LWC Sells Over $202 Million in Bonds
Tuesday December 8, 2009
Louisville Water Company (LWC) sold $202.9 million in bonds on December 8 to fund its capital program for the next 3 years. LWC issued the bonds with an AAA rating, yielding an average borrowing cost of 2.98%.
Standard & Poor’s (S&P), one of the nation’s leading providers of credit ratings, upgraded LWC from a AA+ to a AAA rating, citing LWC’s strong financial operations, large and diverse service area and its comprehensive capital planning. According to S&P, the AAA rating places LWC in the top 8% of the 900 water and sewer utilities it rates. In addition to the S&P rating, Moody’s Investor Services gave LWC a rating of Aa1, its 2nd highest rating.
Proceeds from the bond issue will fund LWC’s capital program through 2012, including upgrades to the Crescent Hill Water Treatment Plant, construction of new transmission pipelines along Interstates 64 and 65 and completion of the riverbank filtration project at the B.E. Payne Plant.
Because of outstanding ratings and current economic conditions, LWC received excellent bond bids. The sale included:
Series 2009A issue of $116.2 million tax exempt bonds at an average borrowing cost of 2.58%. This tax exempt series included refinancing of $78.4 million of bonds issued in 2000 and 2001, saving ratepayers $13 million in interest payments over the remaining life of the bonds.
Series 2009B issue of $86.7 million of new money issued as taxable Build America Bonds at 5.00%, yielding a cost of 3.25% to the Company after a 35% federal tax subsidy provided from the federal stimulus program.
The composite average borrowing cost is 2.98% over 20 years on the combined $202.9 million issue. There were 12 bidders for the Series A bonds with Citigroup producing the lowest borrowing cost and 9 bidders for the Series B bonds with J.P. Morgan at the lowest borrowing cost. Delivery of the bonds is scheduled for December 17.
Jerry Martin, Chair of Louisville Board of Water Works, who approved the bond sale on behalf of the Board, said “I’m extremely pleased with the bond sale and the historically low interest rates, less than 3%. The improved AAA rating reflects the successful efforts of management to execute a strategy to expand water service in the region and continue delivery of high quality water to customers.” Greg Heitzman, President and CEO of the Company said “the favorable interest rates will serve to efficiently fund the capital program and ease pressure on future water rate increases. The AAA bond rating is a testament to strong management and the business strategy of the Company.”