Indebtedness

12 Months Ended

Dec. 31, 2012

9. INDEBTEDNESS

Restrictions on Issuance of Debt

All of IPL's long-term borrowings must first be approved by the IURC and the aggregate amount of IPL's short-term indebtedness must be approved by the FERC. IPL has approval from FERC to borrow up to $500 million of short-term indebtedness outstanding at any time through July 28, 2014. As of December 31, 2012, IPL also has remaining authority from the IURC to, among other things, issue up to $135 million in aggregate principal amount of long-term debt and refinance up to $110 million in existing indebtedness through December 31, 2013, and to have up to $250 million of long-term credit agreements and liquidity facilities outstanding at any one time. IPL also has restrictions on the amount of new debt that may be issued due to contractual obligations of AES and by financial covenant restrictions under our existing debt obligations. Under such restrictions, IPL is generally allowed to fully draw the amounts available on its credit facility, refinance existing debt and issue new debt approved by the IURC and issue certain other indebtedness.

Credit Ratings

Our ability to borrow money or to refinance existing indebtedness and the interest rates at which we can borrow money or refinance existing indebtedness are affected by our credit ratings. In addition, the applicable interest rates on IPL's credit facility (as well as the amount of certain other fees on the credit facility) are dependent upon the credit ratings of IPL. Downgrades in the credit ratings of AES could result in IPL's and/or IPALCO's credit ratings being downgraded.

Long-Term Debt

The following table presents our long-term indebtedness:


Series	Due	December 31,
Series	Due	2012		2011
		*(In Thousands)*
IPL First Mortgage Bonds (see below)
6.30%	July 2013	$	110,000	$	110,000
4.90%⁽²⁾	January 2016		30,000		30,000
4.90%⁽²⁾	January 2016		41,850		41,850
4.90%⁽²⁾	January 2016		60,000		60,000
5.40%⁽¹⁾	August 2017		24,650		24,650
3.875%⁽²⁾	August 2021		55,000		55,000
3.875%⁽²⁾	August 2021		40,000		40,000
4.55%⁽²⁾	December 2024		40,000		40,000
6.60%	January 2034		100,000		100,000
6.05%	October 2036		158,800		158,800
6.60%	June 2037		165,000		165,000
4.875%	November 2041		140,000		140,000
Unamortized discount - net			(1,096)		(1,125)
Total IPL first mortgage bonds			964,204		964,175
Total Long-term Debt - IPL			964,204		964,175
Long-term Debt - IPALCO:
7.25% Senior Secured Notes	April 2016		400,000		400,000
5.00% Senior Secured Notes	May 2018		400,000		400,000
Unamortized discount - net			(3,084)		(3,859)
Total Long-term Debt - IPALCO			796,916		796,141
Total Consolidated IPALCO Long-term Debt			1,761,120		1,760,316
Less: Current Portion of Long-term Debt			110,000		-
Net Consolidated IPALCO Long-term Debt		$	1,651,120	$	1,760,316

⁽¹⁾First Mortgage Bonds are issued to the city of Petersburg, Indiana, to secure the loan of proceeds from various tax-exempt instruments issued by the city.
⁽²⁾First Mortgage Bonds are issued to the Indiana Finance Authority, to secure the loan of proceeds from the tax-exempt bonds issued by the Indiana Finance Authority.

IPL First Mortgage Bonds and Indiana Finance Authority Bond Issuances

The mortgage and deed of trust of IPL, together with the supplemental indentures thereto, secure the first mortgage bonds issued by IPL. Pursuant to the terms of the mortgage, substantially all property owned by IPL is subject to a first mortgage lien securing indebtedness of $965.3 million as of December 31, 2012. The IPL first mortgage bonds require net earnings as calculated thereunder be at least two and one-half times the annual interest requirements before additional bonds can be authenticated on the basis of property additions. IPL was in compliance with such requirements as of December 31, 2012.

In September 2011, the Indiana Finance Authority issued on behalf of IPL an aggregate principal amount of $55.0 million of 3.875% Environmental Facilities Revenue Bonds Series 2011A (Indianapolis Power & Light Company Project) due August 2021 and an aggregate principal amount of $40.0 million of 3.875% Environmental Facilities Refunding Revenue Bonds Series 2011B (Indianapolis Power & Light Company Project) due August 2021. IPL issued $95.0 million aggregate principal amount of first mortgage bonds to the Indiana Finance Authority at 3.875% to secure the loan of proceeds from these two series of bonds issued by the Indiana Finance Authority. Proceeds of these bonds were used to retire $40.0 million of existing 5.75% IPL first mortgage bonds, and for the construction, installation and equipping of pollution control facilities, solid waste disposal facilities and industrial development projects at IPL's Petersburg generating station.

In November 2011, IPL issued $140 million aggregate principal amount of 4.875% first mortgage bonds due November 2041. Net proceeds from this offering were approximately $138.2 million, after deducting the initial purchasers' discount and fees and expenses for the offering payable by IPL. The net proceeds from the offering were used to finance the redemption of the following outstanding indebtedness, including redemption premiums of $1.6 million and to pay related fees and expenses:

$40.0 million aggregate principal amount of the City of Petersburg, Indiana Pollution Control Refunding Revenue Bonds Adjustable Rate Tender Securities, 1995B Series, Indianapolis Power & Light Company Project ("1995B Bonds"), variable rate, due 2023;
$20.0 million aggregate principal amount of the City of Petersburg, Indiana Solid Waste Disposal Revenue Bonds, 1994A Series, Indianapolis Power & Light Company Project, 5.90% Series, due 2024;
$30.0 million aggregate principal amount of the City of Petersburg, Indiana Solid Waste Disposal Revenue Bonds, 1995C Series, Indianapolis Power & Light Company Project, 5.95% Series, due 2029;
$20.0 million aggregate principal amount of the City of Petersburg, Indiana Solid Waste Disposal Revenue Bonds, 1996 Series, Indianapolis Power & Light Company Project, 6.375% Series, due 2029; and
$17.35 million aggregate principal amount of the Indiana Development Finance Authority's Exempt Facilities Revenue Refunding Bonds, Series 1999, Indianapolis Power & Light Company Project, 5.95% Series, due 2030.

In addition, IPL used $10.0 million of the net proceeds to partially fund a $12.6 million termination payment on the interest rate swap related to the 1995B Bonds in November 2011. In accordance with ASC 980, the interest rate swap termination payment is being amortized to expense over the term of the newly issued debt.

In the third quarter of 2012, we reclassified $110 million aggregate principal amount of 6.30% IPL first mortgage bonds due July 2013 from Long-term debt to Short-term debt on our Consolidated Balance Sheet as the debt is now due within one year. Management plans to refinance these bonds in 2013 with a new long-term issuance. In the unlikely event that we are unable to refinance these bonds on acceptable terms using a long-term issuance, IPL has available borrowing capacity on its revolving credit facility that could be used to satisfy the obligation.

IPALCO's Senior Secured Notes

In May 2011, IPALCO completed the sale of $400 million of 5.00% Senior Secured Notes due May 1, 2018 ("2018 IPALCO Notes") pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. The 2018 IPALCO Notes were issued pursuant to an Indenture dated May 18, 2011, by and between IPALCO and The Bank of New York Mellon Trust Company, N.A., as trustee. These notes were subsequently exchanged for new notes with identical terms and like principal amounts, which were registered with the Securities and Exchange Commission pursuant to a registration statement on Form S-4 made effective in November 2011. In connection with this issuance, IPALCO conducted a tender offer to repurchase for cash any and all of IPALCO's then outstanding $375 million of 8.625% (original coupon 7.625%) Senior Secured Notes due November 14, 2011 ("2011 IPALCO Notes"). As a result, IPALCO no longer has indebtedness with an interest rate that changes due to changes in its credit ratings. Additionally, IPALCO no longer has any debt with financial ratio maintenance covenants; although its articles of incorporation continue to contain the same financial ratios restricting dividend payments and intercompany loans to AES as were included in the 2011 IPALCO Notes.

The 2018 IPALCO Notes were priced to the public at 99.927% of par. Net proceeds to IPALCO were $394.7 million after deducting underwriting costs and the discount. These costs and other related financing costs are being amortized through 2018 using the effective interest method. We used the net proceeds to repurchase all of the outstanding 2011 IPALCO Notes through the tender offer and to subsequently redeem all of the remaining 2011 IPALCO Notes not tendered in the second quarter of 2011. A portion of the proceeds was also used to pay the early tender premium of $14.4 million and other fees and expenses related to the tender offer and the redemption of the 2011 IPALCO Notes, as well as other fees and expenses related to the issuance of the 2018 IPALCO Notes. The total loss on early extinguishment of debt of $15.4 million was included as a separate line item within Other Income and (Deductions) in the accompanying audited Consolidated Statements of Comprehensive Income.

The 2018 IPALCO Notes are secured by IPALCO's pledge of all of the outstanding common stock of IPL. The lien on the pledged shares is shared equally and ratably with IPALCO's existing senior secured notes. IPALCO has entered into a Pledge Agreement Supplement with The Bank of New York Mellon Trust Company, N.A., as Collateral Agent, dated May 18, 2011 to the Pledge Agreement between IPALCO and The Bank of New York Mellon Trust Company, N.A. as successor Collateral Agent dated November 14, 2001.

Accounts Receivable Securitization

IPL formed IPL Funding Corporation ("IPL Funding") in 1996 as a special-purpose entity to purchase receivables originated by IPL pursuant to a receivables purchase agreement between IPL and IPL Funding. IPL Funding also entered into a sale facility as defined in the Second Amended and Restated Receivables Sale Agreement, dated as of June 25, 2009, among IPL, IPL Funding Corporation, as the Seller, Indianapolis Power & Light Company, as the Collection Agent, Royal Bank of Scotland plc, as the Agent, the Liquidity Providers and Windmill Funding Corporation ("Receivables Sale Agreement"), which matured as extended on October 24, 2012. On October 22, 2012, under an amended and restated sale agreement, which matures on October 21, 2013, Citibank, N.A. and its affiliate, CRC Funding, LLC, replaced The Royal Bank of Scotland plc and Windmill Funding Corporation as Agent and Investor, respectively. The terms of the new arrangement to IPL are substantially the same as that of the previous arrangement. The Agent and Investor collectively, are referred to as the "Purchasers." Pursuant to the terms of the Receivables Sale Agreement, the Purchasers agree to purchase from IPL Funding, on a revolving basis, interests in the pool of receivables purchased from IPL up to the lesser of (1) an amount determined pursuant to the sale facility that takes into account certain eligibility requirements and reserves relating to the receivables, or (2) $50 million. That amount was $50 million as of December 31, 2012 and December 31, 2011. As collections reduce accounts receivable included in the pool, IPL Funding sells ownership interests in additional receivables acquired from IPL to return the ownership interests sold to the maximum amount permitted by the sale facility. IPL Funding is included in the Consolidated Financial Statements of IPALCO.

IPL retains servicing responsibilities in its role as collection agent on the amounts due on the sold receivables. Per the terms of the purchase agreement IPL Funding pays IPL $0.6 million annually in servicing fees. Also in accordance with the purchase agreement, the receivables are purchased from IPL at a discounted rate of 3.5% as of December 31, 2012 facilitating IPL Funding's ability to pay its expenses such as the servicing fee described above. No servicing asset or liability is recorded since the servicing fee paid to IPL approximates a market rate. However, the Purchasers assume the risk of collection on the purchased receivables without recourse to IPL in the event of a loss.

The total fees paid to the Purchasers recognized on the sales of receivables were $0.6 million, $0.6 million and $0.9 million for the years ended December 31, 2012, 2011 and 2010, respectively. These amounts were included in Other interest on the Consolidated Statements of Comprehensive Income.

IPL and IPL Funding have indemnified the Purchasers on an after-tax basis for any and all damages, losses, claims, etc., arising out of the facility, subject to certain limitations defined in the Receivables Sale Agreement, in the event that there is a breach of representations and warranties made with respect to the purchased receivables and/or certain other circumstances as described in the Receivables Sale Agreement.

Under the sale facility, if IPL fails to maintain a certain debt-to-capital ratio, it would constitute a "termination event." As of December 31, 2012, IPL was in compliance with such covenant.

In the event that IPL's long-term senior unsecured credit rating falls below BBB- at S&P and Baa3 at Moody's Investors Service, the facility agent has the ability to (i) replace IPL as the collection agent; and (ii) declare a "lock-box" event. Under a lock-box event or a termination event, the facility agent has the ability to require all proceeds of purchased receivables of IPL to be directed to lock-box accounts within 45 days of notifying IPL. A termination event would also (i) give the facility agent the option to take control of the lock-box account, and (ii) give the Purchasers the option to discontinue the purchase of additional interests in receivables and cause all proceeds of the purchased interests to be used to reduce the Purchaser's investment and to pay other amounts owed to the Purchasers and the facility agent. This would have the effect of reducing the operating capital available to IPL by the aggregate amount of such purchased interests in receivables ($50 million as of December 31, 2012).

Line of Credit

In December 2010, IPL entered into a $250 million unsecured revolving credit facilities credit agreement (the "Credit Agreement") with a syndication of banks. The Credit Agreement originally included two facilities: (i) a $209.4 million committed line of credit for letters of credit, working capital and general corporate purposes and (ii) a $40.6 million liquidity facility, which was dedicated for the sole purpose of providing liquidity for certain variable rate unsecured debt issued on behalf of IPL. As a result of the November 2011 IPL financing activity described above, the credit agreement was amended in February 2012 to eliminate the $40.6 million liquidity facility and to increase the committed line of credit for letters of credit, working capital and general corporate purposes by the same amount resulting in one facility in the amount of $250 million. The Credit Agreement matures on December 14, 2015 and bears interest at variable rates as defined in the Credit Agreement. Prior to execution, IPL and IPALCO had existing general banking relationships with the parties in this agreement. As of December 31, 2012 and 2011, IPL had $0.0 million and $14.0 million outstanding borrowings on the committed line of credit, respectively.

Debt Maturities

Maturities on long-term indebtedness subsequent to December 31, 2012, are as follows:


Year	Amount
	*(In Thousands)*
2013	$	110,000
2014		-
2015		-
2016		531,850
2017		24,650
Thereafter		1,098,800
Total	$	1,765,300

Indianapolis Power And Light Company [Member]

Indebtedness

9. INDEBTEDNESS

Restrictions on Issuance of Debt

Credit Ratings

Our ability to borrow money or to refinance existing indebtedness and the interest rates at which we can borrow money or refinance existing indebtedness are affected by our credit ratings. In addition, the applicable interest rates on IPL's credit facility (as well as the amount of certain other fees on the credit facility) are dependent upon the credit ratings of IPL. Downgrades in the credit ratings of AES and/or IPALCO could result in IPL's credit ratings being downgraded.

Long-Term Debt

The following table presents our long-term indebtedness:


Series	Due	December 31,
Series	Due	2012		2011
		*(In Thousands)*
IPL First Mortgage Bonds (see below)
6.30%	July 2013	$	110,000	$	110,000
4.90%⁽²⁾	January 2016		30,000		30,000
4.90%⁽²⁾	January 2016		41,850		41,850
4.90%⁽²⁾	January 2016		60,000		60,000
5.40%⁽¹⁾	August 2017		24,650		24,650
3.875%⁽²⁾	August 2021		55,000		55,000
3.875%⁽²⁾	August 2021		40,000		40,000
4.55%⁽²⁾	December 2024		40,000		40,000
6.60%	January 2034		100,000		100,000
6.05%	October 2036		158,800		158,800
6.60%	June 2037		165,000		165,000
4.875%	November 2041		140,000		140,000
Unamortized discount - net			(1,096)		(1,125)
Total IPL first mortgage bonds			964,204		964,175
Less: Current Portion of Long-term Debt			110,000		-
Net Consolidated IPL Long-term Debt		$	854,204	$	964,175

⁽¹⁾First Mortgage Bonds are issued to the city of Petersburg, Indiana, to secure the loan of proceeds from various tax-exempt instruments issued by the city.
⁽²⁾First Mortgage Bonds are issued to the Indiana Finance Authority, to secure the loan of proceeds from the tax-exempt bonds issued by the Indiana Finance Authority.

IPL First Mortgage Bonds and Indiana Finance Authority Bond Issuances

$40.0 million aggregate principal amount of the City of Petersburg, Indiana Pollution Control Refunding Revenue Bonds Adjustable Rate Tender Securities, 1995B Series, Indianapolis Power & Light Company Project ("1995B Bonds"), variable rate, due 2023;
$20.0 million aggregate principal amount of the City of Petersburg, Indiana Solid Waste Disposal Revenue Bonds, 1994A Series, Indianapolis Power & Light Company Project, 5.90% Series, due 2024;
$30.0 million aggregate principal amount of the City of Petersburg, Indiana Solid Waste Disposal Revenue Bonds, 1995C Series, Indianapolis Power & Light Company Project, 5.95% Series, due 2029;
$20.0 million aggregate principal amount of the City of Petersburg, Indiana Solid Waste Disposal Revenue Bonds, 1996 Series, Indianapolis Power & Light Company Project, 6.375% Series, due 2029; and
$17.35 million aggregate principal amount of the Indiana Development Finance Authority's Exempt Facilities Revenue Refunding Bonds, Series 1999, Indianapolis Power & Light Company Project, 5.95% Series, due 2030.

Accounts Receivable Securitization

IPL formed IPL Funding in 1996 as a special-purpose entity to purchase receivables originated by IPL pursuant to a receivables purchase agreement between IPL and IPL Funding. IPL Funding also entered into a sale facility as defined in the Second Amended and Restated Receivables Sale Agreement, dated as of June 25, 2009, among IPL, IPL Funding Corporation, as the Seller, Indianapolis Power & Light Company, as the Collection Agent, Royal Bank of Scotland plc, as the Agent, the Liquidity Providers and Windmill Funding Corporation ("Receivables Sale Agreement"), which matured as extended on October 24, 2012. On October 22, 2012, under an amended and restated sale agreement, which matures on October 21, 2013, Citibank, N.A. and its affiliate, CRC Funding, LLC, replaced The Royal Bank of Scotland plc and Windmill Funding Corporation as Agent and Investor, respectively. The terms of the new arrangement to IPL are substantially the same as that of the previous arrangement. The Agent and Investor collectively, are referred to as the "Purchasers." Pursuant to the terms of the Receivables Sale Agreement, the Purchasers agree to purchase from IPL Funding, on a revolving basis, interests in the pool of receivables purchased from IPL up to the lesser of (1) an amount determined pursuant to the sale facility that takes into account certain eligibility requirements and reserves relating to the receivables, or (2) $50 million. That amount was $50 million as of December 31, 2012 and December 31, 2011. As collections reduce accounts receivable included in the pool, IPL Funding sells ownership interests in additional receivables acquired from IPL to return the ownership interests sold to the maximum amount permitted by the sale facility. IPL Funding is included in the Consolidated Financial Statements of IPL.

Under the sale facility, if IPL fails to maintain a certain debt-to-capital ratio, it would constitute a "termination event." As of December 31, 2012, IPL was in compliance with such covenant.

Line of Credit

In December 2010, IPL entered into a $250 million unsecured revolving credit facilities credit agreement (the "Credit Agreement") with a syndication of banks. The Credit Agreement originally included two facilities: (i) a $209.4 million committed line of credit for letters of credit, working capital and general corporate purposes and (ii) a $40.6 million liquidity facility, which was dedicated for the sole purpose of providing liquidity for certain variable rate unsecured debt issued on behalf of IPL. As a result of the November 2011 IPL financing activity described above, the credit agreement was amended in February 2012 to eliminate the $40.6 million liquidity facility and to increase the committed line of credit for letters of credit, working capital and general corporate purposes by the same amount resulting in one facility in the amount of $250 million. The Credit Agreement matures on December 14, 2015 and bears interest at variable rates as defined in the Credit Agreement. Prior to execution, IPL had existing general banking relationships with the parties in this agreement. As of December 31, 2012 and 2011, IPL had $0.0 million and $14.0 million outstanding borrowings on the committed line of credit, respectively.

Debt Maturities

Maturities on long-term indebtedness subsequent to December 31, 2012, are as follows:


Year	Amount
	*(In Thousands)*
2013	$	110,000
2014		-
2015		-
2016		131,850
2017		24,650
Thereafter		698,800
Total	$	965,300

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References+ Details