American States Water Company Issues $160M of Unsecured Notes

American States Water Company’s AWR wholly owned water utility subsidiary, Golden State Water Company ("GSWC"), announced the completion of the issuance of $160million of unsecured private placement notes.

GSWC used the proceeds to pay short-term borrowings as well as fund operations and capital expenditures. The company benefited from the prevalent low interest rate environment, which aided in the issuance of notes at lower rates.

Transaction Details

The unit issued $85 million amount of aggregate principal of Series A Senior Notes at a coupon rate of 2.17%. These notes will be due Jul 8, 2030. Another $75 million of Series B Senior Notes is issued at a coupon rate of 2.90% payable Jul 8, 2040.

Interest payments will be made on a semi-annual basis, payable Jan 8 and Jul 8, of each year. Also, since the notes are unsecured, these will rank equally with GSWC’s unsecured and unsubordinated debt.

Liquidity Position

American States Water Company's debt-to-capital is 46.54%, better than the Zacks Utilities Water Supply industry’s average of 48.57%. Its times interest earned ratio came in at 5.6 at the end of first-quarter 2020, improving on a sequential basis, from 5.4. Such a strong ratio indicates that the company will be able to meet its near-term debt obligations comfortably.

Strikingly, at a time when every entity is looking forward to preserve liquidity amid uncertainty as a result of the COVID-19 outbreak, this rising ratio is reassuring for investors.

Capital-intensive water utility companies require constant funding for their projects because cash flows at times are not sufficient to meet their ends. Thus, a strong credit rating like that of American States Water Company helps it secure funds from the market at favorable rates.

Price Performance

Currently, the stock carries a Zacks Rank #3 (Hold). In the past year, shares of the company have gained 1.4%, underperforming the industry’s rally of 3.5%.


Key Picks

A few better-ranked stocks from the sector are Fortis Inc. FTS, DTE Energy Company DTE and Korea Electric Power Corporation KEP, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Fortis’ 2020 earnings has moved 1.04% north over the past 60 days. It has a trailing four-quarter positive earnings surprise of 6.28%, on average.

The long-term earnings growth rate for DTE Energy is pegged at 5.53%. The Zacks Consensus Estimate for 2020 earnings has moved 0.46% up over the past 60 days.

Korea Electric Power’s long-term earnings growth rate stands at 5%. The Zacks Consensus Estimate for 2020 earnings has been revised 27.78% upward over the past 60 days.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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