Item 1.01. Entry into a Material Definitive Agreement
On August 16, 2011, CH Energy Group, Inc. (the “Company”) entered into an agreement (the “ASR Agreement”) with J. P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association, London Branch (“JPM”), to implement an accelerated repurchase program providing for the repurchase by the Company of approximately $30,000,000 of its Common Stock, $0.10 par value per share (“Common Stock”). The Company is purchasing this Common Stock under an authorization to repurchase up to 2,000,000 shares of Common Stock approved by the Board of Directors of the Company on July 31, 2007.
Pursuant to the ASR Agreement, on August 17, 2011, the Company paid $30,000,000 to JPM. The Company initially received 554,017 shares of Common Stock from JPM, which represents 100% of the total number of shares the Company would receive under the ASR Agreement if the price per share of the Common Stock remained at the closing price on August 16, 2011 ($54.15 per share) throughout the remainder of the calculation period under the ASR Agreement.
The actual number of shares of Common Stock that the Company will repurchase under the ASR Agreement will be determined based on a discount to the daily volume-weighted average prices of the Company’s common stock over the calculation period (which is expected to end no later than May 16, 2012, but may be earlier terminated by JPM under certain circumstances), subject to collar provisions that establish a minimum and maximum number of shares to be repurchased and certain other adjustments. If the actual number of shares repurchased exceeds the number of shares initially delivered by JPM to the Company, following the end of the calculation period JPM will be required to deliver to the Company a number of additional shares equal to the excess. If the actual number of shares repurchased is less than the number of shares initially delivered, then following the end of the calculation period the Company will be required (at its election) to either deliver to JPM a number of shares of Common Stock approximately equal to the difference or pay to JPM cash in an amount equal to the value of such shares.
The Company used proceeds from the disposition of certain alternative energy investments to fund the initial payment under the ASR Agreement.
The ASR Agreement contains the principal terms and provisions governing the accelerated share repurchase program, including, the mechanism used to determine the number of shares of Common Stock that will be delivered, the circumstances under which adjustments may be made, the circumstances under which the calculation period may be terminated early and other customary provisions for such agreements. The ASR Agreement also provides that, during the term of the agreement, the Company generally will not be permitted to repurchase Common Stock in the open market.
J.P. Morgan Chase Bank, National Association, is Syndication Agent and a lender under the Company’s revolving credit facility, is the Administrative Agent and a lender under a revolving credit agreement to which Central Hudson Gas & Electric Corporation, a subsidiary of the Company (“Central Hudson”), is a party, and is lender to Central Hudson under an uncommitted line of credit in the maximum principal amount of $15 million.
The foregoing description of the ASR Agreement is a summary and is qualified in its entirety by reference to the ASR Agreement, which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2011.