NOTE 4 – DEBT AND FINANCING ARRANGEMENTS

Details on long-term debt at September 30, 2018, September 30, 2017 and December 31, 2017 are shown below:


($ millions)	September 30,				December 31,
	2018		2017		2017
Unitil Corporation:
6.33% Senior Notes, Due May 1, 2022	$	20.0	$	20.0	$	20.0
3.70% Senior Notes, Due August 1, 2026		30.0		30.0		30.0
Unitil Energy First Mortgage Bonds:
5.24% Senior Secured Notes, Due March 2, 2020		10.0		15.0		15.0
8.49% Senior Secured Notes, Due October 14, 2024		7.5		9.0		7.5
6.96% Senior Secured Notes, Due September 1, 2028		20.0		20.0		20.0
8.00% Senior Secured Notes, Due May 1, 2031		15.0		15.0		15.0
6.32% Senior Secured Notes, Due September 15, 2036		15.0		15.0		15.0
Fitchburg:
6.75% Senior Notes, Due November 30, 2023		7.6		9.5		7.6
6.79% Senior Notes, Due October 15, 2025		10.0		10.0		10.0
3.52% Senior Notes, Due November 1, 2027		10.0		—		10.0
7.37% Notes, Due January 15, 2029		12.0		12.0		12.0
5.90% Notes, Due December 15, 2030		15.0		15.0		15.0
7.98% Notes, Due June 1, 2031		14.0		14.0		14.0
4.32% Senior Notes, Due November 1, 2047		15.0		—		15.0
Northern Utilities:
6.95% Senior Notes, Due December 3, 2018		10.0		20.0		10.0
5.29% Senior Notes, Due March 2, 2020		16.6		25.0		25.0
3.52% Senior Notes, Due November 1, 2027		20.0		—		20.0
7.72% Senior Notes, Due December 3, 2038		50.0		50.0		50.0
4.42% Senior Notes, Due October 15, 2044		50.0		50.0		50.0
4.32% Senior Notes, Due November 1, 2047		30.0		—		30.0
Granite State Senior Notes:
7.15% Senior Notes, Due December 15, 2018		3.3		6.7		3.3
3.72% Senior Notes, Due November 1, 2027		15.0		—		15.0

Total Long-Term Debt		396.0		336.2		409.4
Less: Unamortized Debt Issuance Costs		3.1		2.8		3.3

Total Long-Term Debt, net of Unamortized Debt Issuance Costs		392.9		333.4		406.1
Less: Current Portion		31.8		29.8		29.8

Total Long-term Debt, Less Current Portion	$	361.1	$	303.6	$	376.3

Fair Value of Long-Term Debt – Currently, the Company believes that there is no active market in the Company’s debt securities, which have all been sold through private placements. If there were an active market for the Company’s debt securities, the fair value of the Company’s long-term debt would be estimated based on the quoted market prices for the same or similar issues, or on the current rates offered to the Company for debt of the same remaining maturities. The fair value of the Company’s long-term debt is estimated using Level 2 inputs (valuations based on quoted prices available in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are directly observable, and inputs derived principally from market data.) In estimating the fair value of the Company’s long-term debt, the assumed market yield reflects the Moody’s Baa Utility Bond Average Yield. Costs, including prepayment costs, associated with the early settlement of long-term debt are not taken into consideration in determining fair value.

($ millions)

September 30,

December 31,

2018

2017

Estimated Fair Value of Long-Term Debt

418.7

383.0

457.1

Credit Arrangements

On July 25, 2018, the Company entered into a Second Amended and Restated Credit Agreement and related documents (collectively, the “Credit Facility”) with a syndicate of lenders, which amended and restated in its entirety the Company’s prior credit facility. The Credit Facility extends to July 25, 2023, subject to two one-year extensions under certain circumstances, and has a borrowing limit of $120 million, which includes a $25 million sublimit for the issuance of standby letters of credit. The Credit Facility provides the Company with the ability to elect that borrowings under the Credit Facility bear interest under several options, including at a daily fluctuating rate of interest per annum equal to one-month London Interbank Offered Rate plus 1.125%. The Company may increase the borrowing limit under the Credit Facility by up to $50 million under certain circumstances.

The Company utilizes the Credit Facility for cash management purposes related to its short-term operating activities. Total gross borrowings were $202.5 million for the nine months ended September 30, 2018. Total gross repayments were $171.7 million for the nine months ended September 30, 2018. The following table details the borrowing limits, amounts outstanding and amounts available under the Credit Facility as of September 30, 2018, September 30, 2017 and December 31, 2017:


	Credit Facility ($ millions)
	September 30,				December 31,
	2018		2017		2017
Limit	$	120.0	$	120.0	$	120.0
Short-Term Borrowings Outstanding		69.1		111.9		38.3
Letters of Credit Outstanding		—		1.1		—

Available	$	50.9	$	7.0	$	81.7

The Credit Facility contains customary terms and conditions for credit facilities of this type, including affirmative and negative covenants. There are restrictions on, among other things, the Company’s and its subsidiaries’ ability to permit liens or incur indebtedness, and restrictions on the Company’s ability to merge or consolidate with another entity or change its line of business. The affirmative and negative covenants under the Credit Facility shall apply until the Credit Facility terminates and all amounts borrowed under the Credit Facility are paid in full (or with respect to letters of credit, they are cash collateralized). The only financial covenant in the Credit Facility provides that Funded Debt to Capitalization (as each term is defined in the Credit Facility) cannot exceed 65%, tested on a quarterly basis. At September 30, 2018, September 30, 2017 and December 31, 2017, the Company was in compliance with the covenants contained in the Credit Facility in effect on that date. (See also “Credit Arrangements” in Note 4.)

The weighted average interest rates on all short-term borrowings and intercompany money pool transactions were 3.2% and 2.3% for the nine months ended September 30, 2018 and September 30, 2017, respectively. The weighted average interest rate on all short-term borrowings for the twelve months ended December 31, 2017 was 2.4%.

On November 1, 2017, Northern Utilities issued $20 million of Notes due 2027 at 3.52% and $30 million of Notes due 2047 at 4.32%. Fitchburg issued $10 million of Notes due 2027 at 3.52% and $15 million of Notes due 2047 at 4.32%. Granite State issued $15 million of Notes due 2027 at 3.72%. Northern Utilities, Fitchburg and Granite State used the net proceeds from these offerings to refinance higher cost long-term debt that matured in 2017, to repay short-term debt and for general corporate purposes. Approximately $0.7 million of costs associated with these issuances have been netted against Long-Term Debt for presentation purposes on the Consolidated Balance Sheets.

In April 2014, Unitil Service Corp. entered into a financing arrangement, structured as a capital lease obligation, for various information systems and technology equipment. Final funding under this capital lease occurred on October 30, 2015, resulting in total funding of $13.4 million. The capital lease matures on September 30, 2020. As of September 30, 2018, there are $2.7 million of current and $3.0 million of noncurrent obligations under this capital lease on the Company’s Consolidated Balance Sheets.

Unitil Corporation and its utility subsidiaries, Fitchburg, Unitil Energy, Northern Utilities, and Granite State are currently rated “BBB+” by Standard & Poor’s Ratings Services. Unitil Corporation and Granite State are currently rated “Baa2”, and Fitchburg, Unitil Energy and Northern Utilities are currently rated “Baa1” by Moody’s Investors Services.

Northern Utilities enters into asset management agreements under which Northern Utilities releases certain natural gas pipeline and storage assets, resells the natural gas storage inventory to an asset manager and subsequently repurchases the inventory over the course of the natural gas heating season at the same price at which it sold the natural gas inventory to the asset manager. There was $9.6 million, $9.0 million and $8.5 million of natural gas storage inventory at September 30, 2018, September 30, 2017 and December 31, 2017, respectively, related to these asset management agreements. The amount of natural gas inventory released in September 2018 and payable in October 2018 is $0.1 million and is recorded in Accounts Payable at September 30, 2018. The amount of natural gas inventory released in September 2017 and payable in October 2017 was $0.1 million and was recorded in Accounts Payable at September 30, 2017. The amount of natural gas inventory released in December 2017 and payable in January 2018 was $3.1 million and was recorded in Accounts Payable at December 31, 2017.

Guarantees

The Company provides limited guarantees on certain energy and natural gas storage management contracts entered into by the distribution utilities. The Company’s policy is to limit the duration of these guarantees. As of September 30, 2018, there were approximately $5.6 million of guarantees outstanding.

The Company also guarantees the payment of principal, interest and other amounts payable on the notes issued by Granite State. As of September 30, 2018, the principal amount outstanding for the 7.15% Granite State notes was $3.3 million.