20040312Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:TERRI CARLOCK
DATE:MARCH 10, 2004
RE:IN THE MATER OF A VISTA CORPORATION'S APPLICATION FOR
AUTHORITY TO ISSUE $62 000,000 OF SUBORDINATED
DEBENTURES; CASE NO. A VU-04-
On February 19, 2004, Avista Corporation (Avista) applied for authority to offer, issue
and sale up to and including $62 000 000 of Subordinated Debentures. These debentures may be
at fixed or variable rates. The proceeds will be used to redeem the outstanding amount of $60
million for the 7.875% Junior Subordinated Deferrable Interest Debentures, Series A, due 2037
and the Avista Capital I 7.875% Trust Originated Preferred Securities, Series A. The original
securities were issued pursuant to Order No. 26669 dated November 1, 1996 in Case No.
WWP-96-1. The covenants of the existing securities only allow retirement of the securities
with securities holding like subordination. These Subordinated Debentures and the Trust
Preferred Securities meet these covenant requirements and will allow some financing flexibility
for A vista.
The initial issuance will have a fixed interest rate not to exceed 7% for the first five years
when the Preferred Securities can be redeemed or reissued with either a fixed or floating interest
rate. The entire term of the securities can range from 30 to 40 years. Avista also requests
authority to refund, extend, renew or replace the proposed debentures to fully utilize the flexible
nature of these debentures.
DECISION MEMORANDUM - 1 -MARCH 10, 2004
STAFF RECOMMENDATION
The proposed issuance and redemptions provide an opportunity for A vista to reduce
borrowing costs and to increase flexibility with future refinance options. Staff recommends
approval of the requested debenture authority. However, because the issuance is initially for a
period of 5 years with the ongoing terms of the security to be determined at that time, Staff
recommends Avista be required to file a status report with the Commission at least 30 days prior
to any changes in the terms at the 5-year timeframe. Unless an objection is raised regarding the
changes for the security terms, Staff recommends that the authority under this initial approval be
continuing. A vista will file all final documents from the issuances with the Commission.
COMMISSION DECISION
Does the Commission accept Staffs recommendations to:
1) Approve Avista s request for authority to issue and sell up to and including
$62 000 000.
2) Approve Staffs recommended additional filing requirement in 5 years.
3) Approve Staffs recommendation that absent any objections to the refinancing or
changes in the terms of these securities in 5 years, that the Commission authority under this order
continue to be in force.
CwJ ocR
Terri Carlock
i:udmemos/avuuO4.dm3.2004
DECISION MEMORANDUM - 2 -MARCH 10, 2004