8-KMaterial AgreementsFinancial EventsExhibits & Filings

American Water Works Company, Inc. 8-K Report, Material Agreement (Mar 20, 2020)

Filed March 20, 2020For Securities:AWK

Summary

On March 20, 2020, American Water Works Company, Inc. (AWK) and its wholly-owned finance subsidiary, American Water Capital Corp. (AWCC), entered into a new Term Loan Credit Agreement. This agreement provides a facility of up to $750 million, with an initial borrowing of $500 million. The funds are intended for general corporate purposes and to bolster liquidity for both AWCC and the parent company. This action is particularly relevant given the economic uncertainties prevalent at the time of filing. The facility matures on March 19, 2021, and allows for an additional borrowing of up to $250 million before June 19, 2020. The interest rate is variable, based on LIBOR plus a margin or a base rate. American Water's agreement to the terms essentially functions as a functional equivalent of a guarantee for AWCC's debt obligations, reinforcing its commitment to these financial arrangements. The company highlighted that a breach of covenants could lead to an event of default.

Key Highlights

  • 1AWK secured a new $750 million Term Loan Credit Facility through its subsidiary AWCC.
  • 2An initial $500 million was drawn on March 20, 2020, to enhance corporate liquidity and for general purposes.
  • 3The facility has a one-year maturity, expiring on March 19, 2021.
  • 4AWCC has the option to borrow an additional $250 million by June 19, 2020.
  • 5The loan bears interest at a variable rate tied to LIBOR plus a margin or a base rate.
  • 6American Water's agreement acts as a functional guarantee for AWCC's debt obligations under this facility.
  • 7The terms include covenants similar to AWCC's existing $2.25 billion revolving credit facility.

Frequently Asked Questions

American Water entered into this new term loan facility primarily to increase its liquidity and for general corporate purposes. This provides the company with financial flexibility, especially during times of economic uncertainty, to manage its operations and potential investments.

The total potential amount available under the Term Loan Facility is $750 million. On March 20, 2020, the company's subsidiary, AWCC, borrowed $500 million under this facility.

The Term Loan Facility matures on March 19, 2021. AWCC has the option to prepay all or a portion of the amounts due under the facility without any premium or penalty. However, any amounts repaid cannot be reborrowed.

This means that American Water has contractually agreed to ensure that its subsidiary AWCC's obligations under the Term Loan Agreement are met. In essence, it acts like a guarantee, providing additional assurance to the lenders regarding the repayment of the debt.