20080222Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
COMMISSION STAFF
WORKING FILE
FROM:TERRI CARLOCK
KRIS SASSER
DATE:FEBRUARY 21, 2008
SUBJECT:VISTA CORPORATION'S APPLICATION FOR AUTHORITY TO
ISSUE UP TO $350,000,000 OF DEBT, CASE NO. A VU-08-
On February 4 2008, Avista Corporation (Avista) applied for authority to offer, issue and
sell up to $350 000 000 of secured fixed rate bonds. The proceeds will be used for one or more
of the following purposes: (a) the Company s construction, facility improvement, and
maintenance programs, (b) to retire or exchange one or more outstanding stock, bond, or note
issuances, (c) to reimburse to the treasury for funds previously expended, and (d) for such other
purposes as may be permitted by law. More specifically, the Company anticipates using the
proceeds from the issuance of the bonds to refinance debt maturities of $318 Million due in 2008
and to repay funds borrowed under its corporate credit facility to meet the 2008 capital
expenditures budget of $190 Million.
The issuance of the bonds may be in two series with terms of 10-31 years. The actual
amount issued and the maturities selected for the bonds will be determined based on market
conditions, investor demand and on the Company s current maturity schedule. The cost to
maturity for First Mortgage Bonds is not expected to exceed 7% with total fees of approximately
$4.6 Million. The first series will be used in part to replace the 9.75% bonds due June 1 2008.
A vista s current bond ratings are Baa2 by Moody , BBB+ by S&P and BBB by Fitch. The
capital structure due to the issuances will change substantially. The debt ratio at September 30
2007 was 60% with A vista continuing to meet all ratio requirements.
DECISION MEMORANDUM FEBRUARY 21 , 2008
The Company also requests authority to issue the bonds without further Commission
approval to allow additional flexibility. The issuance would allow the Company greater
flexibility to manage its funds and reduce borrowing costs, thereby permitting the Company to
better manage its debt and capital in a more efficient and cost effective manner.
STAFF RECOMMENDATION
Staff recommends approval of the proposed issuance. In addition, it is recommended
that the authority under this initial approval be continuing.
COMMISSION DECISION
1. Does the Commission wish to approve Avista s request to issue up to $350 000 000 of
secured fixed rate bonds?
2. Does the Commission wish to allow its authority under this Order to be continuing to
allow flexibility?
~clf
Terri Carlock
TC:A VU-08-IDebt dm2 212008
DECISION MEMORANDUM FEBRUARY 21 2008