Business Context and Reporting Period
This Form 8-K Current Report, filed on December 16, 2016, covers events occurring on December 14, 2016. The registrants are Spire Inc. ("Spire"), Laclede Gas Company ("Laclede Gas"), and Alabama Gas Corporation ("Alagasco"). The filing details the entry into a new material definitive agreement regarding a syndicated revolving credit facility and the simultaneous termination of three prior loan agreements.
Key Financial Metrics and Debt Structure
The filing establishes a new five-year syndicated revolving credit facility with an aggregate commitment of $975 million. The facility includes specific sublimits: $300 million for Spire, $475 million for Laclede Gas, and $200 million for Alagasco. These sublimits are reallocatable among the borrowers. The agreement also provides for up to $60 million in letters of credit and $75 million in swingline loans.
Interest rates are variable, based on either an Adjusted Base Rate (Prime, Federal Funds + 0.50%, or LIBOR + 1.00%) plus a margin of 0.0% to 0.50%, or LIBOR plus a margin of 0.875% to 1.50%, depending on the borrower's credit rating. Borrowings by Laclede Gas and Alagasco are due within 364 days. The agreement includes a financial covenant limiting consolidated debt to 70% of capitalization.
Material Changes Versus Prior Period
The new Loan Agreement replaces three existing loan agreements with Wells Fargo Bank, National Association, and other participating banks. The prior agreements, dated September 3, 2013 (amended 2014) and September 2, 2014, were set to expire in September 2019 but were terminated early on December 14, 2016, effective with the closing of the new facility. The new agreement extends the term to five years with the option for two one-year extensions.
Outlook, Risks, and Management Commentary
Management expects to use the facility for general corporate purposes, including short-term borrowings and letters of credit. The Borrowers may request an increase in the aggregate credit commitment of up to $300 million under certain terms. The agreement contains customary affirmative and negative covenants, including limitations on acquisitions, investments, and sales of property. Events of default include payment defaults, covenant breaches, bankruptcy, and cross-defaults. As of the filing date, no direct financial obligations or off-balance sheet arrangements have arisen under the new agreement.
Investor Verification Checklist
- Verify the specific credit ratings of Spire, Laclede Gas, and Alagasco to determine the applicable interest rate margins (0.0%–0.50% for Base Rate; 0.875%–1.50% for LIBOR).
- Review the full text of the Loan Agreement (Exhibit 99.1) for the precise definition of "capitalization" used in the 70% debt-to-capitalization covenant.
- Confirm the current utilization of the $975 million facility and the status of the $60 million letter of credit and $75 million swingline loan sublimits.
- Assess the impact of the early termination of the 2013/2014 agreements on any prepayment penalties or fees, noting that upfront fees were paid for the new agreement.