Business Context and Reporting Period
This Form 8-K Current Report, dated March 29, 2019, is filed by PNM Resources, Inc. and its indirect wholly-owned subsidiary, Texas-New Mexico Power Company (TNMP). The filing reports the entry into a material definitive agreement regarding a private placement of debt securities.
Key Financial Metrics and Debt Issuance
TNMP issued a total of $225,000,000 in aggregate principal amount of First Mortgage Bonds in a private placement to institutional accredited investors. The issuance details are as follows:
- Series 2019B: $75,000,000 principal, 3.79% interest rate, due March 29, 2034.
- Series 2019C: $75,000,000 principal, 3.92% interest rate, due March 29, 2039.
- Series 2019D: $75,000,000 principal, 4.06% interest rate, due March 29, 2044.
Interest is payable semiannually commencing September 29, 2019. The Bonds are secured by a first mortgage lien on substantially all of TNMP's property. The filing text does not provide specific values for revenue, profit, cash flow, or liquidity ratios for the reporting period.
Material Changes and Additional Obligations
The Bond Purchase Agreement includes a provision for the potential sale of an additional $80,000,000 aggregate principal amount of 3.60% First Mortgage Bonds (Series 2019A), due 2029, on or before July 1, 2019, subject to certain terms and conditions. This represents a material increase in potential debt obligations compared to the prior period.
Terms, Covenants, and Risks
Prepayment and Repurchase: TNMP may prepay the Bonds at any time with a make-whole premium. A "Bond Repurchase Event" obligates TNMP to repurchase the Bonds at 100% of principal plus accrued interest and a make-whole amount. Triggers for repurchase include:
- Subjecting bondholders to terrorism sanctions.
- Sale or lease of assets exceeding specified thresholds.
- Defaults on certain debt obligations.
- Failure to maintain a consolidated indebtedness to consolidated capitalization ratio of less than or equal to 0.65 to 1.0.
- Material misrepresentations in the Indenture.
Change in Control: A change in control of TNMP or PNM Resources Inc. obligates TNMP to offer to prepay all Bonds at 100% of principal plus accrued interest, without a make-whole premium.
Events of Default: Include failure to pay interest or principal, breach of covenants (with a 90-day cure period), and bankruptcy/insolvency events.
Investor Verification Checklist
- Verify the execution of the Tenth Supplemental Indenture (Exhibit 4.1) and the specific covenants regarding the 0.65 debt-to-capitalization ratio.
- Confirm the status of the optional $80,000,000 Series 2019A bond issuance scheduled for completion by July 1, 2019.
- Review the First Mortgage Indenture to understand the scope of the lien on TNMP's assets and any excepted encumbrances.
- Assess the impact of the new debt on TNMP's overall leverage and liquidity position relative to the 0.65 covenant threshold.