Borrowing Arrangements

12 Months Ended

Dec. 31, 2011

12.	Borrowing Arrangements

Long-Term Debt

Long-term senior unsecured obligations and first mortgage bonds outstanding by subsidiary follow:


			At December 31,
(In millions)			2011	2010
Utility Holdings
	Fixed Rate Senior Unsecured Notes
		2011, 6.625%	$ -	$ 250.0
		2013, 5.25%	100.0	100.0
		2015, 5.45%	75.0	75.0
		2018, 5.75%	100.0	100.0
		2020, 6.28%	100.0	100.0
		2021, 4.67%	55.0	-
		2026, 5.02%	60.0	-
		2035, 6.10%	75.0	75.0
		2036, 5.95%	-	96.7
		2039, 6.25%	121.6	121.9
		2041, 5.99%	35.0	-
		Total Utility Holdings	721.6	918.6
Indiana Gas
	Fixed Rate Senior Unsecured Notes
		2013, Series E, 6.69%	5.0	5.0
		2015, Series E, 7.15%	5.0	5.0
		2015, Series E, 6.69%	5.0	5.0
		2015, Series E, 6.69%	10.0	10.0
		2025, Series E, 6.53%	10.0	10.0
		2027, Series E, 6.42%	5.0	5.0
		2027, Series E, 6.68%	1.0	1.0
		2027, Series F, 6.34%	20.0	20.0
		2028, Series F, 6.36%	10.0	10.0
		2028, Series F, 6.55%	20.0	20.0
		2029, Series G, 7.08%	30.0	30.0
		Total Indiana Gas	121.0	121.0
SIGECO
	First Mortgage Bonds
		2015, 1985 Pollution Control Series A, current adjustable rate 0.10%, tax exempt,
		2011 weighted average: 0.19%	9.8	9.8
		2016, 1986 Series, 8.875%	13.0	13.0
		2020, 1998 Pollution Control Series B, 4.50%, tax exempt	4.6	4.6
		2023, 1993 Environmental Improvement Series B, 5.15%, tax exempt	22.6	22.6
		2024, 2000 Environmental Improvement Series A, 4.65%, tax exempt	22.5	22.5
		2025, 1998 Pollution Control Series A, current adjustable rate 0.08%, tax exempt,
		2011 weighted average: 0.19%	31.5	31.5
		2029, 1999 Senior Notes, 6.72%	80.0	80.0
		2030, 1998 Pollution Control Series B, 5.00%, tax exempt	22.0	22.0
		2030, 1998 Pollution Control Series C, 5.35%, tax exempt	22.2	22.2
		2040, 2009 Environmental Improvement Series, 5.40%, tax exempt	22.3	22.3
		2041, 2007 Pollution Control Series, 5.45%, tax exempt	17.0	17.0
		Total SIGECO	267.5	267.5

(In millions)			2011	2010


Vectren Capital Corp.
	Fixed Rate Senior Unsecured Notes
		2012, 5.13%	25.0	25.0
		2012, 7.43%	35.0	35.0
		2014, 6.37%	30.0	30.0
		2015, 5.31%	75.0	75.0
		2016, 6.92%	60.0	60.0
		2017, 3.48%	75.0	75.0
		2019, 7.30%	60.0	60.0
		2025, 4.53%	50.0	50.0
		Total Vectren Capital Corp.	410.0	410.0
Other Long-Term Notes Payable			4.1	1.1
Total long-term debt outstanding			1,524.2	1,718.2
	Current maturities of long-term debt		(62.7)	(250.7)
	Short-term borrowings refinanced in 2012		100.0	-
	Debt subject to tender		-	(30.0)
	Unamortized debt premium & discount - net		(1.9)	(2.3)
		Total long-term debt-net	$ 1,559.6	$ 1,435.2

Utility Holdings 2012 Debt Issuance

On February 1, 2012, Utility Holdings issued $100 million of senior unsecured notes at an interest rate of 5.00 percent per annum and with a maturity date of February 3, 2042. The notes were sold to various institutional investors pursuant to a private placement note purchase agreement executed in November 2011 with a delayed draw feature. These senior notes are unsecured and jointly and severally guaranteed by Utility Holdings' regulated utility subsidiaries, SIGECO, Indiana Gas, and VEDO. The proceeds from the sale of the notes, net of issuance costs, totaled approximately $99.5 million. These notes have no sinking fund requirements and interest payments are due semi-annually. These notes contain customary representations, warranties and covenants, including a leverage covenant consistent with leverage covenants contained in other Utility Holdings' borrowing arrangements. As of December 31, 2011, the Company has reclassified $100 million of short-term borrowings as long-term debt to reflect those borrowings were refinanced with the proceeds received.

Utility Holdings 2011 Debt Issuance

On November 30, 2011, Utility Holdings closed a financing under a private placement note purchase agreement pursuant to which various institutional investors purchased the following tranches of notes: (i) $55 million of 4.67 percent Senior Guaranteed Notes, due November 30, 2021, (ii) $60 million of 5.02 percent Senior Guaranteed Notes, due November 30, 2026, and (iii) $35 million of 5.99 percent Senior Guaranteed Notes, due December 2, 2041. These senior notes are unsecured and jointly and severally guaranteed by Utility Holdings' regulated utility subsidiaries, SIGECO, Indiana Gas, and VEDO. The proceeds from the sale of the notes, net of issuance costs, totaled approximately $148.9 million. These notes have no sinking fund requirements and interest payments are due semi-annually. These notes contain customary representations, warranties and covenants, including a leverage covenant consistent with leverage covenants contained in other Utility Holdings' borrowing arrangements.

Vectren Capital Corp. 2010 Debt Issuance

On December 15, 2010, the Company and Vectren Capital closed a financing under a private placement note purchase agreement pursuant to which various institutional investors agreed to purchase the following tranches of notes from Vectren Capital: (i) $75 million 3.48 percent Senior Notes, Series A due 2017, and (ii) $50 million 4.53 percent Senior Notes, Series B due 2025. These Senior Notes are unconditionally guaranteed by Vectren. The proceeds from the issuance replaced $48 million debt maturities due in December 2010 and provided long-term financing for some nonutility investments originally financed with short-term borrowings. These notes have no sinking fund requirements and interest payments are due semi-annually. The proceeds from the sale of the notes, net of issuance costs, totaled approximately $124.2 million. These notes contain customary representations, warranties and covenants, including a leverage covenant consistent with leverage covenants contained in other Vectren Capital borrowing arrangements.

Vectren Capital Corp. 2009 Debt Issuance

On March 11, 2009, Vectren and Vectren Capital closed a financing under a private placement Note Purchase Agreement (the "2009 Note Purchase Agreement") pursuant to which various institutional investors purchased the following tranches of notes from Vectren Capital: (i) $30 million in 6.37 percent senior notes, Series A due 2014, (ii) $60 million in 6.92 percent senior notes, Series B due 2016 and (iii) $60 million in 7.30 percent senior notes, Series C due 2019. These senior notes are unconditionally guaranteed by Vectren, the parent of Vectren Capital. These notes have no sinking fund requirements and interest payments are due semi-annually. The proceeds from the sale of the notes, net of issuance costs, totaled approximately $149.0 million. The 2009 Note Purchase Agreement contains customary representations, warranties and covenants, including a leverage covenant consistent with leverage covenants contained in other Vectren Capital borrowing arrangements. On March 11, 2009, Vectren and Vectren Capital also entered into a first amendment with respect to prior note purchase agreements for the remaining outstanding Vectren Capital debt, other than the $22.5 million series due in 2010, to conform the covenants in certain respects to those contained in the 2009 Note Purchase Agreement.

Utility Holdings 2009 Debt Issuance

On April 7, 2009, Utility Holdings closed a financing under 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.

Auction Rate Securities

On March 26, 2009, SIGECO remarketed the remaining $41.3 million of its auction rate securities 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.

Long-Term Debt Puts & Calls

Certain long-term debt issues contain put and call provisions that can be exercised on various dates before maturity. Certain instruments can be put to the Company upon the death of the holder (death puts). During 2011, 2010, and 2009, the Company repaid approximately $0.8 million, $1.8 million, and $3.0 million, respectively, related to death puts.

On October 21, 2011, the Company notified holders of Utility Holdings $96.2 million 5.95 percent senior notes due 2036, of its intent to call those notes. This call option was exercised at par on November 21, 2011.

Future Long-Term Debt Sinking Fund Requirements and Maturities

The annual sinking fund requirement of SIGECO's first mortgage bonds is 1 percent of the greatest amount of bonds outstanding under the Mortgage Indenture. This requirement may be satisfied by certification to the Trustee of unfunded property additions in the prescribed amount as provided in the Mortgage Indenture. SIGECO intends to meet the 2011 sinking fund requirement by this means and, accordingly, the sinking fund requirement for 2011 is excluded from Current liabilities in the Consolidated Balance Sheets. At December 31, 2011, $1.3 billion of SIGECO's utility plant remained unfunded under SIGECO's Mortgage Indenture. SIGECO's gross utility plant balance subject to the Mortgage Indenture approximated $2.7 billion at December 31, 2011.

Consolidated maturities of long-term debt during the five years following 2011 (in millions) are $62.7 in 2012, $106.4 in 2013, $30.0 in 2014, $179.8 in 2015, $73.0 in 2016, and $1,170.4 thereafter.

Debt Guarantees

Vectren Corporation guarantees Vectren Capital's long-term and short-term debt, which totaled $410 million and $84 million, respectively, at December 31, 2011. Utility Holdings' currently outstanding long-term and short-term debt is jointly and severally guaranteed by Indiana Gas, SIGECO, and VEDO. Utility Holdings' long-term debt, including current maturities, and short-term debt outstanding at December 31, 2011, totaled $722 million and $243 million, respectively.

Covenants

Both long-term and short-term borrowing arrangements contain customary default provisions; restrictions on liens, sale-leaseback transactions, mergers or consolidations, and sales of assets; and restrictions on leverage and interest coverage, among other restrictions. Multiple debt agreements contain a covenant that the ratio of consolidated total debt to consolidated total capitalization will not exceed 65 percent. As of December 31, 2011, the Company was in compliance with all debt covenants.

Short-Term Borrowings

At December 31, 2011, the Company has $600 million of short-term borrowing capacity, including $350 million for the Utility Group and $250 million for the wholly owned Nonutility Group and corporate operations. As reduced by borrowings currently outstanding, approximately $107 million was available for the Utility Group operations and approximately $166 million was available for the wholly owned Nonutility Group and corporate operations. This short-term borrowing facility was amended effective November 10, 2011 to extend its maturity date from 2013 to 2016 at current market rates. The $350 million of capacity remains unchanged. The Company has historically funded the short-term borrowing needs of Utility Holdings' operations through the commercial paper market and expects to use the Utility Holdings short-term borrowing facility in instances where the commercial paper market is not efficient.

Following is certain information regarding these short-term borrowing arrangements.


	Utility Group Borrowings									Nonutility Group Borrowings
(In millions)	2011			2010			2009			2011			2010			2009
Year End
Balance Outstanding	$	242.8		$	47.0		$	16.4		$	84.3		$	71.3		$	197.1
Weighted Average Interest Rate		0.57	%		0.41	%		0.25	%		1.45	%		2.01	%		0.60	%
Annual Average
Balance Outstanding	$	39.6		$	14.0		$	29.2		$	124.9		$	143.2		$	151.8
Weighted Average Interest Rate		0.48	%		0.40	%		1.28	%		1.92	%		0.93	%		0.78	%
Maximum Month End Balance Outstanding	$	242.8		$	47.0		$	151.1		$	180.1		$	174.6		$	256.5

Throughout 2011, 2010, and most of 2009, the Company has placed commercial paper without any significant issues and only had to borrow from its backup credit facility in early 2009 on a limited basis. As noted above, $100 million of the outstanding borrowings are presented as long-term at December 31, 2011.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References+ Details