SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: March 2, 2001
PG&E Corporation
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(Exact Name of Registrant as Specified in its Charter)
California 1-12609 94-3234914
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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)
(415) 267-7000
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(Registrant's telephone number, including area code)
Item 5. Other Events.
As previously reported, PG&E Corporation has defaulted on several of its
debt obligations, including commercial paper, borrowings under its long-
term revolving credit facility, and its fourth quarter 2000 common stock
dividend payable to PG&E Corporation shareholders of record as of
December 15, 2000.
On March 2, 2001, PG&E Corporation refinanced its debt obligations with
the $1 billion aggregate proceeds of two term loans under a common
credit agreement with General Electric Capital Corporation and Lehman
Commercial Paper Inc. In accordance with the credit agreement, the
proceeds, together with other PG&E Corporation cash, were used to pay
$501 million in commercial paper (including $457 million of commercial
paper on which PG&E Corporation had defaulted), $434 million in
borrowings under PG&E Corporation's long-term revolving credit facility,
and $116 million to PG&E Corporation shareholders of record as of
December 15, 2000, in satisfaction of the defaulted fourth quarter 2000
dividend. Further, approximately $85 million was used to pre-pay the
first year's interest under the credit agreement and to pay transaction
expenses associated with the debt restructuring.
The loan will mature on March 2, 2003 (which date may be extended at the
option of PG&E Corporation, for up to one year upon payment of a fee of
up to 5% of the then outstanding indebtedness), or earlier, if a spin-
off of the shares of PG&E National Energy Group, Inc. (NEG, Inc.) were
to occur. The shares of NEG, Inc. are owned directly by PG&E National
Energy Group, LLC, a Delaware limited liability company (NEG LLC), and
are wholly owned by PG&E Corporation. As required by the credit
agreement, PG&E Corporation has given the lenders a security interest in
PG&E Corporation's membership interest in NEG LLC and NEG LLC has given
the lenders a security interest in the shares of NEG, Inc. PG&E
Corporation may incur certain unsecured indebtedness, including
indebtedness that is rated at least BBB- by Standard & Poor's or Baa3 by
Moody's Investor Service, Inc. and meets certain other requirements.
Further, as required by the credit agreement, NEG LLC has granted to
affiliates of the lenders an option that entitles these affiliates to
purchase 2 to 3 percent of the shares of NEG, Inc. (depending on how
long the loans are outstanding) at an exercise price of $1.00. The
percentage will be calculated on a fully diluted basis as of the date of
full repayment of the loans. The option becomes exercisable on the date
of full repayment or, earlier, if an initial pubic offering of the
shares of NEG, Inc. ("IPO") were to occur. NEG LLC has the right to
call the option in cash at a purchase price equal to the fair market
value of the underlying shares, which right is exercisable at any time
following the repayment of the loans. If an IPO has not occurred, the
holders of the option have the right to require NEG LLC or PG&E
Corporation to repurchase the option at a purchase price equal to the
fair market value of the underlying shares, which right is exercisable
at any time after the earlier of full repayment of the loans or 45 days
before expiration of the option. The option will expire 45 days after
the maturity of the loans.
Under the credit agreement, NEG, Inc. is permitted to make investments,
incur indebtedness, sell assets and operate its businesses pursuant to
its business plan. Mandatory repayment of the loans will be required
from the net after tax proceeds received by NEG LLC, NEG, Inc., and any
subsidiary of NEG, Inc., from (i) the issuance of indebtedness, (ii) the
issuance or sale of any equity (except for cash proceeds from an IPO),
(iii) asset sales, and (iv) casualty insurance, condemnation awards or
other recoveries. However, if such proceeds are retained as cash, used
to pay indebtedness, or reinvested in NEG, Inc.'s businesses, mandatory
repayment will not be required.
Any net proceeds from an IPO must be used to reduce the outstanding
balance of the loans to $500 million or less. In addition, all
distributions made by NEG LLC to PG&E Corporation (other than to
reimburse PG&E Corporation for (i) corporate overhead expenses, (ii)
pursuant to any tax sharing arrangements to which NEG LLC and PG&E
Corporation are parties, and (iii) any note that may be payable to PG&E
Corporation in connection with an IPO and similar arrangements) must be
used to pay the loans.
The credit agreement also prohibits PG&E Corporation from taking certain
actions, including a restriction against declaring or paying any
dividends for as long as the loans are outstanding. A breach of
covenants, including requirements that (i) NEG, Inc.'s unsecured long
term debt have a credit rating of at least BBB- by Standard & Poor's or
Baa3 by Moody's Investor Service, Inc., (ii) the ratio of fair market
value of NEG, Inc. to the aggregate amount of principal then outstanding
under the loans is not less than 2 to 1, and (iii) PG&E Corporation
maintain a cash or cash equivalent reserve of at least 15 percent of the
total principal amount of the loans outstanding, entitles the lenders to
declare the loans to be due and payable.
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.
PG&E CORPORATION
By: CHRISTOPHER P. JOHNS
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CHRISTOPHER P. JOHNS
Vice President and Controller
Dated: March 2, 2001