20170113Decision Memo.pdf

TO:
FROM:
DATE:
RE:
DECISION MEMORANDUM
COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
LEGAL
WORKING FILE
TERRI CARLOCK
JANUARY 12, 2017
MIDVALE TELEPHONE COMP ANY'S REQUEST TO BORROW UP TO
$12,691,000; CASE NO. MID-T-16-01.
On December 21, 2016, Midvale Telephone Company, Inc. (Midvale), filed an
Application for authority to borrow up to $12,691,000 from the Rural Utilities Service (RUS).
RUS has provided an offering letter to loan the funds to Midvale at the Cost-of-Money rate for
nineteen (19) years. The actual interest rate will be set at the time each advance is made to
Midvale. The rate will be based on the average yield on outstanding marketable obligations of
the United States with a comparable maturity, but not to exceed 7 percent per year.
The purpose of the loan is to pay for and partially reimburse for the installation of new
plant and to provide upgrades in Idaho and Arizona. These include: (1) extend services to
approximately 368 new customers; (2) provide for router and switch upgrades to handle
broadband traffic growth; (3) allow Midvale to provide faster broadband speeds in each of its
eleven exchanges; ( 4) provide fiber to the home ("FTTH") in several areas and extend fiber for
toll and broadband Ethernet transport facilities to provide larger pipes and redundant paths; (5)
build approximately 49.59 miles of new toll fiber, 83.61 mile of local fiber, and 17.56 miles of
drops; (6) serve two new FTTH Carrier Service Areas ("CSA") and one new CSA for copper
DSL; and (7) replace six existing CSAs without Ethernet capabilities. The total new Optical
Network Terminals ("ONT'') for FTTH are 309 and four Digital Subscriber Line Access
Multiplexers ("DSLAM") with 192 lines.
The loan documents reflect typical language and conditions. This includes the loan
agreement, terms, conditions, covenants, promissory note, restated mortgage, security agreement
and financing statement. Plant in the respective states will be used as collateral for the loans.
DECISION MEMORANDUM JANUARY 12, 2017
Plant expenditures in Idaho including network costs, construction equipment, and engineering is
expected to be $7,103,921.
STAFF RECOMMENDATION
Staff recommends the Commission grant the requested Midvale debt authority for
the nineteen-year secured loan with RUS of $12,691,000. To monitor any loan covenant
requirements, Staff also recommends adopting the following reporting requirements:
1) Provide copies of the RUS final loan approvals including documentation for
advances.
2) Provide a copy of any executed collateral documentation.
3) Provide copies of all annual certification, covenant reports, and letters regarding
these determinations.
4) The "Report of Securities Issued".
COMMISSION DECISION
Should the Application be approved with Staffs recommended reporting requirements?
Terri Carlock
TC\ MID T 16 01 RUS loan 1 12 2017
DECISION MEMORANDUM 2 JANUARY 12, 2017