FInancial

information

I have done some digging down into a sample of the documents for PNCs coal company finance. Heres what they show. Aggregate numbers in the RAN !"!# !"" list$ PNC was contributing a lot of money to coal company financing%

Contributing to not less than &'.() billion in credit *typically in revolving lines of credit +nderwriting *as part of syndicates, for &-. billion in bond issues for the five companies PNC underwriting% &. .) million *plus additional un/nown underwriting amounts, for those bond issues.

0hese total include each significant financial transaction for the coal companies # where PNC participated # during that time period. PNC shared those transactions with other participants% e.g. for the bond issues it was a 1unior underwriter$ for the credit transactions there were other lenders. Not all the transactions in the RAN list reflect the ban/ loans and bond issues which support the 20R coal company finance as of now. In both the credit transactions and the bond issues the companies were basically refinancing existing debt: using the proceeds of a bond issue to repay existing debt, or amending and extending an existing line of credit to extend its effective date or increase the amount available. for one with new terms. Only a fraction of the debt and underwriting totals is money the companies are now using to finance their operations. The status quo: current PN coal company finance PN and other ban!s are currently financing the coal companies through various forms letters of credit. "ome of the available credit has been drawn down and used# the rest is still on standby. $y a very rough extrapolation, The total credit commitments by all ban!s for all companies probably exceed %& billion. The credit actually used ' the amount owed ( for borrowing is a fraction of that amount. PN )s commitments of the total under the letters of credit and its actual lending when the credit used are undetermined fractions of those amounts. (These commitments would be shown for the companies most recent regular SEC 10-K filings. !Cs particular credit commitments and the coal companies

*ove to +nbox *ore , of -./ 0inancial information + have done some digging down into a sample of the documents for PN )s coal company finance. 1ere)s what they show. 2ggregate numbers in the 32N .4&4(.4&& list, PN was contributing a lot of money to coal company financing: 5 ontributing to not less than %6.,- billion in credit 7typically in revolving lines of credit 5 8nderwriting 7as part of syndicates9 for %/.. billion in bond issues for the five companies 5 PN underwriting: %:..- million 7plus additional un!nown underwriting amounts9 for those bond issues The available PN and "; documents do not show how much PN made available to the credit financing. 1owever, based on those documents it is possible to analy<e how the =credit facilities> 7revolving and other credit9 were structured, and to estimate some of the income it received. +n one example, PN was ?@oint lead arranger? for ON"OA)s B&.- billion *ay .4&& credit agreement. &. This was a credit transaction running for a finite period, five years, rather than an ongoing investment in ON"OA. .. PN would actually not provide money to 2lpha until 2lpha drew down on the available credit. C. ON"OA was a highly(leveraged borrower which would have to pay premium interest and fees for this credit /. PN was a @oint lead arranger for the transaction. 2n arranger for this !ind of highly(leveraged premium fee transaction would typically collect a fee of between &B to -B of the total amount of the credit. -. +n this case that fee would range from %&- million to %,- million. 2s a @oint arranger PN would share this fee, receiving half: an estimated %,.- million to %C,.million, @ust for helping arranging for the lines of credit. D. 1owever, before 2lpha drew down the money, it would have to pay a 7floating, significant profit margin9 =commitment fee> @ust for having the money available. +nterest 7also at a floating rate plus a margin9 would be due only after drawing down funds. ,. +nterest and commitment fees would depend on how much ON"OA had previously drawn and prevailing inter(ban! rates. PN and other lenders would receive a

margin 7the exact total would require further analysis, nut would be significant pre( determined fee income available for profit. 6. PN received similar fees, depending on its role, for each amendment to its credit agreements with the coal companies. ;ach arrangement was a separate transaction for which it received a new fee. This analysis implies some contrasts with underwriting. Ehen PN underwrote bond issues, its participation and income had a different structure. +n Fune .4&&, 2lpha had two bond issues, one %644 million issue and one %644 million issue. PN participated in the %644 million issue as a @unior underwriter for %.4 million. &. =8nderwriting> is a guarantee that the security 7here a bond9 will have an investor(buyer 7e.g. a pension fund9 in the ongoing mar!et for the bonds. The elapsed time from when the bonds issue to investor purchase is usually a day or less. .. Therefore PN )s involvement 7participation in the underwriting guarantee9 for this transaction was brief, lasting only a day or less. C. $ecause 2lpha was a ris!y borrower, the bonds paid DB annual interest, about &B more than for similar corporate bonds at that time. /. The typical investment(underwriting fee 7for all underwriters collectively9 would probably be about &B of the bond issue. -. 2s a @unior underwriter PN would probably have received about %&44,444 for its %.4 million underwriting of the %644 million Fune .4&& 2lpha bond issue. D. +t would not have received any further fees from theGis bond issue. Ehen PN provided credit 7actual borrowing or committing to ma!e money available9 the commitment was for five years. "econd, when PN was bond underwriting, it actually fronting money only for a very period, only a day or so, from when it bought the bonds from the issuer until when it turned around and sold them to investors. *oreover, it got very little income for doing this. 0or example, ;xtrapolating, PN would not have made more than %. million income for all of its coal company bond underwriting during .4&4 and .4&&. 1owever, supplying credit is another story. The origination fees and ?arranger? fees for a borrower with wea! credit ( as the coal companies are and were ( might amount to from .B to -B of each newly amended credit agreement transaction. This comes to a lot of money, for each transaction and in total. To ta!e another example, PN was ?co(arranger? for 2lphaHs %&.. billion *ay .4&4 credit agreement. +t would have received at least %- million, and perhaps several times that much, @ust for arranging this one line of credit. PN received similar fees each time a borrower came bac! to refinance and it arranged or managed a newly amended agreement. 0or the fees from all of the coal credit transactions this would amount to a range of %.- million to %,- or %&44 million 7or more9 fee income only, for supplying credit during .4&4 and .4&&. This income is @ust for setting up the separate transactions ( there would be other continuing fees and interest afterwards. These estimates suggest ta!ing a closer loo! specifically at the fee income PN has gotten for supplying credit to the coal companies. + thin! itHs important to get these numbers right and use them in public for several

reasons: 5 redibility 5 8sing hard dollars ( + thin! ( would be more li!ely to draw blood when challenging a dollar technocrat li!e Iemcha!, or 3ohr in a different way 5 To me 7as a lawyer9, specifics are more persuasive then generali<ations 7as in the challenge example above9 5 8nderstanding why PN too! credit income out of the .4&4 *T3 policy, 7as opposed to pro@ect finance and ma@ority *T3 operations9: it held onto the lucrative part of coal financing +f PN says we got the numbers wrong we can say: ?OJ, open your boo!s, weHll get an agreed upon set of facts, and then we can tal! about what to do about this.? On a very different front, the research suggests that faith(based challenges might be a powerful way to go after 3ohr 7devout atholic, Notre Iame alumnus9, and Iemcha! 7$ethany ollege, a Iisciples of hrist school9. 0or 3ohr, the basic message could be based on Pope 0rancisHs teachings about environmental stewardship and concern for the poor, and their clear conflict with *T3. This might play out for direct action at Trustee meetings and the li!e at Notre Iame, through alliances with environmental student groups there, other faith(based atholic environmental groups, or even a direct approach to the Iiocese of Pittsburgh or 3ohrHs parish priest. 2 *eeting for Eorship outside a church while *ass is being said inside would be a highly(charged frame. Kod ( or the +nner Aight ( is there in both places. ;L2T could use similar tactics if it could ally with student environmental groups where the individuals are directors or trustees: 3ohr 7Notre Iame9, Fordan 7$ethany ollege9, and 8sher 7Pitt9. "orry to go on and on about money. PN is, after all, about money. +t could a powerful weapon if we can get the ammunition right.