DEBT

Recourse Debt

In February 2014, the Company redeemed in full the $110 million balance of its 7.75% senior unsecured notes due March 2014. On March 7, 2014, the Company issued $750 million aggregate principal amount of 5.50% senior notes due 2024. Concurrent with this offering, the Company redeemed via tender offers $625 million aggregate principal of its existing 8.00% senior unsecured notes due 2017. As a result of the latter transaction, the Company recognized a loss on extinguishment of debt of $132 million that is included in the Condensed Consolidated Statement of Operations.

On May 20, 2014, the Company issued $775 million aggregate principal amount of senior unsecured floating rate notes due June 2019. The notes bear interest at a rate of 3% above three-month LIBOR, reset quarterly. Concurrent with this offering, the Company repaid $767 million of its existing senior secured term loan due 2018. As a result of the latter transaction, the Company recognized a loss on extinguishment of debt of $10 million that is included in the Condensed Consolidated Statement of Operations. On June 16, 2014, the Company repaid in full the remaining balance of $29 million of its senior secured term loan due 2018.

On July 25, 2014, the Company issued two notices to call $320 million aggregate principal amount of unsecured notes, $160 million of which will retire notes due in 2015 and $160 million of which will retire notes due in 2016. The Company anticipates closing the transactions on August 25, 2014.

Non-Recourse Debt

Significant transactions

During the six months ended June 30, 2014, the Company's subsidiaries had the following significant debt transactions:


•	Mong Duong drew $272 million under its construction loan facility;


•	Gener issued new debt of $700 million more than offset by repayments of$853 million;


•	IPL issued new debt of $130 million;


•	Tietê issued new debt of $129 million more than offset by repayments of $132 million;


•	Cochrane drew$125 million under its construction loans; and


•	Alto Maipo drew $103 million under its existing loans.

Debt in default

The following table summarizes the Company’s subsidiary non-recourse debt in default or accelerated as of the period indicated. The debt is classified as current non-recourse debt unless otherwise indicated:



	Primary Nature of Default	June 30, 2014
Subsidiary	Primary Nature of Default	Default Amount		Net Assets
		(in millions)
Maritza (Bulgaria)	Covenant	$	815	$	572
Kavarna (Bulgaria)	Covenant	195		88
		$	1,010

The above defaults are not payment defaults, but are instead defaults triggered by failure to comply with other covenants and/or other conditions such as (but not limited to) failure to meet information covenants, complete construction or other milestones in an allocated time, meet certain minimum or maximum financial ratios, or other requirements contained in the non-recourse debt documents of the borrower.

In addition, in the event that there is a default, bankruptcy or maturity acceleration at a subsidiary or group of subsidiaries that meets the applicable definition of materiality under the corporate debt agreements of The AES Corporation, there could be a cross-default to the Company’s recourse debt. Materiality is defined in the Parent's senior secured credit facility as having provided 20% or more of the Parent Company's total cash distributions from businesses for the four most recently completed fiscal quarters. As of June 30, 2014, none of the defaults listed above individually or in the aggregate result in or are at risk of triggering a cross-default under the recourse debt of the Company. In the event the Company is not in compliance with the financial covenants of its senior secured revolving credit facility, restricted payments will be limited to regular quarterly shareholder dividends at the then-prevailing rate. Additionally, payment defaults and bankruptcy defaults also preclude the making of any restricted payments.

Interest Expense

Interest expense for the three months ended June 30, 2014 has been reduced by approximately $48 million related to contingent interest accruals associated with disputed purchased energy obligations at Sul for which it was determined based on developments within the current quarter that the likelihood of an unfavorable outcome for the payment of interest on the disputed obligations was no longer probable. Interest expense for the three months ended June 30, 2013 has been reduced by approximately $34 million related to the recognition of ineffectiveness on derivative interest rate swaps accounted for as cash flow hedges.