Business Context and Reporting Period
This Form 8-K Current Report, dated July 30, 2012, covers events occurring on July 25, 2012, involving Northeast Utilities ("NU") and its subsidiaries: The Connecticut Light and Power Company, NSTAR Gas Company, NSTAR LLC, Public Service Company of New Hampshire, Western Massachusetts Electric Company, Yankee Gas Services Company, and NSTAR Electric Company. The filing details the entry into new material definitive credit agreements and the termination of prior facilities.
Key Financial Metrics and Credit Facilities
- New Credit Facilities:
- NU Facility: A senior, unsecured revolving credit facility of $1.15 billion with Bank of America, N.A., expiring July 25, 2017. Borrowing limits are allocated as follows: NU ($1.15 billion), CL&P, PSNH, and WMECO ($300 million each), NSTAR Gas and Yankee Gas ($200 million each), and NSTAR ($175 million).
- NSTAR Electric Facility: A senior, unsecured revolving credit facility of $450 million with Barclays Bank PLC, expiring July 25, 2017.
- Commercial Paper Program: NU commenced a program to issue unsecured commercial paper notes up to a maximum aggregate amount of $1.15 billion, with maturities not exceeding 364 days.
- Interest and Fees: Interest rates are based on LIBOR plus a margin ranging from 0 to 147.5 basis points. Quarterly facility fees range from 7.5 to 27.5 basis points, dependent on credit ratings.
- Financial Covenants: Borrowers must maintain a Consolidated Indebtedness to Capitalization Ratio not exceeding 0.65:1.00 at the end of any fiscal quarter.
- Revenue and Profit: The filing text does not provide specific values for revenue, profit, cash flow, or operating margins.
Material Changes Versus Prior Period
On July 25, 2012, the new facilities replaced the following prior arrangements:
- NSTAR Prior Facilities: Revolving credit facilities for NSTAR ($175 million), NSTAR Electric ($450 million), and NSTAR Gas ($75 million).
- NU Prior Facilities: A $500 million facility for NU and a joint $400 million facility for CL&P, PSNH, WMECO, and Yankee Gas, which were scheduled to expire on September 24, 2013.
The NSTAR commercial paper program was terminated on July 25, 2012, while the NSTAR Electric program continues. No material termination penalties were incurred for the termination of the NU Prior Facilities.
Guidance, Outlook, and Risks
Use of Proceeds: The new facilities will fund working capital, capital expenditures, debt repayment, and backstop the commercial paper programs for NU and NSTAR Electric.
Risks and Contingencies:
- Covenants: Agreements restrict mergers, consolidations, asset sales, affiliate transactions, sale-leaseback transactions, and the incurrence of liens.
- Events of Default: Significant corporate events, financial defaults, or covenant violations may trigger immediate repayment of all outstanding loans and termination of commitments.
- Commercial Paper Risks: Dealer agreements include events of default for non-payment, covenant violations, material judgments, and bankruptcy.
Management Commentary: The filing does not contain forward-looking guidance on earnings or operational outlook beyond the description of the new financing structures.
Important Facts for Investor Verification
- Verify the current credit ratings of the borrowers to determine the applicable interest rate margins and facility fees.
- Confirm the company's compliance with the 0.65:1.00 Consolidated Indebtedness to Capitalization Ratio covenant.
- Monitor the utilization levels of the $1.15 billion NU Facility and the $450 million NSTAR Electric Facility.
- Review the Combined Quarterly Report on Form 10-Q for the period ending September 30, 2012, for the full text of the Facility agreements and Dealer Agreements.
- Track the status of the terminated NSTAR commercial paper program versus the active NSTAR Electric program.