Bank Debt

12 Months Ended

Dec. 31, 2022

Bank Debts

Registrant’s bank debts consist of outstanding borrowings made under two separate credit facilities at AWR (parent) and BVESI.

AWR Credit Facility, Liquidity and Financing Plans:

AWR borrows under a credit facility and provides funds to GSWC and ASUS in support of their operations on terms that are similar to that of the credit facility. On April 22, 2022, AWR’s credit facility was amended to increase the borrowing capacity from $200.0 million to $280.0 million. The amendment also changed the benchmark interest rate from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”). The change in benchmark rates has not had a material impact on its financing costs. AWR’s credit agreement will expire in May 2023 and, therefore, the outstanding borrowings under the credit facility of $255.5 million as of December 31, 2022 have been classified as a current liability on AWR’s Consolidated Balance Sheet, thus creating a negative working-capital condition for AWR of $245.2 million. As of March 1, 2023, AWR does not have sufficient liquidity or capital resources to repay its credit facility without extending its existing credit facility, entering into a new credit facility, or issuing new debt or equity.

Management plans to either renew and extend AWR’s credit facility or to enter into a new credit facility prior to its expiration date, and is confident, given AWR’s history in obtaining revolving credit facilities to meet its working-capital needs, that AWR will be able to do so with the needed borrowing capacities required to run its operations. In addition, AWR’s plans included the issuance of long-term debt through GSWC during the fourth quarter of 2022, which it completed with the execution of a note purchase agreement in December 2022 for the issuance of unsecured private placement notes totaling $130.0 million. In January 2023, GSWC through a delayed-draw feature of its note purchase agreement, issued the unsecured private placement notes and used the proceeds to pay off the majority of its outstanding borrowings with AWR at that time. AWR then used the proceeds from GSWC to pay off $124.0 million of the outstanding borrowings under its credit facility thereby improving AWR’s working-capital condition. Management believes that execution of its plan is probable based on Registrant’s ability to generate consistent cash flows, its A+ credit ratings, its relationships with lenders, and its history of successfully raising debt necessary to fund its operations as recently evidenced by the issuance of long-term debt at GSWC. Accordingly, management has concluded that AWR will be able to satisfy its obligations, including those under its credit facility, for at least the next twelve months from the issuance date of these financial statements. However, AWR’s ability to access the capital markets or to otherwise obtain sufficient financing may be affected by future conditions and, accordingly, no assurances can be made that AWR will be successful in implementing its plan.

Under AWR’s credit facility, the aggregate effective amount that may be outstanding under letters of credit is $25.0 million. AWR has obtained letters of credit for AWR and GSWC, in the aggregate amount of $639,000 at fees of 0.65%. Letters of credit outstanding reduce the amount that may be borrowed under the revolving credit facility. AWR is not required to maintain any compensating balances. All of the letters of credit are issued pursuant to AWR’s revolving credit facility.

Loans may be obtained under this credit facility at the option of AWR and bear interest at rates based on credit ratings and SOFR benchmark replacement rate margins. In June 2022, Standard and Poor’s Global Ratings (“S&P”) affirmed an A+ credit rating for both AWR and GSWC. S&P’s debt ratings range from AAA (highest possible) to D (obligation is in default). In January 2023, Moody’s Investors Service (“Moody’s”) affirmed its A2 rating with a stable outlook for GSWC.

BVESI Credit Facility:

BVESI has access to a separate $35.0 million revolving credit facility without a parent guaranty, which was amended in December 2021 to reduce the interest rate and fees, as well as extend the maturity date by a year to July 1, 2024. Borrowings made under this facility support the electric segment’s operations and capital expenditures. As of December 31, 2022, there was $22.0 million outstanding borrowing under this credit facility. Under the terms of the credit agreement, BVESI has the option to increase the facility by an additional $15.0 million, subject to lender approval. Interest rates under this facility are currently based on LIBOR. Effective July 1, 2023, all new borrowings under the credit agreement will be based on SOFR. BVESI does not believe the change from LIBOR to a new benchmark rate will have a material impact on its financing costs. BVESI’s revolving credit facility is considered a short-term debt arrangement by the CPUC. BVESI has been authorized by the CPUC to borrow under this credit facility for a term of up to 24 months. Borrowings under this credit facility are, therefore, required to be fully paid off within a 24-month period. BVESI’s next pay-off period for its credit facility ends in September 2024.

Registrant’s borrowing activities (excluding letters of credit) for the years ended December 31, 2022 and 2021 were as follows:


	December 31,
(in thousands, except percent)	2022			2021
Balance Outstanding at December 31,	$	277,500		$	205,500
Interest Rate at December 31,	5.07% ~ 5.89%			0.78% ~ 1.61%
Average Amount Outstanding	$	226,556		$	165,167
Weighted Average Annual Interest Rate	2.55		%	1.05		%
Maximum Amount Outstanding	$	277,500		$	205,500

The AWR revolving credit facility contains restrictions on prepayments, disposition of property, mergers, liens and negative pledges, indebtedness and guaranty obligations, transactions with affiliates, minimum interest coverage requirements, a maximum debt to capitalization ratio and a minimum debt rating. Pursuant to the credit agreement, AWR must maintain a minimum interest coverage ratio of 3.25 times interest expense, a maximum total funded debt ratio of 0.65 to 1.00 and a minimum Moody’s Investor Service or S&P debt rating of Baa3 or BBB-, respectively. As of December 31, 2022, 2021 and 2020, AWR was in compliance with these requirements. As of December 31, 2022, AWR had an interest coverage ratio of 6.32 times interest expense, a debt ratio of 0.51 to 1.00 and a debt rating of A+ by S&P.

Pursuant to BVESI’s credit facility agreement, BVESI must maintain a minimum interest coverage ratio of 4.5 times interest expense and a maximum consolidated total debt to consolidated total capitalization ratio of 0.65 to 1.00. As of December 31, 2022, 2021 and 2020, BVESI was in compliance with these requirements, with an actual interest coverage ratio of 14.4 times interest expense and a total funded debt ratio of 0.47 to 1.00 as of December 31, 2022. In addition, BVESI is required to have a current safety certification issued by the CPUC, which it currently has.