Summary
American Water Works Company, Inc. (AWK), through its wholly owned finance subsidiary American Water Capital Corp. (AWCC), has issued $1,035.0 million in aggregate principal amount of 3.625% Exchangeable Senior Notes due 2026. The offering was conducted through a private placement to qualified institutional buyers, with net proceeds of approximately $1,022.1 million expected to be used for repaying commercial paper obligations and general corporate purposes. This issuance represents a significant financing event for the company, providing liquidity and potentially impacting its capital structure and future share count upon exchange.
Key Highlights
- 1AWCC issued $1,035.0 million in 3.625% Exchangeable Senior Notes due 2026.
- 2The Notes are senior unsecured obligations of AWCC, with a support agreement from American Water acting as a guarantee.
- 3Net proceeds of approximately $1,022.1 million will be used to repay commercial paper and for general corporate purposes.
- 4The Notes are exchangeable into American Water common stock at an initial rate of 5.8213 shares per $1,000 principal amount, representing an initial exchange price of approximately $171.78 per share.
- 5The initial exchange premium was approximately 22.5% above the last reported sale price of AWK's common stock on June 26, 2023 ($140.23).
- 6Holders have the right to require repurchase upon a 'fundamental change' at 100% of the principal amount plus accrued interest.
- 7A maximum of approximately 7.38 million shares of common stock could be issued upon full exchange of the Notes, subject to adjustments.
Frequently Asked Questions
The net proceeds from the issuance of these Exchangeable Senior Notes are intended to repay American Water Capital Corp.'s commercial paper obligations and for general corporate purposes, which provides the company with liquidity.
'Exchangeable' means that the holders of these notes have the option to convert them into shares of American Water's common stock under certain conditions and periods, or at any time after March 15, 2026. The exchange rate is initially set at 5.8213 shares per $1,000 principal amount of notes.
This issuance adds $1,035.0 million in senior unsecured debt. Upon potential exchange, it could lead to the issuance of up to approximately 7.38 million shares of common stock, which would dilute existing shareholders' ownership if the exchange occurs and the company elects to issue stock.
No, the Notes are senior unsecured obligations of AWCC and have the benefit of a support agreement from American Water, which is the functional equivalent of a guarantee. However, they rank equally with other unsecured obligations and effectively junior to any secured indebtedness to the extent of the value of the collateral securing such debt.