Short-Term and Long-Term Borrowings

6 Months Ended

Jun. 30, 2013

10. Short-Term and Long-Term Borrowings

The following table presents the status of our lines of credit as of June 30, 2013 and December 31, 2012:

(in thousands)	Line Limit		In Use on June 30, 2013		Restricted due to Outstanding Letters of Credit		Available on June 30, 2013		Available on December 31, 2012
Otter Tail Corporation Credit Agreement	$	150,000	$	--	$	680	$	149,320	$	149,267
OTP Credit Agreement		170,000		1,117		1,189		167,694		166,811
Total	$	320,000	$	1,117	$	1,869	$	317,014	$	316,078

Long-Term Debt Issuance, Retirements and Preferred Stock Redemption

On March 1, 2013 OTP entered into a Credit Agreement (the Loan Agreement) with JPMorgan Chase Bank, N.A. (JPMorgan) providing for a $40.9 million unsecured term loan (the Term Loan) to OTP due June 1, 2014, which was fully drawn on March 1, 2013. Borrowings under the Loan Agreement bear interest at LIBOR plus 0.875%. The Loan Agreement permits OTP to use the Term Loan proceeds to fund working capital, capital expenditures and for other corporate purposes. On March 1, 2013, OTP utilized approximately $25.1 million of Term Loan proceeds to fund the redemption price for all of the 4.65% Grant County, South Dakota Pollution Control Refunding Revenue Bonds and 4.85% Mercer County, North Dakota Pollution Control Refunding Revenue Bonds outstanding on that date, in each case for which OTP pays debt service. All such bonds had been called for redemption in full on March 1, 2013. Also on March 1, 2013, OTP utilized approximately $15.7 million of Term Loan proceeds to satisfy an intercompany note to the Company that had a balance and interest rate designed to equate to the balances and dividend rates of the Company’s cumulative preferred shares. Those cumulative preferred shares were redeemed on March 1, 2013 for $15.7 million, including $0.2 million in call premiums charged to equity and included with preferred dividends paid and as part of our preferred dividend requirement for the six-month period ending June 30, 2013.

The Loan Agreement contains a number of restrictions on the business of OTP similar to the OTP Credit Agreement, including restrictions on its ability to merge, sell assets, make investments, create or incur liens on assets, guarantee the obligations of any other party, and engage in transactions with related parties. The Loan Agreement also contains affirmative covenants and events of default, as well as a financial covenant under which OTP may not permit the ratio of its Interest bearing Debt to Total Capitalization (as defined in the Loan Agreement) to be greater than 0.60 to 1.00. The Loan Agreement does not include provisions for the termination of the agreement or the acceleration of repayment of amounts outstanding due to changes in OTP’s credit ratings. OTP’s obligations under the Loan Agreement are not guaranteed by any other party. OTP may prepay borrowings without premium or penalty upon notice to JPMorgan as provided in the Loan Agreement. In the event of certain “Senior Indebtedness Prepayment Events” as defined in the Loan Agreement, OTP must offer to prepay a ratable portion of the Term Loan.

OTP plans to close on a private placement of $150 million of senior unsecured debt on August 14, 2013. On June 28, 2013 the issuance was priced as follows:

Principal Amount	Term	Rate
$60 million	15 years	4.68%
$90 million	30 years	5.47%

Proceeds from the issuance, scheduled to fund on February 27, 2014, will be used for OTP’s planned construction program expenditures and to retire OTP’s $40.9 million unsecured term loan due June 1, 2014. Therefore, the Term Loan remains classified as long-term debt on the Company’s June 30, 2013 consolidated balance sheet.

The following tables provide a breakdown of the assignment of the Company’s consolidated short-term and long-term debt outstanding as of June 30, 2013 and December 31, 2012:

June 30, 2013 (in thousands)	OTP		Varistar		Otter Tail Corporation		Otter Tail Corporation Consolidated
Short-Term Debt	$	1,117	$	--	$	--	$	1,117
Long-Term Debt:
Unsecured Term Loan - LIBOR plus 0.875%, due June 1, 2014	$	40,900					$	40,900
9.000% Notes, due December 15, 2016					$	100,000		100,000
Senior Unsecured Notes 5.95%, Series A, due August 20, 2017		33,000						33,000
Senior Unsecured Notes 4.63%, due December 1, 2021		140,000						140,000
Senior Unsecured Notes 6.15%, Series B, due August 20, 2022		30,000						30,000
Senior Unsecured Notes 6.37%, Series C, due August 20, 2027		42,000						42,000
Senior Unsecured Notes 6.47%, Series D, due August 20, 2037		50,000						50,000
Other Obligations - Various up to 3.95% at June 30, 2013		--				1,638		1,638
Total	$	335,900			$	101,638	$	437,538
Less: Current Maturities		--				182		182
Unamortized Debt Discount		--				3		3
Total Long-Term Debt	$	335,900			$	101,453	$	437,353
Total Short-Term and Long-Term Debt (with current maturities)	$	337,017	$	--	$	101,635	$	438,652

December 31, 2012 (in thousands)	OTP		Varistar		Otter Tail Corporation		Otter Tail Corporation Consolidated
Short-Term Debt	$	--	$	--	$	--	$	--
Long-Term Debt:
9.000% Notes, due December 15, 2016					$	100,000	$	100,000
Senior Unsecured Notes 5.95%, Series A, due August 20, 2017	$	33,000						33,000
Grant County, South Dakota Pollution Control Refunding Revenue Bonds 4.65%, due September 1, 2017		5,065						5,065
Senior Unsecured Notes 4.63%, due December 1, 2021		140,000						140,000
Senior Unsecured Notes 6.15%, Series B, due August 20, 2022		30,000						30,000
Mercer County, North Dakota Pollution Control Refunding Revenue Bonds 4.85%, due September 1, 2022		20,070						20,070
Senior Unsecured Notes 6.37%, Series C, due August 20, 2027		42,000						42,000
Senior Unsecured Notes 6.47%, Series D, due August 20, 2037		50,000						50,000
Other Obligations - Various up to 3.95% at December 31, 2012						1,725		1,725
Total	$	320,135			$	101,725	$	421,860
Less: Current Maturities		--				176		176
Unamortized Debt Discount		--				4		4
Total Long-Term Debt	$	320,135			$	101,545	$	421,680
Total Short-Term and Long-Term Debt (with current maturities)	$	320,135	$	--	$	101,721	$	421,856

- 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.

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