Business Context and Reporting Period
Company: Black Hills Corporation
Filing Type: Form 8-K (Current Report)
Date of Report: November 10, 2010
Event: Entry into a Material Definitive Agreement involving an underwriting agreement and a forward sale agreement.
Key Financial Metrics and Transaction Details
- Offering Size: 4,000,000 shares of Common Stock (Borrowed Underwritten Shares).
- Over-Allotment Option: Option to purchase up to 600,000 additional shares.
- Public Offering Price: $29.75 per share.
- Forward Sale Price: Initially $28.70875 per share (public offering price less underwriting discount).
- Estimated Net Proceeds: Approximately $114,835,000 upon settlement of the Forward Sale Agreement (after underwriters' discount and commissions, before offering expenses).
- Existing Debt: $145.0 million outstanding on the $500 million Revolving Credit Facility as of September 30, 2010.
Material Changes and Transaction Structure
The Company entered into an Underwriting Agreement with J.P. Morgan Securities LLC, BMO Capital Markets Corp., RBC Capital Markets, LLC, and Credit Suisse Securities (USA) LLC. The transaction involves a "forward sale" structure where shares are borrowed and sold by a Forward Seller, with the Company agreeing to sell an equal number of shares to a Forward Purchaser (JPMorgan Chase Bank, National Association) at a later date.
Settlement Timeline: The Offering closing is expected on November 17, 2010. Settlement of the Forward Sale Agreement is expected no later than approximately 12 months following the Offering closing date.
Use of Proceeds, Outlook, and Risks
Use of Proceeds: The Company intends to use net proceeds to:
- Repay borrowings under its $500 million Revolving Credit Facility (maturing April 14, 2013).
- These borrowings were primarily used to finance construction costs for new Colorado Electric and Black Hills Colorado IPP power generation facilities.
- Fund future capital expenditures to complete construction of these facilities.
- General corporate purposes.
Settlement Options: Upon physical settlement, the Company will deliver shares for cash. However, subject to exceptions, the Company may elect cash or net share settlement for all or a portion of its obligations under the Forward Sale Agreement.
Risks/Contingencies: The transaction is subject to customary closing conditions. The forward sale price is subject to adjustment as provided in the Forward Sale Agreement.
Key Facts for Investor Verification
- Verify the final settlement date of the Forward Sale Agreement (expected within 12 months of November 17, 2010).
- Confirm whether the Company elects physical settlement (delivering shares) or cash/net share settlement.
- Monitor the reduction of the $145.0 million outstanding balance on the Revolving Credit Facility.
- Review the final prospectus supplement filed on November 12, 2010, for detailed terms of the underwriting discount and offering expenses.