HomeMy WebLinkAbout960405.docxDECISION MEMORANDUM
TO:COMMISSIONERNELSON
COMMISSIONER SMITH
COMMISSIONER HANSEN
MYRNA WALTERS
STEPHANIE MILLER
DAVID SCHUNKE
DON HOWELL
SUSAN HAMLIN
BEVERLY BARKER
GARY RICHARDSON
TONYA CLARK
WORKING FILE
FROM:TERRI CARLOCK
DATE:APRIL 5, 1996
SUBJECT:RURAL TELEPHONE COMPANY’S REQUEST TO GUARANTEE PEND OREILLE TELEPHONE COMPANY’S LOAN OF $5,650,000, CASE NO. RUR-T-96-1
RECOMMEND:APPROVAL WITH PROTECTION PARAGRAPH FOR IDAHO RATEPAYERS
Rural Telephone Company (Rural) requests approval to guarantee the loan with CoBank of Pend Oreille Telephone Company (Pend Oreille) in the amount of $5,650,000. Pend Oreille is a wholly owned subsidiary of Rural, formed to acquire and operate telephone plant in the State of Washington. The exchanges to be operated currently include Ione, Metalline Falls and Cusick.
The loan proceeds will be used to purchase the exchanges from GTE Northwest and complete central office and outside plant upgrades in the Washington exchanges. The term of the loan will be for 15 years. The interest rate will be set at the market rate at the time of closing. Currently the rate is 7.25% to 7.50%.
Rural will guarantee the underlying mortgage or other security. The purchase appears to be a reasonable transaction at a price to book ratio of approximately 1.2 x. The Washington Utilities and Transportation Commission has approved the transaction and Rural is currently making the FCC filing.
STAFF DISCUSSION AND RECOMMENDATION
Staff believes the transaction is a reasonable business endeavor for Rural but is concerned with the potential impact of the guarantee on Idaho ratepayers. I recommend approval of the guarantee by Rural of the Pend Oreille loan with a paragraph included in the order stating that any loan payments made by Rural will be the responsibility of the shareholders and will not be carried by Idaho ratepayers.
COMMISSION DECISION
Should Rural Telephone Company be granted authority to guarantee the loan of Pend Oreille Telephone Company with CoBank in the amount of $5,650,000?
Should a paragraph be included in the order stating that any loan payments made under this guarantee will be the responsibility of the shareholders and will not be included in any rate proceedings for Idaho ratepayers?
__________________________________________
Terri Carlock
TC/rurs961.dm