Business Context and Reporting Period
This Form 8-K is a current report filed on November 4, 2011, by Pinnacle West Capital Corporation ("Pinnacle West") and its subsidiary, Arizona Public Service Company ("APS"). The filing details the entry into new material definitive agreements regarding credit facilities and the termination of prior facilities.
Key Financial Metrics and Agreements
Pinnacle West Capital Corporation
- New Facility: Entered into a five-year unsecured revolving credit facility of up to $200 million, maturing November 4, 2016.
- Prior Facility: Terminated a prior $200 million unsecured revolving credit facility that was set to expire on February 12, 2013.
- Usage: General corporate purposes, standby support for commercial paper issuances, and letters of credit.
- Interest: Based on Pinnacle West's senior unsecured debt ratings.
Arizona Public Service Company (APS)
- New Facility: Entered into a five-year unsecured revolving credit facility of up to $500 million, maturing November 4, 2016.
- Prior Facility: Terminated a prior $500 million unsecured revolving credit facility that was set to expire on February 12, 2013.
- Usage: General corporate purposes, standby support for commercial paper issuances, and letters of credit.
- Interest: Based on APS's senior unsecured debt ratings.
Note: This filing does not provide specific revenue, profit, cash flow, or margin figures for the reporting period.
Material Changes Versus Prior Period
The primary material change is the replacement of existing credit facilities with new five-year facilities for both registrants. While the total credit capacity remains unchanged ($200 million for Pinnacle West and $500 million for APS), the maturity dates have been extended from February 2013 to November 2016. The new agreements involve a different syndicate of lenders, including Barclays Bank PLC as the Agent and Issuing Bank.
Guidance, Outlook, and Risks
Management Commentary and Events
Pinnacle West announced participation in the Edison Electric Institute Financial Conference from November 6, 2011, to November 9, 2011. Investor handouts were provided as Exhibit 99.1.
Covenants and Risks
- Covenants: Both facilities include customary covenants requiring the maintenance of a consolidated debt-to-capitalization ratio no greater than a prescribed level and compliance with lien restrictions. Pinnacle West must also maintain ownership of a specified percentage of APS stock.
- Events of Default: Include cross-default provisions and change of control provisions. Upon an event of default, lenders may terminate obligations and declare outstanding amounts due and payable.
- Conditions: Borrowings are conditioned on the ability to make certain representations at the time of borrowing.
Investor Verification Checklist
- Verify the specific "prescribed level" for the consolidated debt-to-capitalization ratio covenant in the full credit agreement text.
- Confirm the current senior unsecured debt ratings for Pinnacle West and APS to understand the applicable interest rate margins.
- Review Exhibit 99.1 (Investor handouts) for any forward-looking guidance or operational updates presented at the Edison Electric Institute Financial Conference.
- Monitor the status of commercial paper issuances to determine if the new facilities are being utilized as standby support.