8-KFinancial EventsOther Events

American Water Works Company, Inc. 8-K Report, Financial Obligation (Mar 22, 2016)

Filed March 22, 2016For Securities:AWK

Summary

American Water Works Company, Inc. (AWK), through its finance subsidiary American Water Capital Corp. (AWCC), announced significant enhancements to its debt financing capacity on March 22, 2016. AWCC exercised an "Accordion Feature" under its Amended and Restated Credit Agreement, increasing its unsecured revolving credit facility's borrowing capacity from $1.25 billion to $1.75 billion. This move provides the company with greater financial flexibility for potential future investments and operational needs. Furthermore, AWCC expanded its commercial paper program, allowing for the issuance of short-term notes up to an aggregate principal amount of $1.6 billion outstanding at any time, an increase from the previous $1.0 billion limit. These commercial paper issuances are supported by the company's credit facility. Notably, as of the filing date, no amounts had been borrowed under the expanded revolving credit facility, and AWCC had $825.0 million in commercial paper outstanding prior to the filing. The company's support agreement functionally guarantees AWCC's payment obligations under the commercial paper program.

Key Highlights

  • 1Increased unsecured revolving credit facility capacity to $1.75 billion from $1.25 billion.
  • 2Expanded commercial paper program to allow up to $1.6 billion in outstanding short-term notes, up from $1.0 billion.
  • 3The increase in credit facility capacity was exercised via the Accordion Feature of the existing credit agreement.
  • 4Commercial paper issuances are supported by the revolving credit facility.
  • 5As of March 22, 2016, no amounts were borrowed under the expanded revolving credit facility.
  • 6As of March 21, 2016, AWCC had $825.0 million in commercial paper outstanding.

Frequently Asked Questions

The increase in debt financing capacity provides American Water Works Company with greater financial flexibility to fund future capital expenditures, potential acquisitions, or other strategic initiatives, and to manage its working capital needs effectively.

Not necessarily. While the capacity for borrowing has increased significantly, the filing states that as of March 22, 2016, no amounts had been borrowed under the expanded revolving credit facility. The commercial paper program had $825.0 million outstanding, and the increased limit allows for more flexibility in managing short-term funding needs.

The Support Agreement between American Water Works Company and AWCC acts as a functional guarantee by the parent company for AWCC's payment obligations related to the commercial paper notes. This provides investors in AWCC's commercial paper with the credit backing of the parent company, American Water Works.

The filing explicitly states that all other terms, conditions, and covenants with respect to the Credit Agreement remain unchanged. The expansion primarily relates to the aggregate borrowing limits.