Notes to Consolidated Financial Statements
Note 6 Debt
Our issuance of various securities, including long-term and short-term debt, is subject to customary approval, authorization or review by state
and federal regulatory bodies, including state public service commissions, the SEC and the FERC as granted by the Energy Policy Act of 2005.
The following table shows our long-term debt included in our consolidated statements of financial position. We estimate the fair value using a
discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, optionality and risk profile. In
determining the market interest yield curve, we considered our currently assigned ratings for unsecured debt of BBB+ by S&P, Baa1 by Moody’s
and A- by Fitch.
Outstanding as of December 31, |
|||||
| In millions | Year(s) due |
Interest rate(1) |
Weighted average(1) Interest rate |
2009 |
2008 |
| Short-term debt | |||||
| Commercial paper | 2010 |
0.4% |
0.7% |
$ 601 |
$ 273 |
| Capital leases | 2010 |
4.9 |
4.9 |
1 |
1 |
| Credit Facility | 2010 |
— |
1.2 |
— |
500 |
| SouthStar line of credit | 2010 |
— |
1.1 |
— |
75 |
| Sequent lines of credit (2) | 2010 |
— |
1.0 |
— |
17 |
Total short-term debt |
0.4% |
0.8% |
$ 602 |
$ 866 |
|
| Long-term debt | |||||
| Senior notes | |||||
| Issued February 2001 | 2011 |
7.1% |
7.1% |
$ 300 |
$ 300 |
| Issued July 2003 | 2013 |
4.5 |
4.5 |
225 |
225 |
| Issued December 2004 | 2015 |
5.0 |
5.0 |
200 |
200 |
| Issued June 2006 & December 2007 | 2016 |
6.4 |
6.4 |
300 |
300 |
| Issued August 2009 | 2019 |
5.3 |
5.3 |
300 |
— |
| Issue September 2004 | 2034 |
6.0 |
6.0 |
250 |
250 |
Total |
5.8% |
5.8% |
1,575 |
1,275 |
|
| Gas facility revenue bonds | |||||
| Issued July 1994 | 2022 |
0.2 |
0.2 |
47 |
47 |
| Issued July 1994 | 2024 |
0.4 |
0.6 |
20 |
20 |
| Issued June 1992 | 2026 |
0.2 |
0.2 |
39 |
39 |
| Issued June 1992 | 2032 |
0.2 |
0.2 |
55 |
55 |
| Issued July 1997 | 2033 |
5.3 |
5.3 |
39 |
39 |
Total |
1.2% |
1.2% |
200 |
200 |
|
| Medium-term notes | |||||
| Issued June 1992 | 2012 |
8.3 – 8.4 |
8.3 – 8.4 |
15 |
15 |
| Issued July 1997 | 2017 |
7.2 |
7.2 |
22 |
22 |
| Issued February 1991 | 2021 |
9.1 |
9.1 |
30 |
30 |
| Issued April – May 1992 | 2022 |
8.6 – 8.7 |
8.6 – 8.7 |
46 |
46 |
| Issued November 1996 | 2026 |
6.6 |
6.6 |
30 |
30 |
| Issued July 1997 | 2027 |
7.3 |
7.3 |
53 |
53 |
Total |
7.8% |
7.8% |
196 |
196 |
|
| Capital leases | 2013 |
4.9% |
4.9% |
3 |
4 |
Total long-term debt (3) |
5.5% |
5.5% |
$1,974 |
$1,675 |
|
Total debt |
4.3% |
4.6% |
$2,576 |
$2,541 |
|
(1) As of or for the year ended December 31, 2009.
(2) Sequent’s $25 million line of credit expired in June 2009.
(3) We estimate the fair value was $2,060 million as of December 31, 2009 and $1,647 million as of December 31, 2008.
Short-term Debt
Our short-term debt at December 31, 2009 and 2008 was
composed of borrowings under our commercial paper program;
Credit Facility; current portions of our capital lease obligations; and
lines of credit for Sequent and SouthStar.
Commercial Paper and Credit Facility Our commercial paper
consists of short-term, unsecured promissory notes with maturities
ranging from 4 to 27 days. These unsecured promissory notes are
supported by our $1 billion Credit Facility which expires in August
2011. We have the option to request an increase in the aggregate
principal amount available for borrowing under the $1 billion Credit
Facility to $1.25 billion on not more than three occasions during each
calendar year. Several of our subsidiaries, including SouthStar
participate in our commercial paper program.
SouthStar Credit Facility SouthStar’s five-year $75 million
unsecured credit facility expires in November 2011. SouthStar will
use this line of credit for working capital and its general corporate
needs. SouthStar had no outstanding borrowings on this line of
credit at December 31, 2009 and $75 million of outstanding
borrowings at December 31, 2008.We do not guarantee or provide
any other form of security for the repayment of this credit facility.
Long-term Debt
Our long-term debt at December 31, 2009 and 2008 matures more
than one year from the statements of financial position date and
consists of medium-term notes: Series A, Series B and Series C,
which we issued under an indenture dated December 1, 1989;
senior notes; gas facility revenue bonds; and capital leases. The
trustee with respect to our senior notes is The Bank of New York
Trust Company, N.A., pursuant to an indenture dated February 20,
2001.We fully and unconditionally guarantee all of our senior notes.
The annual maturities of our long-term debt for the next five years,
excluding capital leases of $3 million, are as follows:
| Year | Amount (in millions) | % of total |
| 2011 | $ 300 | 15% |
| 2012 | 15 | 1 |
| 2013 | 225 | 11 |
| 2015 | 200 | 10 |
| After 2016 | 1,231 | 63 |
| Total | $1,971 | 100% |
Gas Facility Revenue Bonds Pivotal Utility is party to a series of
loan agreements with the New Jersey Economic Development
Authority (NJEDA) pursuant to which the NJEDA has issued a series
of gas facility revenue bonds. In 2008, we completed letter of credit
agreements for the bonds with a cumulative principal amount of
$161 million. These agreements provided additional credit support
and increased investor demand. As a result, these bonds were
successfully auctioned and issued as variable rate gas facility bonds.
The bonds with principal amounts of $55 million, $47 million and
$39 million have interest rates that reset daily and the bond with a
principal amount of $20 million has an interest rate that resets
weekly. The letter of credit agreements are set to expire in June and
September 2010.
Preferred Securities As of December 31, 2009, we had 10 million
shares of authorized, unissued Class A junior participating preferred
stock, no par value, and 10 million shares of authorized, unissued
preferred stock, no par value.
Capital Leases Our capital leases consist primarily of a
sale/leaseback transaction completed in 2002 by Florida City Gas
related to its gas meters and other equipment and will be repaid at
approximately $1 million per year until 2013. Pursuant to the terms
of the lease agreement, Florida City Gas is required to insure the
leased equipment during the lease term. In addition, at the expiration
of the lease term, Florida City Gas has the option to purchase the
leased meters from the lessor at their fair market value. The fair
market value of the equipment will be determined on the basis of an
arm’s-length transaction between an informed and willing buyer.
Default Events
Our Credit Facility financial covenants require us to maintain a ratio
of total debt to total capitalization of no greater than 70%; however,
our goal is to maintain this ratio at levels between 50% and 60%.
Our ratio of total debt to total capitalization calculation contained in
our debt covenant includes standby letters of credit, surety bonds
and the exclusion of other comprehensive income pension
adjustments. Adjusting for these items, our debt-to-equity
calculation, as defined by our Credit Facility, was 57% at
December 31, 2009 and 59% at December 31, 2008. These
amounts are within our required and targeted ranges. Our debt-toequity
calculation, as calculated from our consolidated statements
of financial position, was 59% at December 31, 2009 and 60% at
December 31, 2008.
Our debt instruments and other financial obligations include
provisions that, if not complied with, could require early payment,
additional collateral support or similar actions. Our most important
default events include:
- a maximum leverage ratio
- insolvency events and nonpayment of scheduled principal or interest payments
- acceleration of other financial obligations
- change of control provisions
We have no trigger events in our debt instruments that are tied to changes in our specified credit ratings or our stock price and have not
entered into any transaction that requires us to issue equity based on credit ratings or other trigger events. We are currently in compliance with
all existing debt provisions and covenants.