ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF BALANCE SHEET ARRANGEMENT OF A REGISTRANT
On April 7, 2022, American Electric Power Company, Inc. (“AEP”) amended and extended two existing credit agreements, a five-year $4,000,000,000 facility (extending the maturity from March 2026 to March 2027) (the “2027 Agreement”) and a two-year $1,000,000,000 facility (extending the maturity from March 2023 to March 2024), (the “2024 Agreement” and, collectively with the 2027 Agreement, the “Credit Agreements”).
AEP amended and extended the 2027 Agreement, dated March 31, 2021, among AEP, the Initial Lenders named therein, the LC Issuing Banks party thereto, and Wells Fargo Bank, National Association, as Administrative Agent. The 2027 Agreement contains a sustainability-linked pricing metric which permits an interest rate increase or reduction by meeting or missing targets related to environmental sustainability, specifically renewable energy generation.
AEP also amended and extended the 2024 Agreement, dated March 31, 2021, among AEP, the Initial Lenders named therein, and Wells Fargo Bank, National Association, as Administrative Agent. The 2024 Agreement also contains a sustainability-linked pricing metric which permits an interest rate increase or reduction by meeting or missing targets related to environmental sustainability, specifically renewable energy generation.
Borrowings and letters of credit issued under the Credit Agreements are subject to a variable interest rate and are available upon customary terms and conditions for facilities of this type. The Credit Agreements contain certain covenants and require AEP to maintain its percentage of debt to total capitalization at a level that does not exceed 67.5%. The method for calculating outstanding debt and other capital is contractually defined in the Credit Agreements. Nonperformance by AEP of these covenants could result in an event of default under the Credit Agreements. The acceleration of AEP’s payment obligations, or the obligations of certain of its respective subsidiaries, prior to maturity under any other agreement or instrument relating to debt outstanding in excess of $50 million would cause an event of default under the Credit Agreements and permit the lenders to declare AEP’s outstanding amounts payable. The Credit Agreements do not permit the lenders to refuse a draw on either facility if a material adverse change occurs.