Entergy 2006 Annual Report Download - page 88

ENTERGY CORPORATION AND SUBSIDIARIES 2
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The credit facilities have variable interest rates and the average
commitment fee is 0.13%. The Entergy Arkansas credit facility
requires that it maintain total shareholders’ equity of at least 25% of
its total assets.
ENTERGY NEW ORLEANS DEBTOR-IN-POSSESSION CREDIT AGREEMENT
On September 26, 2005, Entergy New Orleans, as borrower, and
Entergy Corporation, as lender, entered into the Debtor-in-Possession
(DIP) credit agreement, a debtor-in-possession credit facility to
provide funding to Entergy New Orleans during its business restora-
tion efforts. On December 9, 2005, the bankruptcy court issued
its final order approving the DIP Credit Agreement. The credit
facility provides for up to $200 million in loans. The facility enables
Entergy New Orleans to request funding from Entergy Corporation,
but the decision to lend money is at the sole discretion of
Entergy Corporation. As of December 31, 2006, Entergy New
Orleans had $52 million of outstanding borrowings under the DIP
credit agreement.
Borrowings under the DIP credit agreement are due in full, and the
agreement will terminate, at the earliest of (i) August 23, 2007, (ii) the
acceleration of the loans and the termination of the DIP credit agree-
ment in accordance with its terms, (iii) the date of the closing of a sale
of all or substantially all of Entergy New Orleans’ assets pursuant to
either section 363 of the United States Bankruptcy Code or a con-
firmed plan of reorganization, or (iv) the effective date of a plan of
reorganization in Entergy New Orleans’ bankruptcy case.
As security for Entergy Corporation as the lender, the terms of the
December 9, 2005 bankruptcy court order provide that all borrow-
ings by Entergy New Orleans under the DIP Credit Agreement are:
(i) entitled to superpriority administrative claim status pursuant to
section 364(c)(1) of the Bankruptcy Code; (ii) secured by a perfected
first priority lien on all property of Entergy New Orleans pursuant to
sections 364(c)(2) and 364(d) of the Bankruptcy Code, except on any
property of Entergy New Orleans subject to valid, perfected, and non-
avoidable liens of the lender on Entergy New Orleans’ $15 million
credit facility that existed as of the date Entergy New Orleans filed its
bankruptcy petition; and (iii) secured by a perfected junior lien pur-
suant to section 364(c)(3) of the Bankruptcy Code on all property of
Entergy New Orleans subject to valid, perfected, and non-avoidable
liens in favor of the lender on Entergy New Orleans’ $15 million cred-
it facility that existed as of the date Entergy New Orleans filed its
bankruptcy petition.
The interest rate on borrowings under the DIP credit agreement
will be the average interest rate of borrowings outstanding under
Entergy Corporation’s $2 billion revolving credit facility, which was
approximately 5.7% per annum at December 31, 2006.
The lien granted by the bankruptcy court under sections 364(c)(2)
and 364(d) primes the liens that secure Entergy New Orleans’ obliga-
tions under its mortgage bond indenture that existed as of the date
Entergy New Orleans filed its bankruptcy petition. To secure Entergy
New Orleans’ obligations under its mortgage bond indenture, the
bankruptcy court’s December 9, 2005 order grants in favor of the
bond trustee, for the benefit of itself and the bondholders, a lien on
all Entergy New Orleans property that secures its obligations under
the DIP Credit Agreement. The lien in favor of the bond trustee is
senior to all other liens except for the liens in favor of Entergy
Corporation and the lender on Entergy New Orleans’ $15 million
credit facility that existed as of the date Entergy New Orleans filed its
bankruptcy petition.
Events of default under the DIP credit agreement include: failure
to make payment of any installment of principal or interest when due
and payable; the occurrence of a change of control of Entergy New
Orleans; failure by either Entergy New Orleans or Entergy
Corporation to receive other necessary governmental approvals and
consents; the occurrence of an event having a materially adverse effect
on Entergy New Orleans or its prospects; and customary bankruptcy-
related defaults, including, without limitation, appointment of a
trustee, “responsible person,” or examiner with expanded powers,
conversion of Entergy New Orleans’ chapter 11 case to a case under
chapter 7 of the Bankruptcy Code, and the interim or final orders
approving the DIP Credit Agreement being stayed or modified or
ceasing to be in full force and effect.
NOTESto CONSOLIDATED FINANCIAL STATEMENTS continued