AEP Texas Restoration Funding LLC
$235,282,000 Senior Secured System Restoration Bonds, scheduled to pay principal semi-annually and sequentially in accordance with the expected sinking fund schedule.
Issuing Entity and Capital Structure
AEP Texas Restoration Funding LLC is a special purpose Delaware limited liability company. AEP Texas Inc. is our sole member and owns all of our equity interests. We have no commercial operations. We were formed solely to purchase and own transition property, to issue system restoration bonds and to perform activities incidental thereto. Please read "AEP Texas Restoration Funding LLC, the Issuing Entity" in the accompanying prospectus.
Our Relationship With The PUCT
Pursuant to the financing order,
- The PUCT or its designated representative has a decision-making role co-equal with AEP Texas with respect to the structuring, marketing and pricing of the system restoration bonds and all matters related to the structuring, marketing and pricing of the system restoration bonds will be determined through a joint decision of AEP Texas and the PUCT or its designated representative,
- AEP Texas is directed to take all necessary steps to ensure that the PUCT or its designated representative is provided sufficient and timely information to allow the PUCT or its designated representative to fully participate in, and exercise its decision-making power over, the proposed securitization, and
- The servicer will file periodic adjustments to system restoration charges with the PUCT on our behalf.
We have agreed that certain reports concerning transition charge collections will be provided to the PUCT.
Purpose Of Transaction
This issuance of Senior Secured System Restoration Bonds will enable AEP Texas to recover certain distribution-related system restoration costs in its Central Division related to Hurricane Harvey and certain other weather-related events occurring after December 2008 but prior to Hurricane Harvey. Please read "The Securitization Provisions of the Public Utility Regulatory Act" in the prospectus.
539 N. Carancahua Street
Corpus Christi, Texas 78401
Senior Secured System Restoration Bonds
AEP Texas Restoration Funding LLC
Senior Secured System Restoration Bonds
|Tranche||Expected Weighted Average Life (Years)||Principal Amount Offered*||Scheduled Final Payment Date||Final Maturity Date||Interest Rate||Initial Price to Public||Underwriting Discounts and Commissions||Proceeds to Issuing||Entity (Before Expenses)|
The total initial price to the public is $235,281,600. The total amount of the underwriting discounts and commissions is $941,128. The total amount of proceeds to the issuing entity before deduction of expenses (estimated to be $3,490,553) is $234,340,472.
Investing in the Senior Secured System Restoration Bonds involves risks. Please read "Risk Factors" beginning on page 21 of the accompanying prospectus to read about factors you should consider before buying the bonds.
AEP Texas Inc., as depositor, is offering $235,282,000 of Senior Secured System Restoration Bonds, referred to herein as the bonds, in two tranches to be issued by AEP Texas Restoration Funding LLC, as the issuing entity. AEP Texas Inc. is also the seller, initial servicer and sponsor with regard to the bonds. The bonds are senior secured obligations of the issuing entity supported by transition property, which includes the right to a special, irrevocable nonbypassable charge, known as a system restoration charge, paid by retail electric customers served at distribution voltage located within the portion of AEP Texas' service area as it existed on the date of the financing order that was formerly serviced by AEP Texas predecessor-in-interest, AEP Texas Central Company (or the AEP Texas Central Division), based on their consumption of electricity as discussed herein. The securitization provisions of the Public Utility Regulatory Act mandate that system restoration charges be adjusted annually, and the Public Utility Commission of Texas further requires such true-ups to occur semi-annually (and permits such true-ups to occur more frequently) if necessary, in each case to ensure the expected recovery of amounts sufficient to timely provide all scheduled payments of principal and interest on the bonds, as described further in this prospectus, and the Public Utility Commission of Texas guarantees it will act under the financing order to ensure such recoveries as described below. Credit enhancement for the bonds will be provided by such statutory true-up mechanisms as well as by accounts held under the indenture. Each bond will be entitled to interest on February 1 and August 1 of each year, beginning in February, 2020. The first scheduled payment date is February 1, 2020. Interest will accrue from the date of issuance and must be paid by the purchaser if the bonds are delivered after that date. On each payment date, each bond will be entitled to payment of principal, but only to the extent funds are available in the collection account after payment of certain fees and expenses and after payment of interest. There currently is no secondary market for the bonds, and we cannot assure you that one will develop.
The bonds represent obligations only of the issuing entity, AEP Texas Restoration Funding LLC, and do not represent obligations of the sponsor or any of its affiliates other than the issuing entity. Please read "Description of the Transition Property" and "Security for the System Restoration Bonds" in this prospectus. The bonds are secured by the assets of the issuing entity, consisting principally of the transition property and funds on deposit in the collection account for the bonds and related subaccounts. Please read"Security for the System Restoration Bonds" and "Description of the Transition Property" in this prospectus. The bonds are not a debt or general obligation of the State of Texas, the Public Utility Commission of Texas or any other governmental agency or instrumentality and are not a charge on the full faith and credit or the taxing power of the State of Texas or any governmental agency or instrumentality.
The Public Utility Commission of Texas guarantees that it will act under its irrevocable financing order as expressly authorized by the securitization provisions of the Public Utility Regulatory Act to ensure that expected system restoration charge revenues are sufficient to pay on a timely basis scheduled principal and interest on the bonds. The Public Utility Commission of Texas' obligations relating to the bonds, including the specific actions that it has guaranteed to take, are direct, explicit, irrevocable and unconditional upon issuance of the bonds, and are legally enforceable against the Public Utility Commission of Texas, which is a United States public sector entity, in accordance with Texas law.
All matters relating to the structuring and pricing of the bonds have been considered jointly by AEP Texas Inc. and the Public Utility Commission of Texas or its designated representative.
Additional information is contained in the accompanying prospectus. You should read this prospectus supplement and the accompanying prospectus carefully before you decide to invest in the bonds. This prospectus supplement may not be used to offer or sell the bonds unless accompanied by the prospectus. Please review the prospectus.
Ratings assigned to the AEP Texas Restoration Funding LLC Senior Secured System Restoration Bonds and the debt issued by the Servicer
Issuer: AEP Texas Restoration Funding LLC
Instrument: System Restoration Bonds
Moody's Rating: Aaa
S&P Rating: AAA
Servicer: AEP Texas Inc
Instrument: Senior Unsecured Debtt
Moody's Rating: Baa1
Moody's Outlook: Stable
S&P Rating: A-
S&P Outlook: Stable