Item 1.01 Entry into a Material Definitive Agreement.
In 2005, Public Service Company of New Mexico (“PNM”) reported the execution of its existing
$400 million unsecured credit agreement facility (“PNM Revolver”) in a PNM Current Report on Form
8-K filed August 19, 2005. PNM recently completed the following additional credit arrangement to
improve its liquidity.
On May 5, 2008, PNM entered into a new $300 million unsecured delayed draw term loan facility
(“Term Loan Agreement”), among PNM as borrower, Merrill Lynch Bank USA, Morgan Stanley Senior
Funding, Inc. and Wachovia Bank, National Association as initial lenders, Merrill Lynch Capital
Corporation as administrative agent, Morgan Stanley Senior Funding, Inc. and Wachovia Bank,
National Association as co-syndication agents and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley Senior Funding, Inc. and Wachovia Capital Markets LLC as arrangers.
From time to time, the agents, arrangers and lenders party to the Term Loan Agreement perform
normal banking and investment banking and advisory services for PNM, its parent, PNM Resources,
Inc. (“PNMR”), or its affiliate, Texas-New Mexico Power Company, for which they have received
customary fees and expenses.
The Term Loan Agreement is described below in Item 2.03 of this report, which is incorporated
by reference into this Item 1.01. A copy of the Term Loan Agreement is filed herewith as Exhibit
10.1.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement of a Registrant.
The Term Loan Agreement allows PNM, at its option, to borrow, on no more than two occasions,
up to $300 million at any time prior to 45 days before April 30, 2009. In the event of a downgrade
in senior unsecured debt credit ratings of PNM, any arranger may require PNM to borrow money under
the Term Loan Agreement. Borrowings must be repaid on April 30, 2009. PNM must pay interest and
fees from time to time based upon its then-current senior unsecured debt credit ratings.
The Term Loan Agreement will be used for general corporate purposes. Borrowings under the
Term Loan Agreement are conditioned on the ability of PNM to make certain customary
representations. The Term Loan Agreement includes customary covenants, including requirements to
maintain a maximum consolidated debt-to-consolidated capitalization ratio.
In addition, in the event of a downgrade of either of PNM’s long-term unsecured senior credit
ratings below their current ratings by S&P or Moody’s or PNM’s failure to issue and sell at least
$350 million of senior unsecured notes by June 13, 2008, PNM must take all actions to attempt to
obtain all necessary regulatory approvals and consents and use all commercially reasonable efforts
to procure from the lenders under the PNM Revolver and PNMR’s revolving credit facility all
consents, in each case required to allow PNM to grant security interests in PNM’s property to the
administrative agent for the benefit of the lenders under the Term Loan Agreement. After receipt
of such approvals and consents, PNM must promptly grant a first priority perfected security
interest, subject to pari passu liens granted or to be granted to other lenders, in all of PNM’s
property other than the assets being sold in the contemplated sale of PNM’s gas utility, assets
under PNM’s current mortgage and assets which would customarily be excluded from a conventional
utility mortgage, and any other assets as to which the parties reasonably determine that the costs
of obtaining a security interest or perfection thereof are excessive in relation to the benefit to
the lenders under the Term Loan Agreement.
The Term Loan Agreement includes customary events of default and has a cross default provision
and a change of control default provision. If an event of default occurs, the administrative agent
may, or upon the request and direction of lenders holding a specified percentage of the commitments
shall, terminate the obligations of the lenders to make loans and/or declare the obligations
outstanding under the facility to be due and payable. Such termination and acceleration will occur
automatically in the event of an insolvency or bankruptcy default.
2