Business Context and Reporting Period
This Form 8-K is a current report filed on May 28, 2021, by Pinnacle West Capital Corporation (Pinnacle West) and its subsidiary, Arizona Public Service Company (APS). The filing details the entry into new material definitive credit agreements and the termination of prior facilities.
Key Financial Metrics and Agreements
The filing establishes new unsecured revolving credit facilities with a maturity date of May 28, 2026:
- Pinnacle West Facility: A single $200 million revolving credit facility.
- APS Facilities: Two separate revolving credit facilities, each with a capacity of $500 million, totaling $1 billion in available credit.
- Interest Rates: Borrowings bear interest based on the registrants' senior unsecured debt ratings.
- Sustainability Link: Both facilities include a sustainability-linked pricing metric that adjusts interest rates based on environmental and employee health/safety targets.
- Usage: Funds are designated for general corporate purposes, supporting commercial paper issuances, and letters of credit.
Note: This filing does not provide specific revenue, profit, cash flow, or margin data as it reports on financing activities rather than operational performance.
Material Changes Versus Prior Period
The new facilities replace prior credit arrangements that were set to expire in 2022 and 2023:
- Pinnacle West: Terminated a prior $200 million facility that would have expired on July 11, 2023.
- APS: Terminated two prior $500 million facilities. One was set to expire on July 11, 2023, and the other on June 29, 2022.
- Extension: The new agreements extend the maturity of the credit lines to May 28, 2026.
Guidance, Risks, and Covenants
The agreements include standard financial covenants and risk provisions:
- Covenants: Pinnacle West must maintain a specified ownership percentage of APS stock. Both entities must maintain a consolidated debt-to-capitalization ratio no greater than a prescribed level and comply with lien restrictions.
- Events of Default: Include cross-default provisions and change of control provisions (specifically relating to Pinnacle West for APS).
- Consequences of Default: Lenders may terminate commitments and declare outstanding obligations due and payable.
- Relationships: The registrants maintain normal banking relationships with the agents and lenders involved in both the new and terminated facilities.
Investor Verification Checklist
- Verify the specific "prescribed level" for the consolidated debt-to-capitalization ratio covenant in the full credit agreement text.
- Confirm the specific environmental and employee health/safety targets required to achieve interest rate reductions under the sustainability-linked pricing metric.
- Review the current senior unsecured debt ratings of Pinnacle West and APS to estimate the baseline interest rate.
- Check for any outstanding borrowings or letters of credit drawn against these new facilities as of the filing date.