Item 1.01 Entry into a Material Definitive Agreement.
Underwriting Agreement
On March 5, 2021, The AES Corporation (the "Company") entered into an
Underwriting Agreement (the "Underwriting Agreement") with Citigroup Global
Markets Inc., Goldman Sachs & Co. LLC, BofA Securities, Inc. and Morgan Stanley
& Co. LLC as representatives of the underwriters named therein, related to the
offering, issuance and sale of 10,430,500 of its Equity Units (the "Equity
Units"), including 430,500 Equity Units pursuant to the underwriters' exercise
in part of their option to purchase up to 1,500,000 Equity Units solely to cover
over-allotments. Pursuant to the terms of the Underwriting Agreement, the
Company sold the Equity Units to the underwriters at a price of 97.5% of the
initial public offering price. The Underwriting Agreement contains customary
terms, conditions, representations and warranties and indemnification
provisions.
The offering of the Equity Units was made under the Company's Registration
Statement on Form S-3ASR (File No. 333-229896), which was originally filed with
the Securities and Exchange Commission on February 27, 2019. The Company intends
to use the net proceeds from the offering to develop its renewables business,
U.S. utility businesses, LNG infrastructure and for other developments
determined by management.
The Underwriting Agreement is filed as Exhibit 1.1 to this Current Report on
Form 8-K and is incorporated herein by reference. The description of the terms
of the Underwriting Agreement is qualified in its entirety by reference to such
exhibit.
Purchase Contract Agreement
On March 11, 2021, the Company entered into the Purchase Contract and Pledge
Agreement (the "Purchase Contract Agreement") with Deutsche Bank Trust Company
Americas, as Purchase Contract Agent, Collateral Agent, Custodial Agent and
Securities Intermediary, pursuant to which the Equity Units will be issued. Each
Equity Unit initially consists of a unit referred to as a Corporate Unit (a
"Corporate Unit") with a stated amount of $100 and is comprised of (i) a
purchase contract under which (1) a holder will purchase from the Company, on
February 15, 2024 for $100 cash, a certain number of shares of the Company's
common stock, par value $0.01 per share (the "Common Stock") and (2) the Company
will pay to the holder contract adjustment payments (each a "Purchase Contract"
and collectively the "Purchase Contracts") and (ii) a 1/10th, or 10%, undivided
beneficial interest in one share of 0% Series A Cumulative Perpetual Convertible
Preferred Stock, without par value, with a liquidation preference of $1,000 (the
"Convertible Preferred Stock") convertible into (y) shares of the Company's 0%
Series B Cumulative Perpetual Preferred Stock, without par value, with a
liquidation preference of $1,000 per share (the "Series B Preferred Stock"), or,
solely with respect to conversions in connection with a redemption, into cash
and (z) shares of Common Stock (if any) as described below. The shares of
Convertible Preferred Stock or Applicable Ownership Interest in the Treasury
Portfolio (as defined in the Purchase Contract and Pledge Agreement), as the
case may be, underlying each Corporate Unit are being pledged as collateral to
Deutsche Bank Trust Company Americas, as Collateral Agent, to secure the
obligation of the holders of the Corporate Units to the Company to purchase the
shares of the Company's Common Stock under the Purchase Contracts. The Purchase
Contract Agreement includes customary agreements and covenants by the Company.
Holders of Corporate Units may create "Treasury Units" or "Cash Settled Units"
from their Corporate Units as provided in the Purchase Contract Agreement by
substituting Treasury securities or cash, respectively, for the Convertible
Preferred Stock comprising a part of the Corporate Units. Holders of Equity
Units will be entitled to receive, quarterly in arrears on February 15, May 15,
August 15 and November 15 of each year, commencing on May 15, 2021,
distributions consisting of contract adjustment payments of 6.875% per year on
the stated amount of $100 per Equity Unit, which will accrue from March 11, 2021
and will be payable by the Company in cash, shares of Common Stock or a
combination of cash and shares of Common Stock, at the Company's election,
unless the Company has irrevocably elected a contract adjustment payment method
to apply.
The Purchase Contract Agreement and the Forms of Corporate Unit, Treasury Unit
and Cash Settled Unit representing the Equity Units are filed as Exhibits 4.1,
4.2, 4.3 and 4.4 to this Current Report on Form 8-K, respectively, and are
incorporated by reference herein. The descriptions of the material terms of the
Purchase Contract Agreement and the Forms of Corporate Unit, Treasury Unit and
Cash Settled Unit representing the Equity Units are qualified in their entirety
by reference to such exhibits.
Deutsche Bank Trust Company Americas is the trustee for certain of the Company's
outstanding notes. Deutsche Bank Trust Company Americas and its affiliates have,
from time to time, performed, and may in the future perform, other financial,
banking and other services for the Company, for which they received or will
receive customary fees and expenses.
Item 3.03 Material Modification to Rights of Security Holders.
The information included in Item 5.03 below is incorporated herein by
reference.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
Convertible Preferred Stock
On March 10, 2021, the Company filed a Certificate of Designations (the
"Convertible Preferred Stock Certificate of Designations") with the Secretary of
State of Delaware to establish the preferences, limitations and relative rights
of the Convertible Preferred Stock, which became effective upon filing. The
Convertible Preferred Stock will have an initial conversion rate of 31.5428
shares of Common Stock per share of the Convertible Preferred Stock, equivalent
to an initial conversion price of approximately $31.70, subject to adjustment.
The initial conversion price represents a premium of approximately 22.5% above
the closing price of the Common Stock on March 4, 2021. Each share of
Convertible Preferred Stock may be converted only after being separated from the
Equity Units and, prior to February 15, 2024, only upon the occurrence of
certain fundamental change events if such fundamental change events occur prior
to a successful remarketing of the Convertible Preferred Stock. Upon any such
conversion, the Company will deliver in respect of each $1,000 liquidation
preference of the Convertible Preferred Stock being converted (i) one share of
the Series B Preferred Stock or, solely with respect to conversions in
connection with a redemption, up to $1,000 in cash and (ii) shares of Common
Stock, if any, in respect of any conversion value in excess of the liquidation
preference of the Convertible Preferred Stock being converted.
The Convertible Preferred Stock is expected to be remarketed during either an
optional remarketing period beginning on, and including, November 15, 2023 and
ending on, and including, February 1, 2024 or a final remarketing period
beginning on, and including, February 7, 2024 and ending on, and including,
February 13, 2024. Upon any successful remarketing, dividends may become payable
on the Convertible Preferred Stock, the conversion rate of the Convertible
Preferred Stock may be increased, and the earliest redemption date for the
Convertible Preferred Stock may be changed to a later date that is on or prior
to March 21, 2025.
The Convertible Preferred Stock will initially not bear any dividends and the
liquidation preference of the Convertible Preferred Stock will not accrete. In
connection with a successful remarketing of the Convertible Preferred Stock,
dividends may become payable on the Convertible Preferred Stock. The Company may
elect to pay dividends, if any, on the Convertible Preferred Stock in cash,
shares of Common Stock, or a combination of cash and shares of Common Stock, at
the Company's election, unless the Company has previously irrevocably elected a
dividend payment method to apply. The Convertible Preferred Stock is perpetual,
but the Company may redeem all or any portion of the outstanding Convertible
Preferred Stock on or after March 22, 2024 (which date may be changed to a later
date as described above), at a redemption price equal to 100% of the liquidation
preference thereof, plus any accumulated and unpaid dividends (whether or not
authorized or declared), which will only accrue if the dividend rate of the
Convertible Preferred Stock is increased upon a successful remarketing. If any
shares of Convertible Preferred Stock are redeemed, the Company must also redeem
a proportionate number of outstanding shares of Series B Preferred Stock, if
any, on the same redemption date.
Upon any voluntary or involuntary liquidation, dissolution or winding up of the
Company, before any distribution or payment shall be made to holders of Common
Stock or any other class or series of capital stock ranking, as to rights upon
any voluntary or involuntary liquidation, dissolution or winding up of the
Company, junior to the Convertible Preferred Stock, holders of the Convertible
Preferred Stock are entitled to be paid out of the Company's assets legally
available for distribution to its stockholders, after payment of or provision
for the Company's debts and other liabilities, a liquidation preference of
$1,000 per share of the Convertible Preferred Stock, plus an amount equal to any
accumulated but unpaid dividends (whether or not declared) (which will only
accrue if the dividend rate of the Convertible Preferred Stock is increased upon
a successful remarketing) up to but excluding the date of payment, but subject
to the prior payment in full of all of the Company's liabilities and the payment
of the Company's senior stock.
The Convertible Preferred Stock Certificate of Designations became effective
upon filing, and a copy is filed as Exhibit 3.1 to this Current Report on Form
8-K. The above description of the Convertible Preferred Stock Certificate of
Designations is a summary and, as such, does not purport to be complete and is
qualified in its entirety by reference to the full text of the Convertible Stock
Certificate of Designations, which is incorporated herein by reference. A
specimen certificate representing the Convertible Preferred Stock Preferred
Stock is filed as Exhibit 4.5 to this Current Report on Form 8-K and is
incorporated herein by reference.
Series B Preferred Stock
On March 10, 2021, the Company filed a Certificate of Designations (the "Series
B Preferred Stock Certificate of Designations") with the Secretary of State of
Delaware to establish the preferences, limitations and relative rights of the
Series B Preferred Stock, which became effective upon filing.
The Series B Preferred Stock initially will not bear any dividends and the
liquidation preference of the Series B Preferred Stock will not accrete.
Following a successful remarketing of the Convertible Preferred Stock, dividends
may become payable on the Convertible Preferred Stock at a dividend rate to be
determined in connection with such successful remarketing, in which case the
Series B Preferred Stock will bear dividends at the same rate as the Convertible
Preferred Stock payable on the same dates as the Convertible Preferred Stock in
cash, shares of Common Stock, or a combination of cash and shares of Common
Stock, at the Company's election, unless the Company has previously irrevocably
elected a dividend payment method to apply. The Series B Preferred Stock is
perpetual, but the Company may redeem all or any portion of the outstanding
Series B Preferred Stock on or after March 22, 2024 (which date may be changed
to a later date that is on or prior to March 21, 2025 in connection with a
successful remarketing of the Convertible Preferred Stock), at a redemption
price equal to 100% of the liquidation preference thereof, plus any accumulated
and unpaid dividends (whether or not authorized or declared), which will only
accrue if the dividend rate of the Series B Preferred Stock is increased upon a
successful remarketing of the Convertible Preferred Stock. If any shares of
Series B Preferred Stock are redeemed, the Company must also redeem a
proportionate number of outstanding shares of Convertible Preferred Stock, if
any, on the same redemption date.
Upon any voluntary or involuntary liquidation, dissolution or winding up of the
Company, before any distribution or payment shall be made to holders of shares
of Common Stock or any other class or series of capital stock ranking, as to
rights upon any voluntary or involuntary liquidation, dissolution or winding up
of the Company junior to the Series B Preferred Stock, holders of shares of
Series B Preferred Stock are entitled to be paid out of the Company's assets
legally available for distribution to the Company's stockholders, after payment
of or provision for the Company's debts and other liabilities, a liquidation
preference of $1,000 per share of Series B Preferred Stock, plus an amount equal
to any accumulated but unpaid dividends (whether or not authorized or declared)
up to but excluding the date of payment, but subject to the prior payment in
full of all of the Company's liabilities and the payment of its senior stock.
The Series B Preferred Stock Certificate of Designations became effective upon
filing, and a copy is filed as Exhibit 3.2 to this Current Report on Form 8-K.
The above description of the Series B Preferred Stock Certificate of
Designations is a summary and, as such, does not purport to be complete and is
qualified in its entirety by reference to the full text of the Series B
Preferred Stock Certificate of Designations, which is incorporated herein by
reference. A specimen certificate representing the Series B Preferred Stock is
filed as Exhibit 4.6 to this Current Report on Form 8-K and is incorporated
herein by reference.
Item 9.01 Financial Statements and Exhibits.
The following material is filed as an exhibit to this Current Report on Form
8-K:
(d) Exhibits
Exhibit No. Description
1.1 Underwriting Agreement, dated March 5, 2021, among the Company
and Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, BofA
Securities, Inc. and Morgan Stanley & Co. LLC, as
representatives of the underwriters named therein relating to
the offering of the Equity Units
3.1 Certificate of Designations of the Company with respect to the
Convertible Preferred Stock, filed with the Secretary of State
of the State of Delaware and effective March 10, 2021
3.2 Certificate of Designations of the Company with respect to the
Series B Preferred Stock, filed with the Secretary of State of
the State of Delaware and effective March 10, 2021
4.1 Purchase Contract and Pledge Agreement, dated March 11, 2021,
between the Company and Deutsche Bank Trust Company Americas, as
purchase contract agent, collateral agent, custodial agent and
securities intermediary.
4.2 Form of Corporate Unit (included as part of Exhibit 4.1
hereto)
4.3 Form of Treasury Unit (included as part of Exhibit 4.1
hereto)
4.4 Form of Cash Settled Unit (included as part of Exhibit 4.1
hereto)
4.5 Form of Series A Cumulative Perpetual Convertible Preferred
Stock Certificate
4.6 Form of Series B Cumulative Perpetual Preferred Stock
Certificate
5.1 Opinion of Davis Polk & Wardwell LLP
23.1 Consent of Davis Polk & Wardwell LLP (included as part of
Exhibit 5.1)
104 Cover Page Interactive Data File (formatted as inline XBRL).
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