Long-Term Debt
Registrant’s long-term debt consists primarily of notes and debentures of GSWC. Registrant summarizes its long-term debt in the Statements of Capitalization. GSWC does not currently have any outstanding mortgages or other encumbrances on its properties.
In March of 2019, GSWC repaid $40 million of its 6.7% senior note, which matured in that month. GSWC increased its intercompany borrowings from AWR to fund the repayment of this note.
Each of the private placement notes issued by GSWC contain various restrictions. Private placement notes issued in the amount of $28 million due in 2031 contain restrictions on the payment of dividends, minimum interest coverage requirements, a maximum total indebtedness to capitalization ratio and a negative pledge. Pursuant to the terms of these notes, GSWC must maintain a minimum interest coverage ratio of two times interest expense. As of December 31, 2019, GSWC had an interest coverage ratio of over four times interest expense.
In December 2014, GSWC issued $15.0 million in 3.45% private placement senior notes due in 2029. In 2005, GSWC issued senior private placement notes due in 2028. Pursuant to the terms of these notes, GSWC must maintain a total indebtedness to capitalization ratio (as defined) of less than 0.6667-to-1 and a total indebtedness to earnings before income taxes, depreciation and amortization ("EBITDA") of less than 8-to-1. As of December 31, 2019, GSWC had a total indebtedness to capitalization ratio of 0.4445-to-1 and a total indebtedness to EBITDA of 3.1-to-1.
Certain long-term debt issues outstanding as of December 31, 2019 can be redeemed, in whole or in part, at the option of GSWC subject to redemption schedules embedded in the agreements particular to each redeemable issue. The 9.56% notes are subject to a make-whole premium based on 55 basis points above the applicable Treasury Yield if redeemed prior to 2021. After 2021, the maximum redemption premium is 3% of par value. The 5.87% senior note is subject to a make-whole premium based on the difference between the bank's cost of funds on the date of purchase and the bank's cost of funds on the date of redemption plus 0.5%. The $15.0 million, 3.45% senior notes due in 2029 have similar redemption premiums.
In October 2009, GSWC entered into an agreement with the California Department of Public Health (“CDPH”) whereby CDPH agreed to provide funds to GSWC of up to $9.0 million under the American Recovery and Reinvestment Act. Proceeds from the funds received were used to reimburse GSWC for capital costs incurred to install water meters to convert customers in GSWC’s Arden-Cordova district from non-metered service to metered service. GSWC received a total of $8.6 million in reimbursements from the CDPH, half of which was recorded as a contribution in aid of construction and the other half as long-term debt in accordance with the terms of the agreement. The loan portion bears interest at a rate of 2.5% and is payable over 20 years beginning in 2013. A surcharge to recover from customers the debt service cost on this loan was approved by the CPUC and implemented in 2013.
Annual maturities of all long-term debt at December 31, 2019 are as follows (in thousands):
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| | | |
2020 | $ | 344 |
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2021 | 365 |
|
2022 | 392 |
|
2023 | 406 |
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2024 | 425 |
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Thereafter | 282,767 |
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Total | $ | 284,699 |
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