Summary
American Water Works Company, Inc. (AWK), through its wholly owned subsidiary American Water Capital Corp. (AWCC), has successfully closed a significant debt offering, raising approximately $1.3 billion in net proceeds. The company issued $625 million of 3.750% Senior Notes due 2028 and $700 million of 4.200% Senior Notes due 2048. These proceeds are earmarked for strategic capital allocation, including lending funds to AWK and its operating subsidiaries, repaying maturing debt, and preemptively retiring higher-interest senior notes.
Key Highlights
- 1AWCC successfully issued $1.325 billion in aggregate principal amount of new senior notes across two maturities (2028 and 2048).
- 2Net proceeds of approximately $1.3 billion were raised from the offering.
- 3The new debt includes $625 million in 3.750% Senior Notes due 2028 and $700 million in 4.200% Senior Notes due 2048.
- 4Proceeds will be used to fund operations, repay maturing debt, and prepay existing, higher-interest debt.
- 5AWCC will prepay $200 million of existing Series E and Series F Senior Notes on or around September 11, 2018, with an estimated make-whole cost of $10 million.
- 6Debt extinguishment expenses related to the prepayment are expected to be recorded as regulatory assets, with recovery anticipated in future rates.
- 7The offering was conducted under a Form S-3 registration statement, indicating the notes were registered with the SEC.
Frequently Asked Questions
The primary purpose is to raise capital for American Water Works Company's operations and subsidiaries. The net proceeds will be used for lending to AWK and its regulated operating subsidiaries, repaying maturing debt, and prepaying existing, higher-interest rate debt.
The company plans to use a portion of the proceeds to repay $191.1 million of maturing 5.62% Senior Notes due 2018 and to prepay $200 million of Series E and Series F Senior Notes which carry higher interest rates (5.62% and 5.77%). This will reduce overall interest expense and optimize the company's debt profile.
AWCC anticipates a make-whole payment of approximately $10 million for the prepayment of the Series E and Series F Notes. These costs are expected to be treated as regulatory assets and recovered through future customer rates.
American Water Capital Corp. issued $625 million in 3.750% Senior Notes due 2028 and $700 million in 4.200% Senior Notes due 2048.