Business Context and Reporting Period
This Form 8-K, dated July 12, 2018, is a combined current report filed by Pinnacle West Capital Corporation and its subsidiary, Arizona Public Service Company (APS). The filing discloses the entry into new material definitive agreements regarding credit facilities and the termination of prior facilities.
Key Financial Metrics and Agreements
The filing details the establishment of two new unsecured revolving credit facilities:
- Pinnacle West Facility: A $200 million five-year revolving credit facility maturing on July 11, 2023.
- APS Facility: A $500 million five-year revolving credit facility maturing on July 11, 2023.
Both facilities replace prior agreements that were set to expire on May 13, 2021. Interest rates are variable, based on the respective registrants' senior unsecured debt ratings. The filing does not provide specific revenue, profit, cash flow, or margin data as this is a transactional report rather than a financial statement.
Material Changes Versus Prior Period
The primary material change is the termination of prior credit facilities and their replacement with new five-year terms:
- Pinnacle West terminated its previous $200 million facility.
- APS terminated its previous $500 million facility.
- The new facilities extend the maturity date by approximately two years compared to the prior agreements (from May 2021 to July 2023).
Guidance, Outlook, and Covenants
Intended Use: Both facilities are designated for general corporate purposes, including serving as standby facilities to support commercial paper issuances and for letters of credit.
Covenants and Conditions:
- Pinnacle West: Must maintain ownership of a specified percentage of APS stock, maintain a consolidated debt-to-capitalization ratio within prescribed limits, and comply with lien restrictions.
- APS: Must maintain a consolidated debt-to-capitalization ratio within prescribed limits and comply with lien restrictions.
- Events of Default: Both agreements include cross-default provisions and change of control provisions. An event of default allows lenders to terminate commitments and declare obligations due and payable.
The filing does not contain forward-looking guidance on earnings or operational outlook beyond the terms of these credit agreements.
Investor Verification Checklist
- Verify the current senior unsecured debt ratings for Pinnacle West and APS to determine applicable interest rates.
- Review the specific "prescribed levels" for the consolidated debt-to-capitalization ratio covenants in the full credit agreements.
- Confirm the percentage of APS capital stock Pinnacle West is required to maintain under the new covenants.
- Monitor for any future filings regarding actual borrowings or letters of credit drawn against these facilities.