Date: January 19, 2007
Source: Covanta Holding Corporation
COVANTA ANNOUNCES RECAPITALIZATION PLAN
Covanta Holding Corporation (NYSE: CVA) ("Covanta") today announced its intention to implement a comprehensive recapitalization plan through a series of equity and debt financings. The proposed plan includes the following components:
refinancing of all credit facilities of Covanta's principal subsidiary, Covanta Energy Corporation ("Covanta Energy"), with new Covanta Energy credit facilities comprised of a $300 million revolving credit facility, a $320 million funded letter of credit facility, and $680 million first lien term loan facility;
an underwritten public offering of approximately $125 million of Covanta's common stock;
an underwritten public offering of approximately $325 million of Covanta's convertible debentures;
the repurchase of outstanding notes at Covanta Energy's intermediate subsidiaries of approximately $612 million in principal amount.
The financings are expected to close in February 2007.
As part of the financings, Covanta also announced that it intends to use a portion of the proceeds of its offerings and cash on hand to permit certain intermediate subsidiaries to commence tender offers to repurchase any and all outstanding notes previously issued by those subsidiaries, consisting of outstanding 8.50% senior secured notes due 2010 of MSW Energy Holdings LLC, outstanding 7.375% senior secured notes due 2010 of MSW Energy Holdings II LLC, and outstanding 6.26% senior notes due 2015 of Covanta ARC LLC. This press release does not constitute the commencement of these tender offers and the Company intends to issue a separate press release announcing the commencement of such offers.
The Company also updated its full year 2006 guidance and issued full year 2007 guidance on Covanta Energy's adjusted EBITDA (as calculated for financial covenant purposes under Covanta Energy's credit agreements), Covanta Energy's free cash flow, and Covanta's diluted earnings per share.
2006 Guidance
Confirming prior guidance for Covanta Energy Adjusted EBITDA in the range of $535 million to $545 million;
* Increasing prior guidance for Covanta Energy free cash flow to a range of $250 million to $260 million, from approximately $235 million, primarily due to the impacts of tax refunds and lower than expected tax payments, as well as favorable changes in working capital; and
* Confirming prior Covanta guidance for diluted earnings per share of approximately $0.75.
2007 Guidance
Assuming that (i) the recapitalization plan as described above is fully implemented as anticipated, without taking into account the potential exercise of any over-allotment options that may be available to underwriters in the public offerings of common stock and convertible debentures, and (ii) that we have recorded an aggregate of approximately $680 million of indebtedness at Covanta Energy under the new credit facilities, and subject to the further assumptions set forth in Exhibit A hereto, we are projecting the following for the full 2007 calendar year:
Covanta Energy Adjusted EBITDA in the range of $545 million to $565 million;
Covanta Energy free cash flow in the range of $290 million to $320 million, which includes the impact of $39 million in interest expense savings associated with the financings described above; and
Covanta diluted earnings per share in the range of $0.65 to $0.75, which includes the impacts of $38 million in estimated expenses and $39 million in estimated interest expense savings associated with the financings described above.
To the extent that any of our assumptions prove to be incorrect, our actual results will differ, perhaps materially.
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