Item 1.01. Entry into a Material Definitive Agreement.
On May 10, 2022, Vistra Operations Company LLC (“Vistra Operations” or the “Issuer”), an indirect, wholly owned subsidiary of Vistra Corp. (the “Company”), entered into a purchase agreement (the “Purchase Agreement”) by and among the Issuer, certain subsidiaries of the Issuer that are guarantors under the Credit Agreement (as defined below) (together with such other subsidiaries that become guarantors from time to time, the “Subsidiary Guarantors”), and Citigroup Global Markets Inc. as representative of the several initial purchasers named in Schedule I thereto (the “Initial Purchasers”). The Purchase Agreement provides for the offer and sale (the “Offering”) by the Issuer, and the purchase by the Initial Purchasers, of $400 million aggregate principal amount of the Issuer’s 4.875% Senior Secured Notes due 2024 (the “2024 Notes”) and $1.1 billion aggregate principal amount of the Issuer’s 5.125% Senior Secured Notes due 2025 (the “2025 Notes” and, together with the 2024 Notes, the “Secured Notes”). The Secured Notes will be senior, secured obligations of the Issuer and will be fully and unconditionally guaranteed by the Subsidiary Guarantors.
The Offering closed on May 13, 2022, following the satisfaction of customary closing conditions. The sale of the Secured Notes was not registered under the Securities Act of 1933, as amended (the “Securities Act”), and the Secured Notes were sold on a private placement basis to persons reasonably believed to be qualified institutional buyers under Rule 144A under the Securities Act and outside the United States to non-U.S. persons in compliance with Regulation S under the Securities Act.
The Purchase Agreement contains customary representations, warranties, covenants and agreements by Vistra Operations, the Subsidiary Guarantors and the Initial Purchasers, including indemnification for certain liabilities under the Securities Act, other obligations of the parties and termination provisions. The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties.
The foregoing is only a brief description of the material terms of the Purchase Agreement and does not purport to be a complete description of the rights and obligations of the parties thereunder. Such description is qualified in its entirety by reference to the Purchase Agreement, which is attached to this Current Report on Form 8-K (the “Current Report”) as Exhibit 10.1, and is incorporated by reference into this Item 1.01.
The Issuer received net proceeds from the sale of the Secured Notes of approximately $1.485 billion after deducting fees and expenses, including the Initial Purchasers’ discounts and commissions. The Company is using the net proceeds, together with cash on hand, (i) to post collateral as may be required in connection with the Company’s comprehensive hedging strategy, and (ii) for general corporate purposes.
Additionally, certain affiliates of the Initial Purchasers are lenders under the Credit Agreement and other credit facilities of the Issuer, and will receive a portion of the net proceeds from the Offering to the extent such proceeds are used to repay borrowings under the Credit Agreement or such credit facilities. Further, the Initial Purchasers and their affiliates have performed commercial banking, investment banking and advisory services for the Company and the Issuer from time to time for which they have received customary fees and reimbursement of expenses. The Initial Purchasers or their affiliates may, from time to time, engage in transactions with and perform services for the Company and the Issuer in the ordinary course of their business for which they may receive customary fees and reimbursement of expenses.
The Secured Notes were issued under an indenture (the “Base Indenture”), dated as of June 11, 2019, by and between the Issuer and Wilmington Trust, National Association (the “Trustee”), as trustee, as supplemented by that certain Eleventh Supplemental Indenture, dated as of May 13, 2022, by and among the Issuer, the Subsidiary Guarantors and the Trustee (the “Supplemental Indenture” and, together with the Base Indenture and such other supplemental indentures entered into from time to time, the “Indenture”).
The Indenture provides for the full and unconditional guarantee by the Subsidiary Guarantors of the punctual payment of the principal of, premium, if any, interest on and all other amounts due under the Secured Notes and the Indenture (the “Guarantees”). The Indenture further provides that the Secured Notes will be secured by a first-priority security interest in the same collateral that is pledged for the benefit of the lenders under that certain credit agreement, dated as of October 3, 2016, by and among Vistra Intermediate Company LLC, the Issuer, the lenders party thereto, the letter of credit issuers party thereto, the administrative agent and collateral agent, and the other parties named therein (as amended, restated, amended and restated, supplemented and/or otherwise modified from time to time, the “Credit Agreement”), which consists of a substantial portion of the property, assets and rights owned by the Issuer and the Subsidiary Guarantors, as well as the stock of the Issuer. The collateral securing the Secured Notes will be released if the Issuer’s senior, unsecured long-term debt securities obtain an investment grade rating from two out of the three rating agencies, subject to reversion if such rating agencies withdraw the investment grade rating of the Issuer’s senior, unsecured long-term debt securities or downgrade such rating below investment grade.