NASHUA – The city now has a way to get the cash to buy Pennichuck Corp.

All it has to do is succeed at what has eluded city officials for years: negotiating a price they can live with.

Two obstacles in front of the city’s efforts to buy Pennichuck were cleared in Concord last week. They come as the city appears to be in 11th-hour negotiations with Pennichuck Corp. to buy the entire company, and not just acquire the Pennichuck Water Works utility through eminent domain.

The first obstacle was cleared through an amendment attached to the state budget bailout bill approved during the Legislature’s special session. The amendment gives the city financial flexibility as it negotiates to buy the water utility’s parent company.

Mayor Donnalee Lozeau said she discovered last week that the city could only use revenue bonds to finance a Pennichuck purchase, not a stock takeover.

Lozeau said city officials and local legislators assumed the language of a 2007 state law expressly allowing the city to buy Pennichuck stock would also let the city use general obligation bonds to do it.

“This is to make sure we don’t limit any options that are available to us,” Lozeau said.

Rep. David Campbell, D-Nashua, presented the state budget deficit bill add-on, which made clear the stock purchase “shall at no time” affect the city’s bonded indebtedness. Campbell also hinted a deal might be in the works, although city officials have declined to comment and Lozeau said no deal is “imminent.”

The city’s bonded indebtedness – and specifically, its bond rating – is especially important now to city officials because the city’s bond rating has just been upgraded a notch.

Fitch Rating upgraded Nashua’s bond rating for general obligation bonds from AA+ to AAA, city Treasurer David Fredette announced last week.

The triple-A rating is the highest rating a community can receive. It represents an almost zero credit risk to purchasers of the city’s bonds, Fredette said.

Fitch noted, “The upgrade reflects the city’s expanding and diverse economic base, projected positive operating results for fiscal year 2010 and management’s responsiveness in making appropriate spending cuts to maintain historic fund balance levels within the city policy levels,” Fredette said.

“A strong bond rating allows the city to sell bonds and borrow at reduced rates, which will positively affect all Nashua taxpayers,” Lozeau said.

The bond rating pertains to general obligation bonds, not special revenue bonds. However, the top rating certainly can’t hurt as the city explores ways to buy either Pennichuck Corp. through a stock takeover or Pennichuck Water Works via eminent domain proceedings, city officials said.

“The bond rating could potentially impact any revenue bonds we sell as well,” said Mike Gilbar, the city’s chief financial officer.

A revenue bond sell could require bond ratings from not only Fitch but from other companies, such as Standard and Poor’s and Moody’s, Gilbar said.

The second obstacle to the city’s efforts to buy Pennichuck was cleared by the N.H. Public Utilities Commission, which granted the city’s request for a deadline extension to file two contracts.

In a brief ruling issued Wednesday, the commission stated, “The request is reasonable and would not unduly delay the proceeding or adversely affect the rights of any party.”

The original deadline passed last week for the city to file two contracts with the PUC. Instead, the city filed a motion with the PUC asking for a deadline extension.

Pennichuck Corp. assented to the city’s request for the deadline extension.

The city has negotiated the contracts with Veolia Water and R.W. Beck, but the Board of Aldermen hasn’t approved the contracts yet, according to the city’s motion filed with the PUC.

In its filing, the city asked for an extension until Sept. 30 or when the Board of Aldermen votes to approve the contracts, whichever comes first.

Veolia Water would manage the utility for the city and R.W. Beck would serve as a middleman between the city and Veolia.

Meanwhile, the city is continuing to negotiate with Pennichuck Corp. for a stock purchase of the entire company, according to state lawmakers. A deal could end the eminent domain proceedings, but it’s unclear whether services provided by Veolia or R.W. Beck would still be needed if Nashua purchased the entire company and not just the utility.

Lozeau wouldn’t comment on the role Veolia or Beck would have if the city bought the entire company through a stock purchase. She also declined to comment on the status of any negotiations that might be occurring between the city and Pennichuck officials.

Negotiations broke down last winter, with the two parties reportedly far apart on a sales price.

In March, the Supreme Court upheld a Public Utilities Commission ruling that the city could take the Nashua-based waterworks for $243 million, of which $40 million had to be put into a fund to protect customers at two smaller, Pennichuck-owned utilities.

The sale would be without 450 acres of undeveloped land owned by Pennichuck.

Last month, Pennichuck executives disclosed at an annual meeting their view that the acquisition price should be $32 a share, which would be $65 million cheaper than if the city had to take the land by eminent domain.

The cost of the city taking the property would be more like $45 a share, they said.

The city still faces a deadline in early July to commit to acquiring the company by eminent domain.

Patrick Meighan can be reached at 594-6518 or pmeighan@nashuatelegraph.com.