DEBT

12 Months Ended

Dec. 31, 2020

NOTE 8

DEBT

At December 31, 2020, Artesian Resources had a $40 million line of credit with Citizens Bank, or Citizens, which is available to all subsidiaries of Artesian Resources. As of December 31, 2020, there was $31.2 million of available funds under this line of credit. The interest rate for borrowings under this line is the London Interbank Offered Rate, or LIBOR, plus 1.25%. This is a demand line of credit and therefore the financial institution may demand payment for any outstanding amounts at any time. The term of this line of credit expires on the earlier of May 31, 2021 or any date on which Citizens demands payment. The Company expects to renew this line of credit.

At December 31, 2020, Artesian Water had a $20 million line of credit with CoBank, ACB, or CoBank, that allows for the financing of operations for Artesian Water, with up to $10 million of this line available for the operations of Artesian Water Maryland. As of December 31, 2020, there was $2.0 million of available funds under this line of credit. The interest rate for borrowings under this line allows the Company to select either LIBOR plus 1.50% or a weekly variable rate established by CoBank; the Company has historically used the weekly variable interest rate. The term of this line of credit expires on July 30, 2021. Artesian Water expects to renew this line of credit.

On December 17, 2019, Artesian Water entered into a Bond Purchase Agreement relating to the issue and sale by Artesian Water to CoBank of a $30 million principal amount First Mortgage Bond, Series V, or the Series V Bond, due October 31, 2049, or the Maturity Date. The Series V Bond was issued pursuant to Artesian Water’s Indenture of Mortgage dated as of July 1, 1961, as amended and supplemented by supplemental indentures, including the Twenty-Fourth Supplemental Indenture dated as of December 17, 2019 from Artesian Water to Wilmington Trust Company, as Trustee. The Indenture is a first mortgage lien against substantially all of Artesian Water’s utility plant. The proceeds from the sale of the Series V Bond were used to pay down outstanding lines of credit of the Company and a loan payable to Artesian Resources. The DEPSC approved the issuance of the Series V Bond on November 14, 2019.

The Series V Bond carries an annual interest rate of 4.42% through but excluding the Maturity Date. Interest is payable on January 30th, April 30th, July 30th and October 30th in each year and on the Maturity Date, beginning January 30, 2020 until Artesian Water’s obligation with respect to the payment of principal, premium (if any) and interest shall be discharged. Overdue payments shall bear interest as provided in the Twenty-Fourth Supplemental Indenture. The term of the Series V Bond also includes certain limitations on Artesian Water’s indebtedness.

On April 28, 2020, Artesian Water entered into three financing agreements, or the Financing Agreements, with the Delaware Drinking Water State Revolving Fund, acting by and through the Delaware Department of Health & Social Services, Division of Public Health, a public agency of the state of Delaware, or the Department. Under the Financing Agreements, the Department has agreed to advance to Artesian Water up to approximately $1.7 million, $1.0 million and $1.3 million, collectively, the Loans, to finance all or a portion of the costs to replace specific water transmission mains in service areas located in New Castle County, Delaware, collectively, the Projects. In accordance with the Financing Agreements, Artesian Water will from time to time request funds under the Loans as it incurs costs in connection with the Projects. The Company shall pay to the Department, on the principal amount drawn down and outstanding from the date drawn, interest at a rate of 0.6% per annum and an administrative fee at the rate of 0.6% per annum. As of December 31, 2020, no funds were borrowed under the Loans.

CoBank may make an annual patronage refund. The annual patronage refund rate was reduced in 2019 to 0.80% from 1.00% of the average line of credit and loan volume outstanding by Artesian. The $20 million line of credit, the First Mortgage Bonds and the promissory note are with CoBank. The patronage refunds earned by Artesian in 2020 and 2019 were $1.0 million and $0.9 million, respectively. In 2020, CoBank issued a one-time additional all-cash patronage distribution of $107,000, or 0.10%, of the average line of credit and loan volume outstanding in the prior year, which was in addition to the standard 0.80% patronage rate.

The weighted average interest rate on the lines of credit discussed above paid by the Company was 1.82% for the year ended December 31, 2020. These lines of credit, as well as the long-term debt obligations shown below, require us to abide by certain financial covenants and ratios. As of December 31, 2020, we were in compliance with these covenants.

Long-term debt consists of:

	December 31,
In thousands	2020		2019
First mortgage bonds

Series R, 5.96%, due December 31, 2028	$	25,000	$	25,000
Series S, 4.45%, due December 31, 2033		7,800		8,400
Series T, 4.24%, due December 20, 2036		40,000		40,000
Series U, 4.71%, due January 31, 2038		25,000		25,000
Series V, 4.42%, due October 31, 2049		30,000		30,000
		127,800		128,400

State revolving fund loans

4.48%, due August 1, 2021		318		622
3.57%, due September 1, 2023		294		385
3.64%, due May 1, 2025		648		778
3.41%, due February 1, 2031		1,887		2,034
3.40%, due July 1, 2032		1,864		1,995
		5,011		5,814
Notes Payable

Promissory Note, 5.12%, due December 30, 2028		11,279		11,648

Sub-total		144,090		145,862

Less: current maturities (principal amount)		1,757		1,706

Total long-term debt	$	142,333	$	144,156

Payments of principal amounts due during the next five years and thereafter:

In thousands	2021		2022		2023		2024		2025		Thereafter
First Mortgage bonds	$	600	$	600	$	600	$	600	$	600	$	124,800
State revolving fund loans		767		533		552		466		404		2,289
Promissory note		390		411		433		454		480		9,111
Total payments	$	1,757	$	1,544	$	1,585	$	1,520	$	1,484	$	136,200

Substantially all of Artesian Water's utility plant is pledged as security for our First Mortgage Bonds. As of December 31, 2020, no other water utility plant has been pledged as security for loans. Two parcels of land in Artesian Wastewater are pledged as security for the promissory note.