20200508Decision Memo.pdf

DECISION MEMORANDUM - 1 - MAY 8, 2020
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
LEGAL
WORKING FILE

FROM: JOSEPH TERRY
TERRI CARLOCK

DATE: MAY 8, 2020

RE: IN THE MATTER OF THE APPLICATION OF WESTEL LLC FOR
AUTHORITY TO GUARANTY LOAN TO INVOLTA, LLC IN AN
AGGREGATE AMOUNT OF NOT TO EXCEED $147,000,000;
CASE NO. WSC-T-20-01

On April 22, 2020, Westel LLC (“Company” or “Westel”), a subsidiary of Involta LLC
(“Involta”), applied under Idaho Code §61-901 for authority to guaranty no more than $147
Million (M) in a loan facility to Involta LLC. The Application did not include the financial data
required by IDAPA §31.01.01.141.06 or the proper filing fee required by §61-905. The financial
information was subsequently received on April 30, 2020, and the proper filing fee was received
on May 5,2020.
The debt facility that the Company requests to guaranty consists of four separate
facilities. The first is a term loan for $92.5M, with the purpose of refinancing other loans that
are already outstanding. The second is a delayed draw term loan for $42M, with the purpose of
building new capital as needed. The third is a revolving short-term loan for up to $10M, with the
purpose to provide working capital as needed. The last is a letter of credit for up to $2.5M, for
other corporate needs. The overarching goal of these debt facilities is to refinance existing debts,
build additional capital, liquidity, and other purposes as necessary by law.
At the time of issuance, Involta will choose one of two different interest rates. The first
is London Interbank Offer Rate (LIBOR) plus 4%, and the second is Alternative Base Rate
(ABR) plus 3%. ABR as the highest of: Prime rate, Federal Funds Rate plus .5%, or one-month
LIBOR +1%.

DECISION MEMORANDUM - 2 - MAY 8, 2020
Current interest rates are significantly lower now than they were a year ago. LIBOR is
currently at .383% vs 2.72% last year. Prime rate is at 3.25% vs 5.5%. Federal funds rate is at
.25% vs 2.5% and the one-month LIBOR is at .25% vs 2.46%. Thus, the ability to lock in these
low rates now would be advantageous to customers due to lower cost, but also lessen the stress
on the cashflows of Involta.
Westel has an income of $40,000 a year and no debt. However, Westel is a loan
guarantor, and not the loan holder. The holder of the loan will be its parent company, Involta.
One of the requirements for the loan facility is that all subsidiaries need to be guarantors. Involta
has many subsidiaries. The listing of real property assets provided were in excess $110M.
Westel is a small portion of the subsidiaries of Involta. Because the largest part of this loan
facility is to refinance loans Involta already has, there is little threat that these loans would pose
an unreasonable threat to Westel’s operations beyond that which existed before.
Utilities, even telephone utilities, can have significant capital costs at any time. Because
smaller utilities are viewed as risky investments, they have a difficult time raising funds for
significant capital projects on their own. Therefore, they frequently resort to their owners to
fund any large capital investments. These debt facilities will help ensure the owning company,
Involta, has sufficient capital reserves for all its subsidiaries, including Westel.

STAFF RECOMMENDATION
Staff recommends the Commission approve the application.

COMMISSION DECISION
Does the Commission wish to approve the application to allow Westel assets be used as
part of the guaranty of the loans not to exceed $147M?

Joseph Terry
___________________________
Joseph Terry

Udmemos/WSC-T-20-01 Decicion Memo