20101119Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KEMPTON
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:TERRI CARLOCK
DATE:NOVEMBER 18,2010
SUBJECT:VISTA CORPORATION'S APPLICATION FOR AUTHORITY TO
ISSUE UP TO $150 000,000 OF DEBT; CASE NO. A VU-I0-
On October 22, 2010, A vista Corporation (A vista) applied for authority to offer, issue
and sell up to and including $150 000 000 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
obligation, ( c) to reimburse the treasury for funds previously expended, and (d) for such other
purposes as may be permitted by law. The Company anticipates using proceeds from the
issuance of the bonds to refinance more expensive First Mortgage Bonds.
The issuance of the bonds may be in one or more series with terms through 30 years. The
requested authority differs from existing authorities as these securities will be First Mortgage
Bonds (FMB) secured by a lien on the Mortgage and Deed of Trust. 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 FMBs are currently very
competitively priced. The all-in cost to maturity for these FMBs will not exceed 8%. Staff has
reviewed Company options for refinancing and believes there is potential for significant savings
for the Company and customers.
The Company also requests authority to issue, refund, extend, renew or replace the bonds
without further Commission approval to allow additional flexibility. This authority is
conditioned on the all-in coupon rate being competitively priced and the senior secured debt
maintaining an investment grade rating from at least two nationally recognized rating agencies.
DECISION MEMORANDUM NOVEMBER 18 2010
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 providing the senior secured debt
maintains an investment grade rating from at least two nationally recognized rating agencies.
COMMISSION DECISION
1. Does the Commission wish to approve Avista s request to issue up to $150 000 000 of
secured fixed rate bonds?
2. Does the Commission wish to allow its authority under this Order to be continuing to
allow flexibility?
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r~ck
Terri Carlock
TC:AVU-IO-02Debtdmll 172010
DECISION MEMORANDUM NOVEMBER 18 , 2010