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While this case study is based on actual businesses, the facts have been changed to meet the instructional exigencies of the case study. As a result, the case study should not be construed as an accurate factual depiction of the businesses’ strategies, activities, or financial condition. Nor should the case study be treated as making any inference about the merits of the actual businesses’ strategies, activities, or financial condition.
© 2017. All Rights Reserved
1.Directors
The current board of directors (“Directors”) of AEC, and all of the AEC subsidiaries, are Ibrahim Kazeem, Idris Nuhu, Aishat Suleiman, Nafiseh Calvin and Hadizah Werner. They divide into two groups: those who are also officers of the corporation – Officer Directors – and those who hold no office with the corporation – Non-Officer Directors.
The Officer Directors are Ibrahim Kazeem, the Chairman of the Board and CEO, Idris Nuhu, AEC’s COO, Aishat Suleiman, AEC’s CFO. Ibrahim Kazeem is currently AEC’s major shareholder (75%), with Idris Nuhu and Aishat Suleiman holding 20%, split evenly between them.
Nafiseh Calvin and Hadizah Werner are the Non-Officer Directors. Each receives $50,000.00 annually for their board services, and has been given periodic share distributions. They hold the remaining balance of the shares (5%) spilt equally between them. Hadizah’s trucking company, Werner Enterprises, also hauls a substantial amount of cargo for AEC, and AEC is currently its fifth largest client.
Ibrahim Kazeem has a vision of national and regional domination of the energy industry, and he is eagerly prepared to wager his corporate stake on it. Idris Nuhu and Aishat Suleiman– the other Officer Directors – are long-time friends and business associated of Ibrahim. They echo Ibrahim’s aspirations and believe that economy of scale is the formula for industry success.
Nafiseh and Hadizah have a more conservative outlook than the Officer Directors. They are impressed with the success that AEC has achieved but are uneasy about the increased risk exposure to creditors associated with borrowing huge sums to fund expansion. By contrast to AEC, for example, Werner Enterprises has grown from humble origins to become one of the top ten Qatar trucking companies with very little borrowing; the family company funded its growth using retained earnings, turning to external funding only when it undertook an initial public offering.
Private Meeting of Directors Ibrahim Kazeem’s brain races as he contemplates the path that lies before his company. The need to procure the capital for the PLM Acquisition without compromising his majority ownership of AEC is foremost in his mind. Most certainly, this means borrowing the money rather that diluting his ownership with additional equity. Reducing the cost of this debt as much as possible, he decides, is the principal objective he needs to focus on. One institutional lender is an unlikely scenario. This means tapping into the public markets to assemble a number of lenders to loan the money.
Idris Nuhu and Aishat Suleiman join Ibrahim in rejecting any notion of using equity financing. They are extremely resistant to dilution of their shareholding in AEC and of their target acquisition, PLM, and they share this with Ibrahim in a private meeting among the Officer Directors. They agree with Ibrahim that the focus should be on using debt financing to fund the PLM acquisition. Their position is that AEC will be easily able to raise the needed capital on the bond market. While they have a preference for borrowing from one, or a small group of institutional lenders (banks, hedge funds, etc.), they realize that it may have to go to the bond market to raise sufficient capital and to lower the cost of borrowing. A public bond issuance, however, will require the company to expend the time and money needed to comply with the SEC’s disclosure requirements.
The Officer Directors recognize the need to offer collateral to secure the new debt. Using AEC’s current assets as collateral poses challenges, as much of its property has already been pledged to existing lenders.
Idris Nuhu estimates that AEC will need to raise $500 million on the securities market through a public bond issuance in order to fund the PLM Acquisition. The real challenge, he explains, is tying together AEC’s fragmented corporate structure so as to provide a common financial front sufficient to attract money to the venture with the lowest cost of capital; AEC is a holding company for the five subsidiaries, each separately incorporated. While AEC holds the shares in these entities and owns a fair amount of assets in its own name, many of the operating assets are owned by the subsidiaries. To secure the most favorable interest rates, each of these companies will have to back the securities. To add to the challenge, each subsidiary has already encumbered itself with significant unsecured, and some secured, borrowings. The new lenders will want to make sure that they are not displaced by the existing subsidiary loans.
Aishat Suleiman also points out that according to the terms of the earlier Secured Credit Facility that AEC has entered into with Qatar National Bank, AEC has agreed not to undertake any future borrowing that ranks either ahead of or pari passu with that loan. Any bond issuance would accordingly have to rank behind the Secured Credit Facility loan. Ibrahim grudgingly concedes this point. After pausing to reflect on this revelation, Jack observes that, while this will complicate matters and no doubt raise the cost of capital, based on his review of AEC’s financials he thinks it is not an insurmountable obstacle.
Idris turns conversation to the mechanics of the bond issuance. In order to secure the lower interest rates, pursuing a multiplicity of lenders is unavoidable he concludes. Moreover, whether or not AEC could issue the debt pursuant to an SEC registration exemption, the lenders will want the informational transparency that is required of a reporting company. This means SEC compliance and creating an intermediary to channel communications between AEC and its new creditor constituency. He stresses that the board needs to prepare itself for paying a sizeable (and, some would say, hard-earned) amount of money to professionals and any financial intermediary. In addition, he warns that the accompanying loan covenants will likely constrain AEC’s future operations in ways that may not be compatible with its current growth strategy; hard bargaining will be the order of the day, he emphasizes.
Nafiseh Calvin and Hadizah Werner, the Non-Officer Directors, find themselves in the unenviable position of being killjoys, and meet separate from the Officer Directors to discuss the matter. The acquisition of PLM using debt financing radically alters the company’s debt-to-equity ratio and they are concerned that it will affect financial indices to move the company from a financially sound entity to one that compares unfavorably with its industry peers. Furthermore, they are uneasy about QFMA compliance and the cost and scrutiny that this will involve. They are also quick to point out that the company has already experienced considerable difficulty in harmonizing its back office operations (accounting, logistics, human relations, etc.) with the much smaller entities that AEC has recently acquired. Integrating a business the size of PLM with AEC’s current operations frankly frightens them.
Nafiseh believes that a PLM-type acquisition not only involves saddling the company with the acquisition costs, but also exponentially increases AEC’s accounts payable to its vendors – the numerous businesses that supply AEC with the petroleum products it delivers to its customers. He estimates that with the acquisition of PLM, AEC’s vendor payables would increase in an amount roughly equal to the $800 million purchase price. Nafiseh wants the company to pursue a slower, more organic growth strategy. “Put this in perspective,” Nafiseh remarks to Hadizah, “$800 million would buy my trucking company 8,000 new semi tractors! It’s a nearly billion-dollar investment. That’s no small potatoes.”
Hadizah agrees and shares with Nafiseh that an increase in secured debt is going to create a massive stratification of creditors and that in the event of a downturn in business AEC is likely to confront hostile vendors and other unsecured trade creditors when they discover they have been demoted below secured creditors. She adds that even if the money was raised in the equity markets, to the extent that the existing shareholders attempt to avoid dilution by using preferred as opposed to common stock a similar stratification will ensue.
If the Officer Directors get their way and the company proceeds with the PLM acquisition, Hadizah and Nafiseh feel that equity offers the advantage of greater flexibility. Loans have to be repaid, and even if repayment of principal can be postponed, interest payments invariably have to be met in the short term. A rough calculation establishes that, at a rate of 9% per annum, the annual debt service on $800 million will be over $70 million. A negative feature of equity, however, is that it receives less favorable tax treatment than debt. Interest payments will be business expenses deductible against income for AEC, with the result that they will only have to be taxed once (in the hands of the lenders). Equity dividends, however, are subject to double taxation: first as income to AEC and second as income to the shareholder upon distribution as a dividend.
Instructions:

  1. Having resolved to proceed with the PLM Acquisition, discuss and agree on how you want to finance the deal. Prepare a power point presentation on the modes of financing considered and the key reasons for settling to entertain some or all of them. Your Power Point should highlight necessary regulatory steps that must be taken to achieve the selected funding source. Your PowerPoint should involve no more than seven slides and the Class presentation should take no more than 20 minutes. Your PowerPoint presentation must be submitted to the Instructors by 3:00 pm on Sunday of next week.
  1. You have decided to further instruct Investment Banker to assist you with the PLM Acquisition financing based on the selected method of financing. Consult with Investment Banker and assist it with preparing a PowerPoint presentation that outlines AEC’s goals with respect to PLM and the types of financing AEC is prepared to entertain. Prepare a formal request letter to the Investment Banker asking them to assist AEC come up with a formal request for financing proposals that will be sent to the capital sources. Please specify the key elements that you would like to see in the Financial Proposal to be prepared by the Investment Banker. Feel free to discuss these elements with the Investment Banker. Investment Banker will come up with the formal request for financing proposals, which they will need to present in the next class. (Investment Banker has the option to selectively include the AEC Directors in its oral presentation.) .
  1. Important reminders and restrictions:
    • Both PLM and AEC are currently separate legal entities and AEC has subsidiaries who could act as guarantors
    • Any substantive merger of PLM into AEC would require you to renegotiate all of your current AEC funding; acquisition of PLM without a merger (with PLM simply becoming a subsidiary of AEC Holding) would not require this.
    • You can negotiate either a share purchase or an asset purchase in order to execute PLM Acquisition. However, an asset purchase will require you to transfer the assets to some new or current AEC entity and to renegotiate any current PLM funding that you wish to continue.

·There are provisions in the current AEC financing agreements, which may restrict your ability for AEC to undertake any future borrowing; these restrictions will not impact your ability to use the assets, or obligation, of PLM to fund your acquisition. ·PLM has assets that are unencumbered (are not subject to security interests) and could be used to secure PLM funding. ·You must have at least $100 million available and open funding sources for PLM’s post-acquisition inventory financing and $25 million for its two-years operating expenses. These sums are over and above the funding sources you will need to continue to service your current AEC operations. ·After PLM Acquisition, AEC must continue inventory financing equal to that currently provided by the QNB Credit Facility. Given the restrictions contained in the current AEC Credit Facility, AEC does not have the available cashflow to use any credit balance on the Credit Facility for purposes of funding the PLM Acquisition. ·You must have a post-Acquisition, PLM Receivables Trust in place with a capacity of up to $250 million funding for future PLM receivables.
The following is a description of AEC’s principal long-term funding:
Credit Facility (Qatar National Bank)
At the PLM Closing in June 2015, AEC entered into a new $355.0 million senior secured credit facility (the “Credit Facility”) by and among Qatar National Bank and Savings Association (“QNB”; in such capacity, the “Administrative Agent”), and DLJ Capital Funding, Inc. (in such capacity, the documentation agent; and with the Administrative Agent, the “Agents”) and the other Lenders thereto. QNB Securities, Inc. (“QNB Securities”) served as the syndication agent.
The following amounts were drawn under the Credit Facility: $205.0 million of term loans (the “Term Loans”), consisting of: (a) $78.1 million Term Loan A, which matures in six years; (b) $42.3 million of Term Loan B, which matures in seven years; (c) $42.3 million of Term Loan C, which matures in eight years; and (d) $42.3 million of Term Loan D, which matures in nine years.
A $150.0 million revolving credit facility (the “Revolving Credit Facility”) is available as part of the Credit Facility for working capital and general corporate purposes.
The initial interest rate for borrowings under the Revolving Credit Facility and the Term A Loan will be, at the option of AEC, LIBOR plus 2.50% or the Base Rate plus 1.25%. The interest rate for the Term B Loan will be, at the option of AEC, LIBOR plus 3.00% or the Base Rate plus 1.75%. The interest rate for the Term C Loan will be, at the option of AEC, LIBOR plus 3.25% or the Base Rate plus 2.00%. The rate for the Term D Loan will be, at the option of AEC, LIBOR plus 3.50% or the Base Rate plus 2.25%.
The “Base Rate” is the higher of (i) the Administrative Agent’s reference rate and (ii) the Federal Funds Effective Rate plus one-half of 1%. LIBOR will at all times include statutory reserves to the extent actually incurred.
All domestic subsidiaries of AEC have guaranteed the Indebtedness under the Credit Facility (the “Guarantors”). All extensions of credit under the Credit Facility to AEC and guaranties of subsidiaries of AEC are secured by all existing and after-acquired personal property (other than accounts receivable transferred in connection with the Accounts Receivable Program or any securitization refinancing of the Accounts Receivable Program) of the AEC and its subsidiaries, including all outstanding capital stock of the AEC and of all of its domestic subsidiaries, 65% of outstanding capital stock of AEC’s foreign subsidiaries and any intercompany debt obligations, and, subject to exceptions to be agreed upon, all existing and after-acquired real property fee and leasehold interests. ZIG’s guaranty is secured by a pledge of all outstanding capital stock of AEC. With certain exceptions to be agreed upon, ZIG, AEC and its subsidiaries are prohibited from pledging any of their assets other than under the Credit Facility.
AEC will be required to make the following mandatory prepayments (subject to certain exceptions and basket amounts to be set forth in the Credit Facility): (a) with respect to asset sales, prepayments in an amount equal to 100% of (i) the net after-tax cash proceeds of the sale or other disposition of any property or assets of AEC or any of its subsidiaries other than net cash proceeds of sales or certain other dispositions in the ordinary course of business, or (ii) the net after-tax cash proceeds in excess of $275 million from the sale or other disposition of receivables payable upon receipt; (b) with respect to debt financings of AEC or any of its subsidiaries, prepayments in an amount equal to 100% of the net cash proceeds received from such debt financings (excluding, among other things, the Senior Notes), payable upon receipt; (c) with respect to equity offerings of AEC or any of its subsidiaries, prepayments in an amount equal to 50% of the net cash proceeds received from the issuance of such equity securities, payable upon receipt; and (d) with respect to excess cash flow (to be defined in the Credit Facility), prepayments in an amount equal to 75% of such excess cash flow, payable within 90 days of fiscal year-end, reducing to 50% of such excess cash flow after the outstanding aggregate principal amount of Term Loans has been repaid to 50% of the Term Loans outstanding on the Closing.
All mandatory prepayments will be applied first to reduce the Term Loans outstanding to the full extent thereof and thereafter to the permanent reduction of the commitments under the Revolving Credit Facility. All mandatory prepayments shall be applied ratably between Term Loan A, Term Loan B, Term Loan C and Term Loan D and to scheduled amortization payments of the Term Loans as follows: (a) with respect to asset sale proceeds, excess cash flow and equity offerings, prepayment amount applied pro rata to all remaining scheduled amortization payments; and (b) with respect to debt financings, prepayment amount applied to remaining scheduled amortization payments in inverse order of maturity. Notwithstanding the foregoing, in the case of any mandatory prepayment to be applied to Term Loan B, Term Loan C or Term Loan D, AEC may elect to offer the holders of such term loans the opportunity to waive the right to receive the amount of such mandatory prepayment. In the event any such holders elect to waive such right, 50% of the amount that would otherwise have been applied as such mandatory prepayment of the applicable term loans of such holders shall be applied to the prepayment of Term Loan A and 50%of such amount shall be retained by AEC.
The Credit Facility also contains customary affirmative and negative covenants (including, where appropriate, certain exceptions and baskets to be mutually agreed upon), including but not limited to furnishing information and limitations on other indebtedness, liens, investments, guarantees, restricted payments, restructuring and reserve costs, mergers and acquisitions, sales of assets, capital expenditures, leases, and affiliate transactions. The Credit Facility further contains financial covenants, including without limitation, those relating to: minimum interest coverage; minimum fixed charge coverage; and maximum leverage.
Events of default under the Credit Facility are usual and customary, including without limitation, those relating to: (a) non-payment of interest, principal or fees payable under the Credit Facility; (b) non-performance of certain covenants; (c) cross default to other material debt of AEC and its subsidiaries; (d) bankruptcy or insolvency; (e) judgments in excess of specified amounts; (f) impairment of security interests in collateral; (g) invalidity of guarantees; (h) materially inaccurate or false representations or warranties; and (i) change of control.
It contains restriction on future, subordinate borrowing exceeding $100 million. There is no restriction on the ability to acquire new assets or subsidiary entities.
Signatories:

  1. ASHLAND ENERGY CORPORATION
  2. QNB NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent
  3. QNB NATIONAL TRUST AND SAVINGS ASSOCIATION, as Issuing Lender
  4. QNB NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Lender
  5. CREDIT LYONNAIS DOHA BRANCH, as a Lender
  6. CYPRESSTREE INVESTMENT MANAGEMENT COMPANY, INC. As: Attorney-in-Fact and on behalf of First Allmerica Financial Life Insurance Company
  7. ORIX Corporation, as a Lender
  8. TRANSAMERICA BUSINESS CREDIT CORPORATION, as a Lender
  9. PRIME INCOME TRUST, as a Lender
  10. THE LONG-TERM CREDIT BANK OF JAPAN, LTD., DOHA BRANCH, as a Lender
  11. FLOATING RATE PORTFOLIO By: Chancellor LGT Senior Secured Management Inc., as attorney in fact
  12. NATEXIS BANQUE, as a Lender
  13. ROYALTON COMPANY, as a Lender By: Pacific Investment Management Company, as its Investment Advisor
  14. THE DAI-ICHI KANGYO BANK, LTD., DOHA BRANCH, as a Lender
  15. THE MITSUBISHI TRUST AND BANKING CORPORATION, DOHA BRANCH as a Lender
  16. BankDoha, N.A. as a Lender
  17. FLEET NATIONAL BANK, as a Lender
  18. VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, as a Lender
  19. METROPOLITAN LIFE INSURANCE COMPANY,as a Lender
  20. CHRISTIANIA BANK OG KREDITKASSE ASA, as a Lender
  21. NATIONAL WESTMINSTER BANK PLC, as a Lender
  22. BANK ONE, as a Lender
  23. SOUTHERN PACIFIC THRIFT & LOAN ASSOCIATION, as a Lender
  24. HELLER FINANCIAL, INC., as a Lender
  25. BANK OF TOKYO – MITSUBISHI TRUST COMPANY, as a Lender
  26. NORTHERN LIFE INSURANCE COMPANYBy: ING Capital Advisors, Inc., as Investment Advisor
  27. OCTAGON CREDIT INVESTORS LOAN PORTFOLIO (a Unit of the Chase Manhattan Bank), as a Lender
  28. DOHA MUTUAL LIFE INSURANCE COMPANY, as a Lender
  29. THE FIRST NATIONAL BANK OF DOHA, as a Lender
  30. THE FUJI BANK, LIMITED, as a Lender
  31. SUMITOMO BANK, LIMITED, CHICAGO BRANCH, as a Lender
  32. PILGRIM AMERICA PRIME RATE TRUST, as a Lender
  33. DEEPROCK & COMPANY, as a Lender
  34. KZH-ING-I CORPORATION, as a Lender
  35. KZH-SOLEIL CORPORATION, as a Lender
  36. KZH – CRESCENT CORPORATION, as a Lender
  37. DONALDSON LUFKIN & JENRETTE SECURITIES CORPORATION, as Documentation Agent
  38. CRESCENT – MACH I PARTNERS, L.P. by: TCW Asset Management Company, its investment manager
  39. Continental Assurance Company Separate Account (E) By: TCW Asset Management Company as Attorney-in-Fact
  40. PPM AMERICA, INC., as attorney infact, on behalf of Jackson National Life Insurance Company

Senior 8 7/8 Notes
SECURITIES: $350.0 million in aggregate principal amount of AEC’s 8 7/8% Senior Notes (“Senior Notes”) due 2019.
MATURITY DATE: October 15, 2019.
INTEREST RATE: The Senior Notes will bear interest at the rate of 8 7/8% per annum, payable semi-annually on April 15 and October 15 of each year, commencing April 15, 2013.
OPTIONAL REDEMPTION: The Senior Notes will be redeemable at the option of AEC, in whole or in part, at any time on or after April 15, 2016 in cash at the redemption prices set forth in the indenture, plus accrued and unpaid interest and liquidated damages, if any, thereon to the date of redemption. In addition, at any time prior to October 15, 2016, AEC may redeem up to 33% of the initially outstanding aggregate principal amount of Senior Notes at a redemption price equal to 108.875% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the redemption date, with the net proceeds of a Public Equity Offering; provided that, in each case, at least 67% of the initially outstanding aggregate principal amount of Senior Notes remains outstanding immediately after the occurrence of any such redemption.
CHANGE OF CONTROL: Upon the occurrence of a Change of Control, each holder of Senior Notes will have the right to require AEC to repurchase all or any part of such holder’s Senior Notes at an offer price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of repurchase.
RANKING: The Senior Notes will be senior unsecured obligations of AEC and will rank pari passu in right of payment with all existing and future senior unsecured indebtedness of AEC and senior in right of payment to all existing and future subordinated indebtedness of AEC. The Senior Notes will be effectively subordinated, however, to all secured obligations of AEC, including AEC’s borrowings, if any, under the Credit Facility, to the extent of the assets securing such obligations. As of June 28, 2016, on a pro forma basis after giving effect to the Offering and the Transactions and the application of the estimated net proceeds therefrom, the Senior Notes and the Senior Notes Guarantees would have been effectively subordinated to approximately $24.1 million in aggregate principal amount of secured obligations of AEC and the Subsidiary Guarantors.
SENIOR NOTE GUARANTEES: The Senior Notes will be fully and unconditionally guaranteed on a joint and several basis by all direct or indirect domestic Restricted Subsidiaries of AEC (together, the “Subsidiary Guarantors”). The Senior Note Guarantees will be general unsecured obligations of the Subsidiary Guarantors and will rank pari passu in right of payment to all existing and future senior unsecured indebtedness of the Subsidiary Guarantors and senior in right of payment to all existing and future subordinated indebtedness of the Subsidiary Guarantors.
CERTAIN COVENANTS: The Indenture will contain certain covenants that will limit, among other things, the ability of AEC to: (i) pay dividends, redeem capital stock or make certain other restricted payments or investments; (ii) incur additional indebtedness or issue preferred equity interests; (iii) merge, consolidate or sell all or substantially all of its assets; (iv) create liens on assets; and (v) enter into certain transactions with affiliates or related persons. It contains no restriction on future borrowing, so long as it ranks subordinate. Nor is there any restriction on the ability to acquire new assets or subsidiary entities.
10 1/8% Senior Subordinated Notes
$500,000,000 principal amount of 10 1/8% Senior Subordinated Notes (“Subordinated Notes”)
INTEREST RATE: The Notes will bear interest at the rate of 10 1/8% per annum, payable semi-annually on January 15 and July 15 of each year, commencing January 15, 2015.
SUBORDINATION: General unsecured obligations of AEC, will rank subordinate in right of payment to all Senior Debt and will rank senior or pari passu in right of payment to all existing and future subordinated indebtedness of AEC. The Subsidiary Guarantors will unconditionally guarantee the Subordinated Notes on a senior subordinated basis. The Note Guarantees will be general unsecured obligations of the Subsidiary Guarantors, will rank subordinate in right of payment to all Senior Debt of the Subsidiary Guarantors and will rank senior or pari passu in right of payment to all existing and future subordinated indebtedness of the Subsidiary Guarantors. As of March 29, 2015, on a pro forma basis, after giving effect to the Transactions, the Senior Notes would have been subordinate to $217.5 million of Senior Debt. By reason of such subordination, in the event of the insolvency, liquidation, reorganization, dissolution or other winding-up of AEC or upon a default in payment with respect to, or the acceleration of, any Senior Debt, the Holders of such Senior Debt must be paid in full before the holders of the Subordinated Notes may be paid. If AEC incurs any additional pari passu debt, the holders of such debt would be entitled to share ratably with the holders of the Subordinated Notes in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding-up of AEC. This may have the effect of reducing the amount of proceeds paid to holders of the Subordinated Notes. In addition, no payments may be made with respect to the principal of, premium and Liquidated Damages, if any, or interest on the Subordinated Notes if a payment default exists with respect to Senior Debt and, under certain circumstances, no payments may be made with respect to the principal of, premium and Liquidated Damages, if any, or interest on the Senior Notes for a period of up to 179 days if a non-payment default exists with respect to Senior Debt. In addition, the Indenture permits AEC and its subsidiaries to incur additional debt if certain conditions are met.
OPTIONAL REDEMPTION: The Subordinated Notes will be redeemable at the option of AEC, in whole or in part, at any time on or after July 15, 2017 in cash at the redemption prices set forth herein, plus accrued and unpaid interest and liquidated damages, if any, thereon to the date of redemption. In addition, at any time prior to July 15, 2017, AEC may redeem up to 33% of the initially outstanding aggregate principal amount of Subordinated Notes at a redemption price equal to 110.125% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages, if any, thereon to the redemption date, with the net proceeds of a Public Equity Offering; provided that, in each case, at least 67% of the initially outstanding aggregate principal amount of Subordinated Notes remains outstanding immediately after the occurrence of any such redemption.
CHANGE OF CONTROL: Upon the occurrence of a Change of Control, each holder of Senior Notes will have the right to require AEC to repurchase all or any part of such holder’s Subordinated Notes at an offer price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and liquidated damages, if any, thereon to the date of repurchase.
NOTE GUARANTEES: The Subordinated Notes will be unconditionally guaranteed on a senior subordinated basis by the Subsidiary Guarantors.
CERTAIN COVENANTS: The Indenture contains certain covenants that limit, among other things, the ability of AEC to: (i) pay dividends, redeem capital stock or make certain other restricted payments or investments; (ii) merge, consolidate or sell all or substantially all of its assets; (iii) create liens on assets; and (iv) enter into certain transactions with affiliates or related persons. It contains no restriction on future borrowing, so long as it ranks pari passu. Nor is there any restriction on the ability to acquire new assets or subsidiary entities.
Signatories:

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  1. State Street Bank and Trust Company, as Trustee
  2. AEC and Initial Subsidiary Guarantors
  3. Initial Subsidiary Guarantors:
  4. Precision Energy Services
  5. AEC Gas & Power
  6. MP Oil Storage and Transportation Company
  7. Doha Supply and Trading
  8. Northland Terminaling and Logistics

PRINCIPAL AMOUNT OF SENIOR SUBORDINATED NOTES INITIAL PURCHASERS TO BE PURCHASED
Donaldson, Lufkin & Jenrette

  • Securities Corporation ………………………………….. $400,000,000
  • QNB Securities, Inc. ………………………………. $100,000,000

Attachments:

Board-of-Dire….docxGuide-to-Answ….docxIntroduction-….docx