APS 2015 Annual Report Download - page 120

Table of Contents
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On November 6, 2015, APS issued $250 million of 4.35% unsecured senior notes that mature on November 15, 2045. The net
proceeds from the sale were used to refinance via redemption and cancellation at par our indebtedness related to the principal amounts
of the Navajo County, Arizona Pollution Control Corporation Pollution Control Revenue Refunding Bonds (Arizona Public Service
Company Cholla Project), 2009 Series A and 2009 Series C both due June 1, 2034, and repay commercial paper borrowings and
replenish cash temporarily used to fund capital expenditures.
On November 17, 2015, APS redeemed at par and canceled all $38 million of the Navajo County, Arizona Pollution Control
Corporation Revenue Refunding Bonds (Arizona Public Service Company Cholla Project), 2009 Series A. These bonds were classified
as current maturities of long-term debt on our Consolidated Balance Sheets at December 31, 2014.
On November 17, 2015, APS canceled all $32 million of the Navajo County, Arizona Pollution Control Corporation Revenue
Refunding Bonds (Arizona Public Service Company Cholla Project), 2009 Series B, purchased in connection with the mandatory tender
provision on May 30, 2014.
On December 8, 2015, APS redeemed at par and canceled all $32 million of the Navajo County, Arizona Pollution Control
Corporation Revenue Refunding Bonds (Arizona Public Service Company Cholla Project), 2009 Series C.
See “Lines of Credit and Short-Term Borrowings” in Note 5 and “Financial Assurances” in Note 10 for discussion of APS’s
separate outstanding letters of credit.
Debt Provisions
Pinnacle West’s and APS’s debt covenants related to their respective bank financing arrangements include maximum debt to
capitalization ratios. Pinnacle West and APS comply with this covenant. For both Pinnacle West and APS, this covenant requires that
the ratio of consolidated debt to total consolidated capitalization not exceed 65%. At December 31, 2015, the ratio was approximately
47% for Pinnacle West and 46% for APS. Failure to comply with such covenant levels would result in an event of default which,
generally speaking, would require the immediate repayment of the debt subject to the covenants and could cross-default other debt.
See further discussion of “cross-default” provisions below.
Neither Pinnacle West’s nor APS’s financing agreements contain “rating triggers” that would result in an acceleration of the
required interest and principal payments in the event of a rating downgrade. However, our bank credit agreements contain a pricing
grid in which the interest rates we pay for borrowings thereunder are determined by our current credit ratings.
All of Pinnacle West’s loan agreements contain “cross-default” provisions that would result in defaults and the potential
acceleration of payment under these loan agreements if Pinnacle West or APS were to default under certain other material agreements.
All of APS’s bank agreements contain "cross-default" provisions that would result in defaults and the potential acceleration of payment
under these bank agreements if APS were to default under certain other material agreements. Pinnacle West and APS do not have a
material adverse change restriction for credit facility borrowings.
An existing ACC order requires APS to maintain a common equity ratio of at least 40%. As defined in the ACC order, the
common equity ratio is total shareholder equity divided by the sum of total shareholder equity and long-term debt, including current
maturities of long-term debt. At December 31, 2015, APS was in
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