Business Context and Reporting Period
This Form 8-K is a current report filed by Pinnacle West Capital Corporation and its subsidiary, Arizona Public Service Company (APS), on September 2, 2015. The filing discloses the entry into a new material definitive agreement and the termination of a prior agreement regarding APS's credit facilities.
Key Financial Metrics and Agreements
- New Facility: APS entered into a five-year unsecured revolving credit facility with a capacity of $500 million, maturing on September 2, 2020.
- Prior Facility: APS terminated its previous $500 million unsecured revolving credit facility, which was set to expire on April 9, 2018.
- Interest Rates: Borrowings under the new facility bear interest based on APS's then-current senior unsecured debt ratings.
- Usage: The facility is designated for general corporate purposes, including serving as a standby for commercial paper issuances and letters of credit.
- Covenants: The agreement includes a requirement to maintain a consolidated debt-to-capitalization ratio no greater than a prescribed level and compliance with lien restrictions.
Material Changes Versus Prior Period
The primary material change is the replacement of the expiring credit facility with a new five-year term, extending the maturity date from April 2018 to September 2020. The total borrowing capacity remains unchanged at $500 million. The syndicate of lenders has been updated, with Barclays Bank PLC remaining as the Agent and Issuing Bank, while Mizuho Bank, Ltd. joined as the Syndication Agent.
Guidance, Risks, and Contingencies
- Events of Default: The facility includes customary events of default, including a cross-default provision and a change of control provision specifically relating to Pinnacle West Capital Corporation.
- Consequences of Default: In the event of default, lenders may terminate loan obligations, cease issuing letters of credit, and declare outstanding obligations immediately due and payable.
- Conditions Precedent: Borrowings are conditioned on APS's ability to make certain representations at the time of borrowing, excluding representations regarding material adverse effects and litigation, which were made at the inception of the facility.
Investor Verification Checklist
- Verify APS's current senior unsecured debt ratings to determine applicable interest rates.
- Confirm the specific "prescribed level" for the consolidated debt-to-capitalization ratio covenant.
- Review the full list of lenders and agents to assess concentration risk.
- Monitor for any potential "change of control" events at Pinnacle West Capital Corporation that could trigger default.