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Friday, July 11, 2014

Pennichuck Corp. seeks to issue $54.5 million worth of bonds

NASHUA – Pennichuck Corp. is seeking authorization from the city of Nashua to sell up to $54.5 million worth of bonds to refinance existing debt and pay for capital projects through 2016.

Nashua’s Board of Aldermen took up a resolution Tuesday that would allow Pennichuck Water Works, one of the corporation’s subsidiaries, to move forward with a new long-term financing plan. ...

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NASHUA – Pennichuck Corp. is seeking authorization from the city of Nashua to sell up to $54.5 million worth of bonds to refinance existing debt and pay for capital projects through 2016.

Nashua’s Board of Aldermen took up a resolution Tuesday that would allow Pennichuck Water Works, one of the corporation’s subsidiaries, to move forward with a new long-term financing plan.

Pennichuck is working to transform the corporation’s capital structure from one suited for a publicly-traded company to one “better aligned” with Pennichuck’s new status as a city-owned public utility.

Part of that transition is laying the groundwork for Pennichuck to finance projects with long-term debt rather than private equity in the future.

Specifically, Pennichuck is seeking to refinance approximately $23.4 million worth of outstanding debt with new bonds.

The company’s plan calls for the bonds to be issued through the New Hampshire Business Finance Authority, bearing a fixed interest rate of approximately 5.5 percent.

Pennichuck Water Works is currently carrying approximately $50.1 million of long-term debt. The lion’s share was taken out before the corporation was acquired by Nashua in 2012.

Approximately $39.8 million of the outstanding debt exists as “balloon” or “bullet” maturities, a form of financing that requires making large payments at the end of the borrowing term. Those maturities are slated to begin coming due in April 2018, with some terms extending through 2035.

Under its previous owners, Pennichuck anticipated either refinancing the debt as it came due or issuing new equity to pay off bonds reaching maturity.

But under new ownership, the public equity option is no longer available.

Instead, Pennichuck is looking for ways to refinance balloon maturity
obligations now to mitigate the risk that financing won’t be available in the future, or that interest rates will go up.

In addition to refinancing existing debts, Pennichuck also is seeking to issue new bonds to finance a debt service reserve fund and to pay for capital projects between 2013 and 2016. The company completed approximately $5.1 million worth of work last year and anticipates needing an additional $19.5 million for capital projects in the future.

As Pennichuck’s sole shareholder, the city of Nashua is required to approve requests from the corporation to sell bonds or take on new debt.

The request also must be approved by the New Hampshire Public Utilities Commission. Pennichuck is asking the PUC to hold a hearing on the matter and issue a ruling by Nov. 15.

In documents submitted to the PUC, Pennichuck’s attorneys wrote that the financing plan is “consistent with the public good” and will not have an adverse impact on customers’ rates.

Pennichuck Water Works provides water service to approximately 26,760 customers in Nashua, Amherst, Merrimack, Milford, Hollis, Bedford, Derry, Plaistow, Epping, Salem and Newmarket.

Jim Haddadin can be reached at 594-6589 or jhaddadin@nashuatelegraph.com. Also, follow Haddadin on Twitter (@Telegraph_JimH).