Business Context and Reporting Period
This Form 8-K, dated April 10, 2023, reports material definitive agreements entered into by Pinnacle West Capital Corporation ("Pinnacle West") and its subsidiary, Arizona Public Service Company ("APS"). The filing details the establishment of new unsecured revolving credit facilities and the simultaneous termination of prior facilities for both entities.
Key Financial Metrics and Agreements
Pinnacle West Capital Corporation
- New Facility: Entered into a five-year unsecured revolving credit facility with a capacity of $200 million, maturing on April 10, 2028.
- Prior Facility: Terminated a prior $200 million unsecured revolving credit facility that was set to expire on May 28, 2026.
- Interest Rate: Based on Pinnacle West's senior unsecured debt ratings, featuring a sustainability-linked pricing metric tied to environmental and employee health/safety objectives.
- Usage: General corporate purposes, standby support for commercial paper, and letters of credit.
Arizona Public Service Company (APS)
- New Facility: Entered into a five-year unsecured revolving credit facility with a capacity of $1.25 billion, maturing on April 10, 2028.
- Prior Facilities: Terminated two prior unsecured revolving credit facilities (each $500 million, totaling $1 billion) that were set to expire on May 28, 2026.
- Interest Rate: Based on APS's senior unsecured debt ratings, featuring a sustainability-linked pricing metric.
- Usage: General corporate purposes, standby support for commercial paper, and letters of credit.
Material Changes Versus Prior Period
The primary material change is the extension of the maturity dates for the revolving credit facilities. Both Pinnacle West and APS replaced facilities expiring in May 2026 with new facilities expiring in April 2028, extending the term by approximately two years. Additionally, APS consolidated two separate $500 million facilities into a single $1.25 billion facility, increasing total available liquidity by $250 million compared to the prior arrangement.
Guidance, Risks, and Covenants
The filing does not provide specific financial guidance or outlook beyond the terms of the credit agreements. Key covenants and risks include:
- Covenants: Both facilities require maintaining a consolidated debt-to-capitalization ratio no greater than a prescribed level and complying with lien restrictions. Pinnacle West must also maintain ownership of a specified percentage of APS capital stock.
- Events of Default: Include cross-default provisions and change of control provisions (specifically relating to Pinnacle West for the APS facility).
- Sustainability Metrics: Interest rates may increase or decrease based on meeting specific environmental and employee health and safety targets.
- Contingencies: Borrowings are conditioned on the ability to make certain representations at the time of borrowing, excluding representations regarding material adverse effects and litigation which were made at inception.
Investor Verification Checklist
- Verify the specific "prescribed level" for the consolidated debt-to-capitalization ratio covenant in the full text of the credit agreements (Exhibits 10.1 and 10.2).
- Confirm the specific environmental and employee health/safety targets that trigger the sustainability-linked pricing adjustments.
- Review the list of lenders and agents to assess concentration risk or potential conflicts of interest.
- Check subsequent filings for any draws on these facilities or changes in the companies' credit ratings which would affect borrowing costs.