American United Life Insurance (AULI) Loan Refinancing. The proposed financing would also enable PWW to refinance a further outstanding loan relative to the $2.4 million remaining principal amount on PWW’s note payable to AULI, which matures and is due in full on March 1, 2021. That loan was originally taken out in 1996, to fund 4 See the pre-filed direct testimony of Xxxxx X. Xxxxxxx in DW 20-055, Xxxxx 37. capital projects at the time, in the amount of $8 million over 25 years, at an interest rate of 7.4% with annual sinking fund payments of $400,000. It is necessary for PWW to refinance the remaining $2.4 million due on this loan prior to its maturity because the Company’s current revenue structure does not enable it to possess the necessary “cash on hand” to pay the entire amount due on that date. However, the AULI debt instrument also has a “make whole” provision if it is repaid prior to the March 1, 2021 due date. That requirement is currently estimated to be approximately $74,141 if the loan is paid on August 1, 2020, but will decrease subsequent to that date.5 The precise amount of the “make whole” payoff will not be determined until the date of closing as its precise determination is based upon the number of days remaining until loan maturity as well as the US Treasuries rate upon which the “make whole” provision is calculated. With the present inclusion of the refinancing of this loan within the proposed overall financing, it is anticipated that PWW’s ratepayers will benefit from a further reduction in the Company’s debt service in that the currently estimated interest rate of the proposed financing of 3.67% is less than half the interest rate of the existing loan of 7.40%. This is particularly beneficial, as refinancing the $2.4 million amount due on its own in early 2021 would not inure the same benefits as incorporating it into the overall proposed $75 million financing, as that amount on its own is too small to take to the bond markets, and would be at much higher interest rates with onerous covenants and requirements, if refinanced with a term loan at a commercial bank or the existing AULI lender.
