8-KOther EventsExhibits & Filings

American Water Works Company, Inc. 8-K Report, Corporate Update (May 14, 2021)

Filed May 14, 2021For Securities:AWK

Summary

American Water Works Company, Inc. (AWK), through its finance subsidiary American Water Capital Corp. (AWCC), has successfully closed a significant debt offering, raising approximately $1.086 billion in net proceeds. This offering comprises $550 million of 2.300% Senior Notes due 2031 and $550 million of 3.250% Senior Notes due 2051. The proceeds are earmarked for several key financial strategies, including lending to AWK's regulated utility businesses, prepaying existing higher-cost debt, and managing commercial paper obligations, alongside general corporate purposes. Notably, AWCC intends to use a portion of the proceeds to prepay approximately $326.3 million of its outstanding Series D and Series H Senior Notes on or about June 14, 2021. This prepayment includes an estimated $17 million make-whole amount. The company anticipates that a substantial part of this make-whole cost will be recognized as regulatory assets, expected to be recovered through future customer rates, which should mitigate the immediate impact on earnings.

Key Highlights

  • 1AWCC, a subsidiary of American Water Works, raised approximately $1.086 billion in net proceeds from the sale of new senior notes.
  • 2The offering consisted of $550 million in 2.300% Senior Notes due 2031 and $550 million in 3.250% Senior Notes due 2051.
  • 3Proceeds will be used to fund AWK's regulated businesses, repay existing debt, and for general corporate purposes.
  • 4AWCC plans to prepay approximately $326.3 million of existing Series D and Series H Senior Notes on or about June 14, 2021.
  • 5The prepayment of existing notes will incur an estimated $17 million make-whole amount.
  • 6A significant portion of the make-whole amount is expected to be treated as a regulatory asset, recoverable through future rates.

Frequently Asked Questions

The primary purpose of this debt offering is to raise capital for American Water Works Company, Inc. (AWK) and its subsidiaries. Specifically, the net proceeds will be used to lend funds to AWK's regulated businesses, prepay existing higher-interest debt (Series D and Series H Senior Notes), repay commercial paper obligations, and for general corporate purposes.

AWCC intends to prepay approximately $326.3 million of its outstanding Series D and Series H Senior Notes. This prepayment will incur an estimated $17 million make-whole amount. However, American Water anticipates that most of this make-whole amount will be treated as a regulatory asset, which is expected to be recovered through future customer rates, thereby minimizing the immediate impact on the company's earnings.

The new notes consist of $550.0 million aggregate principal amount of 2.300% Senior Notes due 2031 and $550.0 million aggregate principal amount of 3.250% Senior Notes due 2051.

After deducting underwriting discounts and before offering expenses, American Water Capital Corp. received approximately $1,086 million in net proceeds from the sale of the new senior notes.