20220218Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER ANDERSON
COMMISSIONER CHATBURN
COMMISSIONER HAMMOND
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:JOSEPH TERRY
TERRI CARLOCK
RILEY NEWTON
DATE:FEBRUARY 18,2022
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 $500,000,000;CASE NO.
WSC-T-22-01
BACKGROUND
On February 4,2022,Westel LLC ("Company"or "Westel"),a subsidiary of Involta
LLC ("Involta"),applied under Idaho Code §61-901 for authority to guaranty no more than $500
Million (M)in a loan facility to Involta LLC.The Application did not include the financial data
required by IDAPA §31.01.01.141.06or the proper filing fee required by §61-905.The financial
information was subsequently received on February 17,2022,and the proper filing fee was
received on February 10,2022.
The debt facility that the Company requests to guaranty consists of three separate facilities.
The first is a term loan for $l25M,with the purpose of refinancing other loans that are already
outstanding.The second is a delayed draw term loan for $50M,with the purpose of building new
capital investments as needed.The third is a revolving short-term loan for up to $20M,with the
purpose to provide working capital as needed.There are provisions in this agreement to increase
the debt amount,and the Company is requesting authorityto increase it up to $500M over time if
needed.The overarching goal of these debt facilities is to refinance existing debts,build additional
capital investments,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 Term Benchmark Rate +3.25%and the second is Alternative Base Rate (ABR)+2.25%.The
DECISION MEMORANDUM -1 -FEBRUARY 18,2022
Term Benchmark Rate is the Secured Overnight Financing Rate (SOFR).ABR as the highest of:
Prime rate,Federal Funds Rate plus .5%,or SOFR +1%.
These terms are better than the previous agreement provided in Case No.WSC-T-20-01.
Under the previous agreement the interest rates would have been around 4.1%and at these rates
they would be closer 3.4%.Thus,the ability to lock in these lower rates now would be
advantageous to customers due to lower cost,but also lessen the stress on the cashflows of
Involta.
Westel had revenue of $464 thousand and a net income of $206 thousand in 2021 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.Previously,Involta had listed
real property assets provided 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 telephoneutilities,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 debt not to exceed $500M?
seph T
Udmemos/WSC-T-22-01 Decision Memo
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