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Short-Term and Long-Term Borrowings

12 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Short-Term and Long-Term Borrowings

Short-Term and Long-Term Borrowings

The following is a summary of our outstanding short and long-term borrowings by borrower, Otter Tail Corporation (OTC) or Otter Tail Power Company (OTP), as of December 31, 2020 and 2019:

			2020																		2019
(in thousands)			OTC						OTP						Total						OTC						OTP						Total
Short-Term Debt			$	65,166					$	15,831					$	80,997					$	6,000					$	—					$	6,000
Current Maturities of Long-Term Debt			169						139,918						140,087						183						—						183
Long-Term Debt, net of current maturities			79,695						544,737						624,432						79,812						609,769						689,581
Total			$	145,030					$	700,486					$	845,516					$	85,995					$	609,769					$	695,764

Short-Term Debt

The following is a summary of our lines of credit as of December 31, 2020 and 2019:

									2020																		2019
(in thousands)			Line Limit						Amount Outstanding						Letters of Credit						Amount Available						Amount Available
OTC Credit Agreement			$	170,000					$	65,166					$	—					$	104,834					$	164,000
OTP Credit Agreement			170,000						15,831						14,101						140,068						154,524
Total			$	340,000					$	80,997					$	14,101					$	244,902					$	318,524

Otter Tail Corporation is party to a Third Amended and Restated Credit Agreement (the OTC Credit Agreement) and OTP is party to a Second Amended and Restated Credit Agreement (the OTP Credit Agreement) both of which provide for revolving lines of credit to support operations. Borrowings may be used for working capital needs and other capital requirements, to refinance certain indebtedness and for the issuance of letters of credit in an aggregate not to exceed $40 million for the OTC Credit Agreement and $50 million for the OTP Credit Agreement. Each credit facility includes an accordion provision allowing the borrower to increase the available borrowing capacity, subject to certain terms and conditions. The borrowing capacity can be increased to $290 million for the OTC Credit Agreement and to $250 million for the OTP Credit Agreement. Each credit facility charges a variable rate of interest on outstanding balances and applies a commitment fee based on the average unused amount available to be drawn under the respective facility. The variable rate of interest to be charged is based on a benchmark interest rate, either the Prime Rate, the Federal Funds Rate or LIBOR, as selected by the borrower at the time of an advance, plus an applicable credit spread. The credit spread ranges from zero to 2.00% depending on the benchmark interest rate selected and is subject to adjustment based on the credit ratings of the borrower. As of December 31, 2020, the LIBOR based credit spread was 1.50% and 1.25% under the OTC Credit Agreement and OTP Credit Agreement, respectively. The weighted-average interest rate on outstanding borrowings as of December 31, 2020 and 2019 was 1.61% and 3.20%.

Each credit facility contains a number of restrictions on the borrower, including restrictions on its ability to merge, sell assets, make investments, create or incur liens on assets, guarantee the obligations of any other party, and engage in transactions with related parties. Each credit facility also contains customary affirmative covenants, including financial covenants as further described below, and certain events of default. Each credit facility expires on October 31, 2024.

Both the OTC Credit Agreement and the OTP Credit Agreement include LIBOR as a benchmark interest rate in determining the applicable rate of interest to charge on outstanding borrowings. LIBOR is currently expected to be eliminated by January 1, 2022. Both credit agreements contain a provision to determine how interest rates will be established in the event a replacement for LIBOR has not been identified before the agreement expires. The agreements require the parties to jointly agree on an alternate rate of interest, such as the Secured Overnight Financing Rate, that gives due consideration to prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time. The parties will enter into amendments to these agreements to reflect any alternate rate of interest and other related changes to the agreements as may be applicable. If for any reason an agreement cannot be reached on an alternate rate of interest, then any borrowings under the agreements will be determined using the Prime Rate plus a margin based on the borrower's long-term debt ratings at the time of borrowing.

Long-Term Debt

The following is a summary of outstanding long-term debt by borrower as of December 31, 2020 and 2019: 

																								(in thousands)
Entity						Debt Instrument						Rate						Maturity						2020						2019
OTC						Guaranteed Senior Notes						3.55%						12/15/26						$	80,000					$	80,000
OTP						Series 2011A Senior Unsecured Notes						4.63%						12/01/21						140,000						140,000
OTP						Series 2007B Senior Unsecured Notes						6.15%						08/20/22						30,000						30,000
OTP						Series 2007C Senior Unsecured Notes						6.37%						08/02/27						42,000						42,000
OTP						Series 2013A Senior Unsecured Notes						4.68%						02/27/29						60,000						60,000
OTP						Series 2019A Senior Unsecured Notes						3.07%						10/10/29						10,000						10,000
OTP						Series 2020A Senior Unsecured Notes						3.22%						02/25/30						10,000						—
OTP						Series 2020B Senior Unsecured Notes						3.22%						08/20/30						40,000						—
OTP						Series 2007D Senior Unsecured Notes						6.47%						08/20/37						50,000						50,000
OTP						Series 2019B Senior Unsecured Notes						3.52%						10/10/39						26,000						26,000
OTP						Series 2020C Senior Unsecured Notes						3.62%						02/25/40						10,000						—
OTP						Series 2013B Senior Unsecured Notes						5.47%						02/27/44						90,000						90,000
OTP						Series 2018A Senior Unsecured Notes						4.07%						02/07/48						100,000						100,000
OTP						Series 2019C Senior Unsecured Notes						3.82%						10/10/49						64,000						64,000
OTP						Series 2020D Senior Unsecured Notes						3.92%						02/25/50						15,000						—
OTC						PACE Note						2.54%						03/18/21						169						351
Total																								$	767,169					$	692,351
Less:			Current Maturities Net of Unamortized Debt Issuance Costs																					140,087						183
			Unamortized Long-Term Debt Issuance Costs																					2,650						2,587
Total Long-Term Debt Net of Unamortized Debt Issuance Costs																								$	624,432					$	689,581

During the year ended December 31, 2020, OTP issued in a private placement pursuant to our 2019 Note Purchase Agreement, its Series 2020A, Series 2020B, Series 2020C and Series 2020D notes for aggregate proceeds of $75.0 million.

Our guaranteed and unsecured notes require the borrower to maintain various financial covenants, as further described below. These notes provide for prepayment options allowing for a full or partial repayment at 100% of the principal amount so repaid, together with unpaid accrued interest and a make-whole amount, as defined. These notes also include restrictions on the borrowers, including its ability to merge, sell assets, create or incur liens on assets, guarantee the obligations of any other party, and engage in transactions with related parties.

Aggregate maturities of long-term debt obligations at December 31, 2020 for each of the next five years are as follows:

(in thousands)			2021						2022						2023						2024						2025
Debt Maturities			$	140,169					$	30,000					$	—					$	—					$	—

Financial Covenants

Certain of OTC's and OTP's short-term and long-term debt agreements require the borrower, whether OTC or OTP, to maintain certain financial covenants, including a maximum debt to total capitalization of 0.60 to 1.00, a minimum interest and dividend coverage ratio of 1.50 to 1.00, and a maximum level of priority indebtedness. As of December 31, 2020, OTC and OTP were in compliance with these financial covenants.

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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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