Avista sells stock to raise cash
Avista Corp. is selling shares of common stock out of the corporate treasury for the first time in 23 years as part of a financing plan that raised about $220 million.
Most of the cash — about $150 million — will come from the sale of bonds. The rest, perhaps up to $70 million, will be raised from the common stock sales.
The Spokane company will use the money to pay down debts and help pay for upgrades to hydroelectric dams and transmission lines. It also will help Avista meet a set of Washington state regulations designed to bolster the equity, or net worth, of the company’s regulated utility, which provides electricity and natural gas to homes and businesses across Eastern Washington and North Idaho.
The stock sale, which includes a public offering of 2.75 million common shares, valued at about $26.12 each, is a significant development for Avista. Christy Burmeister-Smith, treasurer and a vice president of Avista Corp., said the financial dealings have gone according to plan and should help the company.
The bonds were sold with an insurance wrap that boosted their rating to investment grade. Though Avista had to pay an undisclosed amount in insurance fees, the move helped the company secure buyers for 30-year notes at 5.7 percent interest. That’s a better deal overall deal for the company, which is retiring $150 million worth of seven-year notes by Jan. 1 that carried a 7.75 percent interest rate, said Burmeister-Smith.
Avista has been trying to refinance its higher-interest debts. It’s been a long, difficult ordeal for the company, which is still recovering from the energy crisis of six years ago.
Rating agencies have not returned Avista’s bonds to investment grade, and thus the company has been forced to settle for less attractive interest rates on the bonds it sells.One reason is that the firm’s equity isn’t rich enough.
According to financial filings, the company will use some of the money from the sale of stock to raise the equity in its utility.
This will help Avista comply with an order from the Washington Utilities and Transportation Commission that calls on Avista to boost the worth of its utility over the next two years.
While the company has been busy raising money, it had to lower its profit forecast slightly for 2007.