Vectren 2010 Annual Report Download - page 60

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Utility Holdings 2009 Debt Issuance
On April 7, 2009, Utility Holdings entered into a private placement Note Purchase Agreement pursuant to which institutional
investors purchased from Utility Holdings $100 million in 6.28 percent senior unsecured notes due April 7, 2020 (2020 Notes).
The 2020 Notes are guaranteed by Utility Holdings’ three utilities: SIGECO, Indiana Gas, and VEDO. These guarantees are
full and unconditional and joint and several. The proceeds from the sale of the 2020 Notes, net of issuance costs, totaled
approximately $99.5 million. The 2020 Notes have no sinking fund requirements and interest payments are due semi-annually.
The 2020 Notes contain customary representations, warranties and covenants, including a leverage covenant consistent with
leverage covenants contained in other Utility Holdings’ borrowing arrangements.
SIGECO 2009 Debt Issuance
On August 19, 2009 SIGECO also completed a $22.3 million tax-exempt first mortgage bond issuance at an interest rate of 5.4
percent that is fixed through maturity. The bonds mature in 2040. The proceeds from the sale of the bonds, net of issuance
costs, totaled approximately $21.3 million.
Vectren Common Stock Issuance
In February 2007, the Company sold 4.6 million authorized but previously unissued shares of its common stock to a group of
underwriters in an SEC-registered primary offering at a price of $28.33 per share. The transaction generated proceeds, net of
underwriting discounts and commissions, of approximately $125.7 million. The Company executed an equity forward sale
agreement (equity forward) in connection with the offering, and therefore, did not receive proceeds at the time of the equity
offering. The equity forward allowed the Company to price an offering under market conditions existing at that time, and to
better match the receipt of the offering proceeds and the associated share dilution with the implementation of regulatory
initiatives.
On June 27, 2008, the Company physically settled the equity forward by delivering the 4.6 million shares, receiving proceeds of
approximately $124.9 million. The slight difference between the proceeds generated by the public offering and those received
by the Company were due to adjustments defined in the equity forward agreement including: 1) daily increases in the forward
sale price based on a floating interest factor equal to the federal funds rate, less a 35 basis point fixed spread, and 2) structured
quarterly decreases to the forward sale price that align with expected Company dividend payments.
Vectren transferred the proceeds to Utility Holdings, and Utility Holdings used the proceeds to repay short-term debt obligations
incurred primarily to fund its capital expenditure program. The proceeds received were recorded as an increase to Common
Stock in Common Shareholders’ Equity and are presented in the Statement of Cash Flows as a financing activity.
Utility Holdings 2008 Debt Issuance
In March 2008, Utility Holdings issued $125 million in 6.25 percent senior unsecured notes due April 1, 2039 (2039 Notes) at
par. The 2039 Notes are guaranteed by Utility Holdings’ three public utilities: SIGECO, Indiana Gas, and VEDO. These
guarantees are full and unconditional and joint and several. The 2039 Notes have no sinking fund requirements and interest
payments are due monthly. The notes may be called by Utility Holdings, in whole or in part, at any time on or after April 1, 2013,
at 100 percent of principal amount plus accrued interest. During 2007, Utility Holdings entered into several interest rate hedges
with an $80 million notional amount. Upon issuance of the notes, these instruments were settled resulting in the payment of
approximately $9.6 million, which was recorded as a Regulatory asset pursuant to existing regulatory orders. The value paid is
being amortized as an increase to interest expense over the life of the issue. The proceeds from the sale of the 2039 Notes
less settlement of the hedging arrangements and payments of issuance costs amounted to approximately $111.1 million.
Auction Rate Securities
In February 2008, SIGECO provided notice to the current holders of approximately $103 million of tax-exempt auction rate
mode long-term debt of its plans to convert that debt from its current auction rate mode into a daily interest rate mode. In March
2008, the debt was tendered at 100 percent of the principal amount plus accrued interest. During March 2008, SIGECO
remarketed approximately $61.8 million of these instruments at interest rates that are fixed to maturity, receiving proceeds, net
of issuance costs, of approximately $60.0 million. The terms are $22.6 million at 5.15 percent due in 2023, $22.2 million at 5.35
percent due in 2030 and $17.0 million at 5.45 percent due in 2041.
On March 26, 2009, SIGECO remarketed the remaining $41.3 million of these obligations, receiving proceeds, net of issuance
costs of approximately $40.6 million. The remarketed notes have a variable rate interest rate which is reset weekly and are
supported by a standby letter of credit. The notes are collateralized by SIGECO’s utility plant, and $9.8 million are due in 2015
and $31.5 million are due in 2025.