (10) Business Days after the date upon which such
obligation arises, (c) trade payables, (d) any obligations of such Person under
Swap Agreements, (e) customer advance payments and deposits arising in the
ordinary course of business or (f) operating leases.
"Consolidated EBITDA" means, for any twelve-month period ending on the
date of determination, Consolidated Net Income for such period plus, without
duplication and to the extent reflected as a charge in the statement of such
Consolidated Net Income for such period, the sum of (a) income tax expense, (b)
interest expense, amortization or writeoff of debt discount and debt issuance
costs and commissions, discounts and other fees and charges associated with
Indebtedness (including the Loans) and amortization of settlement payments
previously made on forward-starting Swap Agreements, (c) depreciation and
amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (e) any extraordinary, unusual or
non-recurring expenses or losses (including, whether or not otherwise includable
as a separate item in the statement of such Consolidated Net Income for such
period, losses on sales of assets outside of the ordinary course of business),
(f) any other non-cash charges and (g) Pre-Tax ECOM, and minus, to the extent
included as income in the statement of such Consolidated Net Income for such
period, the sum of (a) interest income, (b) any extraordinary, unusual or
non-recurring income or gains (including, whether or not otherwise includable as
a separate item in the statement of such Consolidated Net Income for such
period, gains on the sales of assets outside of the ordinary course of
business), (c) any other non-cash income, (d) Pre-Tax Securitization Principal
and Interest and (e) Pre-Tax Excess Mitigation Credit and Pre-Tax ECOM, all as
determined on a consolidated basis.
"Adjusted Interest Expense" means, for any period, the difference
between (a) total interest expense (including that attributable to Capital Lease
obligations and capitalized interest) determined in accordance with GAAP of the
Borrower and its Subsidiaries for such period with respect to all outstanding
Indebtedness of the Borrower and its Subsidiaries (including all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financings and net costs under Swap Agreements in respect of
interest rates to the extent such net costs are allocable to such period in
accordance with GAAP) less (b) the sum of the following for such period (i)
total interest income determined in accordance with GAAP and (ii) (but only to
the extent included in the amount calculated pursuant to clause (a) above): (x)
interest expense on Hybrid Preferred Securities, (y) interest expense in respect
of the securitization programs of the Borrower and its Subsidiaries set forth on
a schedule to the CNP Credit Agreement and (z) amortization of settlement
payments previously made on forward-starting Swap Agreements and of any upfront
fees and other costs associated with financings for the Borrower and its
Subsidiaries.
2. Mandatory Prepayment Obligations
Under the CNP Credit Agreement, CenterPoint is required to prepay 100%
of the Net Cash Proceeds of any Capital Stock or Indebtedness issued or incurred
by the Borrower or any of its Subsidiaries (other than Excluded Transactions).
"Net Cash Proceeds," in relation to any issuance or sale of Capital
Stock or any incurrence of Indebtedness for Borrowed Money, means the cash
proceeds received from such issuance or incurrence, net of (i) attorneys' fees,
investment banking fees, accountants' fees, underwriting discounts, escrow fees,
reserves, related swap costs and commissions and other customary fees and
expenses actually incurred in connection therewith and other similar payment
obligations resulting therefrom (other than the obligations under the CNP Credit
Agreement) that are required to be paid concurrently or otherwise as a result of
such issuance or incurrence and (ii) other amounts that are to be refinanced or
otherwise paid with all or part of the proceeds thereof.
"Indebtedness" of any Person means the sum of (a) all items (other than
Capital Stock, capital surplus and retained earnings) that, in accordance with
GAAP consistently applied, would be included in determining total liabilities as
shown on the liability side of a balance sheet of such Person as at the date on
which the Indebtedness is to be determined, (b) all obligations of the Borrower
or any Subsidiary, contingent or otherwise, as account party or applicant (or
equivalent status) in respect of any standby letters of credit or equivalent
instruments, and (c) without duplication, the amount of all Guarantees by such
Person of items described in clauses (a) and (b); provided, however, that
Indebtedness of a Person shall not include (i) any Junior Subordinated Debt
owned by any Hybrid Preferred Securities Subsidiary, (ii) any Guarantee by the
Borrower or its Subsidiaries of payments with respect to any Hybrid Preferred
Securities or (iii) any Securitization Securities.
"Excluded Transactions" means the incurrence or issuance by the
Borrower and its Subsidiaries of the following:
(a) Indebtedness for Borrowed Money in respect of any refinancing,
refunding, remarketing, renewal or extension (on or prior to the maturity
thereof) of (without any increase in the principal amount thereof plus any
expenses (including any redemption premium, penalty, broken funding, settlement
and other costs) or any shortening of the final maturity thereof) Indebtedness
for Borrowed Money outstanding on the Closing Date (and any refinancing,
refunding, remarketing, renewal or extension thereof) and additional
Indebtedness for Borrowed Money incurred by (x) GasCo and/or its Subsidiaries in
an aggregate principal amount not to exceed $200,000,000 outstanding at any time
and (y) the Borrower and/or its Subsidiaries (including, without limitation,
GasCo and its Subsidiaries) in an aggregate principal amount not to exceed
$250,000,000 outstanding at any time;
(b) Intercompany Indebtedness;
(c) Indebtedness permitted hereunder to the extent constituting
(i) the issuance by the Borrower or any of its Subsidiaries of commercial paper,
(ii) any backup credit or liquidity facilities in respect of any such commercial
paper issuance, (iii) other short-term
instruments in lieu of the issuance of commercial paper, (iv) letters of credit
issued for the account of the Borrower or any of its Subsidiaries in respect of
any of the foregoing and (v) drawings on letters of credit, bonds or similar
obligations permitted under this Agreement if the proceeds are applied to the
underlying obligation secured or supported thereby;
(d) Indebtedness of the Borrower pursuant to the Loan Documents;
(e) Indebtedness in respect of performance, surety and similar
bonds and completion guarantees provided by the Borrower or any of its
Subsidiaries in the ordinary course of business;
(f) Indebtedness in respect of Capital Leases entered into by the
Borrower or any of its Subsidiaries in the ordinary course of business;
(g) Indebtedness in respect of Swap Agreements entered into in the
ordinary course of business and not entered into for speculative purposes;
(h) Capital Stock to employees, directors or consultants of the
Borrower or any of its Subsidiaries under, or upon the exercise of any warrants,
options, conversion rights or other rights in respect of, any employee stock
option plan, other employee benefit or compensation plans, dividend reinvestment
plans, including the Borrower's Investors Choice Plan, or arrangements of the
Borrower or any of its Subsidiaries existing on the Closing Date;
(i) Capital Stock issued by any Subsidiary of the Borrower solely
to the Borrower or any of its Subsidiaries; and
(j) Capital Stock of the Borrower to the extent issued as
consideration to effect acquisitions permitted under Section 8.2(g) and expenses
incurred in connection therewith.
"Subsidiary" means, as to any Person, a corporation, partnership,
limited liability company or other entity of which more than 50% of the
outstanding shares of Capital Stock or other ownership interests having ordinary
voting power (other than Capital Stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect directors
or other managers of such corporation, partnership or other entity are at the
time owned, directly or indirectly, through one or more Subsidiaries of such
Person, by such Person; provided, however, that no Securitization Subsidiary
shall be deemed to be a Subsidiary for purposes of the CNP Credit Agreement.
3. Texas Genco Entities
In the CNP Credit Agreement, CenterPoint further covenants that it will
not permit the Texas Genco entities to incur aggregate Indebtedness for Borrowed
Money in excess of $250,000,000.
B. T&D Utility
In the $1,310,000,000 Credit Agreement, dated as of November 12, 2002,
among the T&D Utility, the banks and other lenders from time to time parties
thereto and Credit Suisse First
Boston, as administrative agent, (the "T&D Utility Credit Agreement"), the T&D
Utility is subject to restrictions on additional indebtedness in the form of a
leverage ratio covenant and a mandatory prepayment obligation.
1. Leverage Ratio Covenant
Under the leverage ratio covenant, the T&D Utility must maintain a
ratio of Consolidated Indebtedness for Borrowed Money to Consolidated
Capitalization of no greater than 0.68:1
"Consolidated Indebtedness" means, as of any date of determination, the sum of
(i) the total Indebtedness as shown on the consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries, determined without duplication of
any Guarantee of Indebtedness of the Borrower by any of its Consolidated
Subsidiaries or of any Guarantee of Indebtedness of any such Consolidated
Subsidiary by the Borrower or any other Consolidated Subsidiary of the Borrower,
plus (ii) any Mandatory Payment Preferred Stock.
"Borrowed Money" of any Person means any Indebtedness of such Person
for or in respect of money borrowed or raised by whatever means (including
acceptances, deposits, lease obligations under Capital Leases, Mandatory Payment
Preferred Stock and synthetic leases); provided, however, that Borrowed Money
shall not include (a) any guarantees that may be incurred by endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business or similar transactions, (b) any obligations or guarantees of
performance of obligations under a franchise, performance bonds, franchise
bonds, obligations to reimburse drawings under letters of credit issued in
accordance with the terms of any safe harbor lease or franchise or in lieu of
performance or franchise bonds or other obligations incurred in the ordinary
course of business that do not represent money borrowed or raised, in each case
to the extent that such reimbursement obligations are payable in full within ten
(10) Business Days after the date upon which such obligation arises, (c) trade
payables, (d) any obligations of such Person under Swap Agreements, (e) customer
advance payments and deposits arising in the ordinary course of business or (f)
operating leases.
"Consolidated Capitalization" means, as of any date of determination,
the sum of (a) Consolidated Shareholders' Equity, (b) Consolidated Indebtedness
for Borrowed Money and, without duplication, (c) Mandatory Payment Preferred
Stock; provided that for the purpose of calculating compliance with Section
8.2(a), Consolidated Capitalization shall be determined excluding any
adjustment, non-cash charge to net income or other non-cash charges or writeoffs
resulting thereto from application of SFAS No. 142.
2. Mandatory Prepayments
Under the T&D Utility Credit Agreement, the T&D Utility is required to
prepay 100% of the Net Cash Proceeds of any Capital Stock or Indebtedness issued
or incurred by the Borrower or any of its Subsidiaries (other than Excluded
Transactions).
"Net Cash Proceeds," in relation to any issuance or sale of Capital
Stock or any incurrence of Indebtedness for Borrowed Money, means the cash
proceeds received from such issuance or incurrence, net of (i) attorneys' fees,
investment banking fees, accountants' fees, underwriting discounts, escrow fees,
reserves, related swap costs and commissions and other
customary fees and expenses actually incurred in connection therewith and other
similar payment obligations resulting therefrom (other than the obligations
under the CNP Credit Agreement) that are required to be paid concurrently or
otherwise as a result of such issuance or incurrence and (ii) other amounts that
are to be refinanced or otherwise paid with all or part of the proceeds thereof.
"Indebtedness" of any Person means the sum of (a) all items (other than
Capital Stock, capital surplus and retained earnings) that, in accordance with
GAAP consistently applied, would be included in determining total liabilities as
shown on the liability side of a balance sheet of such Person as at the date on
which the Indebtedness is to be determined, (b) all obligations of the Borrower
or any Subsidiary, contingent or otherwise, as account party or applicant (or
equivalent status) in respect of any standby letters of credit or equivalent
instruments, and (c) without duplication, the amount of all Guarantees by such
Person of items described in clauses (a) and (b); provided, however, that
Indebtedness of a Person shall not include (i) any Junior Subordinated Debt
owned by any Hybrid Preferred Securities Subsidiary, (ii) any Guarantee by the
Borrower or its Subsidiaries of payments with respect to any Hybrid Preferred
Securities or (iii) any Securitization Securities.
"Excluded Transactions" means the incurrence or issuance by the
Borrower and its Subsidiaries of the following:
(a) Indebtedness in respect of any refinancing refundings,
renewals or extensions (on or prior to the maturity thereof) of (without any
increase in the principal amount thereof plus any expenses (including any
redemption premium or penalty) or any shortening of the final maturity thereof)
Indebtedness outstanding on the Closing Date (excluding Indebtedness in respect
of the Reliant Energy FinanceCo II LP 7.40% Senior Notes due November 15, 2002
and the Existing Credit Facilities);
(b) Intercompany Indebtedness;
(c) Indebtedness permitted hereunder to the extent constituting
(i) the issuance by the Borrower or any of its Subsidiaries of commercial paper,
(ii) any backup credit or liquidity facilities in respect of any such commercial
paper issuance, (iii) other short-term instruments in lieu of the issuance of
commercial paper, (iv) letters of credit issued for the account of the Borrower
or any of its Subsidiaries in respect of any of the foregoing and (v) drawings
on letters of credit, bonds or similar obligations permitted under this
Agreement if the proceeds are applied to the underlying obligation secured or
supported thereby;
(d) Indebtedness of the Borrower in respect of the Loans and the
Pledged Bonds;
(e) Indebtedness in respect of performance, surety and similar
bonds and completion guarantees provided by the Borrower or any of its
Subsidiaries in the ordinary course of business;
(f) Indebtedness in respect of Capital Leases entered into by the
Borrower or any of its Subsidiaries in the ordinary course of business;
(g) Indebtedness in respect of Swap Agreements entered into in the
ordinary course of business and not entered into for speculative purposes;
(h) Capital Stock to employees, directors or consultants of the
Borrower or any of its Subsidiaries under, or upon the exercise of any warrants,
options, conversion rights or other rights in respect of, any employee stock
option plan, other employee benefit or compensation plans, dividend reinvestment
plans, including CenterPoint's Investors Choice Plan, or arrangements of the
Borrower or any of its Subsidiaries existing on the Closing Date;
(i) Capital Stock issued by any Subsidiary of the Borrower solely
to the Borrower or any of its Subsidiaries;
(j) Capital Stock of the Borrower to the extent issued as
consideration to effect acquisitions permitted under Section 8.2(g) and expenses
incurred in connection therewith; and
(k) Indebtedness incurred by the Borrower or any of its
Subsidiaries after the date hereof at any time outstanding in aggregate
principal amount not to exceed $300,000,000.
"Subsidiary" means, as to any Person, a corporation, partnership,
limited liability company or other entity of which more than 50% of the
outstanding shares of Capital Stock or other ownership interests having ordinary
voting power (other than Capital Stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect directors
or other managers of such corporation, partnership or other entity are at the
time owned, directly or indirectly, through one or more Subsidiaries of such
Person, by such Person; provided, however, that no Securitization Subsidiary
shall be deemed to be a Subsidiary for purposes of the T&D Utility Credit
Agreement.
X. XxxXx
In the $200,000,000 Credit Agreement, dated as of March 25, 2003, among
GasCo, the banks, financial institutions and other institutional lenders listed
on the signature pages thereof, Xxxxxxx Xxxxx Xxxxxx Inc. and X.X. Xxxxxx
Securities Inc. as lead arrangers and as joint bookrunners, Wachovia Bank,
National Association and Banc One Capital Markets, Inc., as syndication agents,
Credit Suisse First Boston, Cayman Islands Branch, as documentation agent,
Citicorp North America, Inc., as collateral agent and Citicorp USA, Inc., as
administrative agent (the "GasCo Credit Agreement"), GasCo is subject to
restrictions on additional indebtedness in the form of a leverage ratio covenant
and a coverage ratio covenant.
A. Leverage Ratio Covenant
Under the leverage ratio covenant, GasCo must maintain a ratio of Total
Debt for Borrowed Money to Consolidated Capitalization of no greater than
0.68:1.
"Total Debt" means, as of any date of determination, the sum of (i) the
total Indebtedness for Borrowed Money as shown on the consolidated balance sheet
of Borrower and its Consolidated Subsidiaries, determined without duplication of
any Guarantee of Indebtedness for Borrowed Money of Borrower by any of its
Consolidated Subsidiaries or of any Guarantee of
Indebtedness of any such Consolidated Subsidiary by Borrower or any other
Consolidated Subsidiary of Borrower, and any Mandatory Payment Preferred Stock,
less (ii) such amount of Indebtedness for Borrowed Money attributable to amounts
then outstanding under receivables facilities or arrangements to the extent that
such amount would not have been shown as Indebtedness for Borrowed Money on a
balance sheet prepared in accordance with GAAP prior to January 1, 1997, less
(iii) with respect to any Indexed Debt Securities that are Fully Hedged and the
liabilities in respect of which as shown on the consolidated balance sheet of
Borrower and its Consolidated Subsidiaries have increased from the amount of
liabilities in respect thereof at the time of their issuance by reason of an
increase in the price of the Indexed Asset relating thereto, the excess of (a)
the aggregate amount of liabilities in respect of such Indexed Debt Securities
at the time of determination over (b) the initial amount of liabilities in
respect of such Indexed Debt Securities at the time of their issuance, provided
that at the time of determination such increase in the price of the Indexed
Asset relating to such Indexed Debt Securities has not been recorded on such
consolidated balance sheet, less (iv) funds segregated to repay bonds maturing
in November, 2003, and less (v) Non-Recourse Debt of the Borrower and its
Subsidiaries.
"Borrowed Money" of any Person means any Indebtedness of such Person
for or in respect of money borrowed or raised by whatever means (including
acceptances, deposits and lease obligations under Capital Leases); provided,
however, that Borrowed Money shall not include (a) any guarantees that may be
incurred by endorsement of negotiable instruments for deposit or collection in
the ordinary course of business or similar transactions, (b) any obligations or
guarantees of performance of obligations under a franchise, performance bonds,
franchise bonds, obligations to reimburse drawings under letters of credit
issued in accordance with the terms of any safe harbor lease or franchise or in
lieu of performance or in lieu of franchise bonds or other obligations that do
not represent money borrowed or raised, which reimbursement obligations in each
case shall be payable in full within ten (10) Business Days after the date upon
which such obligation arises, (c) trade payables, (d) customer advance payments
and deposits arising in the ordinary course of such Person's business, (e)
operating leases and (f) obligations under swap agreements.
"Consolidated Capitalization" means the sum of (a) Consolidated
Shareholders' Equity, (b) Consolidated Indebtedness for Borrowed Money and (c)
without duplication, any Mandatory Payment Preferred Stock.
B. Coverage Ratio Covenant
Under the coverage ratio covenant, GasCo must maintain a ratio of
EBITDA to Cash Interest for the immediately preceding four calendar quarters of
no less than 2.25:1.00.
"EBITDA" means, for any period, net income (or net loss) plus the sum
of (a) interest expense, (b) income tax expense, (c) depreciation expense, (d)
amortization expense and (e) to the extent reflected as a charge in the
computation of net income for such period, any other non-cash charges, in each
case determined in accordance with GAAP for such period.
"Cash Interest" means interest expense of the Borrower and its
Subsidiaries, to the extent actually paid in cash, during the relevant period.
