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Note 10 - Short-term and Long-term Borrowings

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

10. Short-Term and Long-Term Borrowings

The following table presents the status of the Company’s lines of credit as of September 30, 2020 and December 31, 2019:

(in thousands)		Line Limit				In Use on September 30, 2020				Restricted due to Outstanding Letters of Credit				Available on September 30, 2020				Available on December 31, 2019
Otter Tail Corporation Credit Agreement		$	170,000			$	48,600			$	-			$	121,400			$	164,000
OTP Credit Agreement			170,000				-				7,670				162,330				154,524
Total		$	340,000			$	48,600			$	7,670			$	283,730			$	318,524

Long-Term Debt Issuances

2019 Note Purchase Agreement

On September 12, 2019, OTP entered into a Note Purchase Agreement (the 2019 Note Purchase Agreement) with the purchasers named therein (the Purchasers), pursuant to which OTP agreed to issue to the Purchasers, in a private placement transaction, $175 million aggregate principal amount of OTP’s senior unsecured notes consisting of (a) $10,000,000 aggregate principal amount of its 3.07% Series 2019A Senior Unsecured Notes due October 10, 2029 (the Series 2019A Notes), (b) $26,000,000 aggregate principal amount of its 3.52% Series 2019B Senior Unsecured Notes due October 10, 2039 (the Series 2019B Notes), (c) $64,000,000 aggregate principal amount of its 3.82% Series 2019C Senior Unsecured Notes due October 10, 2049 (the Series 2019C Notes), (d) $10,000,000 aggregate principal amount of its 3.22% Series 2020A Senior Unsecured Notes due February 25, 2030 (the Series 2020A Notes), (e) $40,000,000 aggregate principal amount of its 3.22% Series 2020B Senior Unsecured Notes due August 20, 2030 (the Series 2020B Notes), (f) $10,000,000 aggregate principal amount of its 3.62% Series 2020C Senior Unsecured Notes due February 25, 2040 (the Series 2020C Notes) and (g) $15,000,000 aggregate principal amount of its 3.92% Series 2020D Senior Unsecured Notes due February 25, 2050 (the Series 2020D Notes; and together with the Series 2019A Notes, the Series 2019B Notes, the Series 2019C Notes, the Series 2020A Notes, the Series 2020B Notes and the Series 2020C Notes, the Notes).

On February 25, 2020, OTP issued the Series 2020A Notes, the Series 2020C Notes and the Series 2020D Notes pursuant to the 2019 Note Purchase Agreement. On August 20, 2020, OTP issued the Series 2020B Notes pursuant to the 2019 Note Purchase Agreement. OTP used the $75 million proceeds from the issuances to pay for capital expenditures and for other corporate purposes. The Series 2019A Notes, Series 2019B Notes and Series 2019C Notes were issued by the Company on October 10, 2019.

OTP may prepay all or any part of the Notes (in an amount not less than 10% of the aggregate principal amount of the Notes then outstanding in the case of a partial prepayment) at 100% of the principal amount so prepaid, together with unpaid accrued interest and a make-whole amount; provided that if no default or event of default exists under the 2019 Note Purchase Agreement, any prepayment made by OTP of all of the (a) Series 2020A Notes then outstanding on or after August 25, 2029, (b) Series 2020C Notes then outstanding on or after August 25, 2039 or (c) Series 2020D Notes then outstanding on or after August 25, 2049 will be made without any make-whole amount. The 2019 Note Purchase Agreement also requires OTP to offer to prepay all outstanding Notes at 100% of the principal amount together with unpaid accrued interest in the event of a Change of Control (as defined in the 2019 Note Purchase Agreement) of OTP.

The 2019 Note Purchase Agreement contains a number of restrictions on the business of OTP. These include restrictions on OTP’s abilities to merge, sell assets, create or incur liens on assets, guarantee the obligations of any other party, and engage in transactions with related parties. The 2019 Note Purchase Agreement also contains other negative covenants and events of default, as well as certain financial covenants. Specifically, OTP may not permit its Interest-bearing Debt (as defined in the 2019 Note Purchase Agreement) to exceed 60% of Total Capitalization (as defined in the 2019 Note Purchase Agreement), determined as of the end of each fiscal quarter. OTP is also restricted from allowing its Priority Indebtedness (as defined in the Note Purchase Agreement) to exceed 20% of Total Capitalization, determined as of the end of each fiscal quarter. The 2019 Note Purchase Agreement does not include provisions for the termination of the agreement or the acceleration of repayment of amounts outstanding due to changes in OTP’s credit ratings. The 2019 Note Purchase Agreement includes a “most favored lender” provision generally requiring that in the event OTP’s existing credit agreement or any renewal, extension or replacement thereof, at any time contains any financial covenant or other provision providing for limitations on interest

expense and such a covenant is not contained in the 2019 Note Purchase Agreement under substantially similar terms or would be more beneficial to the holders of the Notes than any analogous provision contained in the 2019 Note Purchase Agreement (an Additional Covenant), then unless waived by the Required Holders (as defined in the 2019 Note Purchase Agreement), the Additional Covenant will be deemed to be incorporated into the 2019 Note Purchase Agreement. The 2019 Note Purchase Agreement also provides for the amendment, modification or deletion of an Additional Covenant if such Additional Covenant is amended or modified under or deleted from the credit agreement, provided that no default or event of default has occurred and is continuing.

The following tables provide a breakdown of the assignment of the Company’s consolidated short-term and long-term debt outstanding as of September 30, 2020 and December 31, 2019:

September 30, 2020 (in thousands)		OTP				Otter Tail Corporation				Consolidated
Short-Term Debt		$	-			$	48,600			$	48,600
Long-Term Debt:
3.55% Guaranteed Senior Notes, due December 15, 2026						$	80,000			$	80,000
Senior Unsecured Notes 4.63%, Series 2011A, due December 1, 2021		$	140,000								140,000
Senior Unsecured Notes 6.15%, Series 2007B, due August 20, 2022			30,000								30,000
Senior Unsecured Notes 6.37%, Series 2007C, due August 20, 2027			42,000								42,000
Senior Unsecured Notes 4.68%, Series 2013A, due February 27, 2029			60,000								60,000
Senior Unsecured Notes 3.07%, Series 2019A, due October 10, 20291			10,000								10,000
Senior Unsecured Notes 3.22%, Series 2020A, due February 25, 2030			10,000								10,000
Senior Unsecured Notes 3.22%, Series 2020B, due August 20, 20301			40,000								40,000
Senior Unsecured Notes 6.47%, Series 2007D, due August 20, 2037			50,000								50,000
Senior Unsecured Notes 3.52%, Series 2019B, due October 10, 2039			26,000								26,000
Senior Unsecured Notes 3.62%. Series 2020C, due February 25, 2040			10,000								10,000
Senior Unsecured Notes 5.47%, Series 2013B, due February 27, 2044			90,000								90,000
Senior Unsecured Notes 4.07%, Series 2018A, due February 7, 2048			100,000								100,000
Senior Unsecured Notes 3.82%, Series 2019C, due October 10, 2049			64,000								64,000
Senior Unsecured Notes 3.92%, Series 2020D, due February 25, 2050			15,000								15,000
PACE Note, 2.54%, due March 18, 2021							215				215
Total		$	687,000			$	80,215			$	767,215
Less: Current Maturities net of Unamortized Debt Issuance Costs			-				215				215
Unamortized Long-Term Debt Issuance Costs			2,408				318				2,726
Total Long-Term Debt net of Unamortized Debt Issuance Costs		$	684,592			$	79,682			$	764,274
Total Short-Term and Long-Term Debt (with current maturities)		$	684,592			$	128,497			$	813,089
December 31, 2019 (in thousands)
Short-Term Debt		$	-			$	6,000			$	6,000
Long-Term Debt:
3.55% Guaranteed Senior Notes, due December 15, 2026						$	80,000			$	80,000
Senior Unsecured Notes 4.63%, Series 2011A, due December 1, 2021		$	140,000								140,000
Senior Unsecured Notes 6.15%, Series 2007B, due August 20, 2022			30,000								30,000
Senior Unsecured Notes 6.37%, Series 2007C, due August 20, 2027			42,000								42,000
Senior Unsecured Notes 4.68%, Series 2013A, due February 27, 2029			60,000								60,000
Senior Unsecured Notes 3.07%, Series 2019A, due October 10, 20291			10,000								10,000
Senior Unsecured Notes 6.47%, Series 2007D, due August 20, 2037			50,000								50,000
Senior Unsecured Notes 3.52%, Series 2019B, due October 10, 2039			26,000								26,000
Senior Unsecured Notes 5.47%, Series 2013B, due February 27, 2044			90,000								90,000
Senior Unsecured Notes 4.07%, Series 2018A, due February 7, 2048			100,000								100,000
Senior Unsecured Notes 3.82%, Series 2019C, due October 10, 2049			64,000								64,000
PACE Note, 2.54%, due March 18, 2021							351				351
Total		$	612,000			$	80,351			$	692,351
Less: Current Maturities net of Unamortized Debt Issuance Costs			-				183				183
Unamortized Long-Term Debt Issuance Costs			2,231				356				2,587
Total Long-Term Debt net of Unamortized Debt Issuance Costs		$	609,769			$	79,812			$	689,581
Total Short-Term and Long-Term Debt (with current maturities)		$	609,769			$	85,995			$	695,764

¹Holder is COBANK, a cooperative lender. Interest payments are subject to cash credits which may result in a lower effective interest rate.

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- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI http://asc.fasb.org/topic&trid=2208564

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