Algonquin Power & Utilities Corp. Announces Pricing of $500 Million of Senior Unsecured Notes due 2029 and $350 Million of Senior Unsecured Notes due 2034

Rhea-AI Summary

Algonquin Power & Utilities Corp. (APUC) (TSX: AQN) (NYSE: AQN) announced the pricing of $500 million aggregate principal amount of 5.577% senior notes due January 31, 2029, and $350 million aggregate principal amount of 5.869% senior notes due January 31, 2034 by its U.S. regulated distribution utility holding company, Liberty Utilities Co. The net proceeds will be used to repay indebtedness and/or for other general corporate purposes. The Notes are unsecured and unsubordinated obligations of Liberty Utilities and will rank equally with all of Liberty Utilities' existing and future unsecured and unsubordinated indebtedness. APUC is not a guarantor or obligor of the Notes. The offering is expected to close on January 12, 2024, subject to the satisfaction of customary closing conditions.

Financial Analyst

The recent bond issuance by Liberty Utilities Co. represents a significant financial maneuver within the utilities sector. The decision to issue $500 million in 5.577% senior notes due in 2029 and $350 million in 5.869% senior notes due in 2034 indicates a strategic approach to capital management. These rates are notably higher than historical averages, reflecting the current interest rate environment and market demand for higher yields amid inflationary pressures and economic uncertainty.

Investors should consider the creditworthiness of Liberty Utilities and the unsecured nature of the debt. Unsecured notes imply that they are not backed by physical assets, which could potentially increase the risk profile. However, the equal ranking with other unsecured debt suggests standard practice for corporate bonds. The non-guarantee by APUC may influence the perceived risk, albeit Liberty Utilities' standing as a regulated utility could imply a level of stability in its cash flows.

The intended use of proceeds for repaying existing indebtedness and general corporate purposes is typical, yet it underscores a proactive approach to optimizing the company's capital structure. The impact on the company's leverage ratios and interest coverage metrics will be key factors for stakeholders to monitor, as these will influence future financial flexibility and credit ratings.

Market Research Analyst

The utility industry is often characterized by its need for substantial capital to fund ongoing operations and infrastructure investments. The issuance of senior notes by Liberty Utilities aligns with the sector's practices and reflects an active capital market strategy to secure funding. The pricing of the notes close to their face value suggests a balanced market reception, potentially indicative of investor confidence in the utility's ability to meet its financial obligations.

Given the long-term nature of the notes, investors may be attracted to the stability and predictable returns associated with utility investments, particularly during volatile market conditions. However, the higher interest rates compared to historical standards for utility debt could signal a shift in investor expectations, possibly due to a reevaluation of risk in the current economic climate.

It is also relevant to consider the broader market implications of such a sizable bond offering. If successful, it might encourage similar moves by other utilities, thereby affecting the overall supply and pricing dynamics within the corporate bond market. Observing the post-issuance performance of these notes will provide valuable insights into the market's appetite for utility sector debt at these interest levels.

Legal Expert

The private placement of the senior notes to qualified institutional buyers under Rule 144A and to non-U.S. persons under Regulation S is a common method to raise capital while avoiding the regulatory complexities of a public offering. The exemption from registration with the Securities and Exchange Commission (SEC) under the Securities Act of 1933 allows for a more expedient and less public fundraising process, albeit with restrictions on the resale and transfer of the securities.

Investors should be mindful of the legal stipulations attached to the notes, including the lack of registration under state securities laws, which limits their marketability. The fact that the notes will not be registered also means less public disclosure, which could affect the ability of investors to make fully informed decisions based on comprehensive financial data.

The absence of a guarantee from APUC is a critical legal distinction, as it delineates the boundaries of liability and risk exposure. Potential investors in the notes must rely on Liberty Utilities' financial strength and operational performance, rather than the parent company's backing, which could affect the pricing and demand for the notes.

OAKVILLE, ON, Jan. 10, 2024 /PRNewswire/ - Algonquin Power & Utilities Corp. ("APUC") (TSX: AQN) (NYSE: AQN) today announced that on January 9, 2024, Liberty Utilities Co. ("Liberty Utilities"), APUC's U.S. regulated distribution utility holding company, priced an offering of $500 million aggregate principal amount of 5.577% senior notes due January 31, 2029 (the "2029 Notes") and $350 million aggregate principal amount of 5.869% senior notes due January 31, 2034 (the "2034 Notes" and, together with the 2029 Notes, the "Notes"). 

Liberty Utilities intends to use the net proceeds from the sale of the Notes to repay indebtedness and/or for other general corporate purposes.  Liberty Utilities may invest funds which it does not immediately require in short-term investment instruments.

The Notes are unsecured and unsubordinated obligations of Liberty Utilities and will rank equally with all of Liberty Utilities' existing and future unsecured and unsubordinated indebtedness and senior in right of payment to any existing and future Liberty Utilities subordinated indebtedness. APUC is not a guarantor or obligor of the Notes. The 2029 Notes were priced at an issue price of 99.996% of their face value and will mature on January 31, 2029. The 2034 Notes were priced at an issue price of 99.995% of their face value and will mature on January 31, 2034. The offering is expected to close on January 12, 2024, subject to the satisfaction of customary closing conditions.

The Notes were offered and will be sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and to non-U.S. persons in transactions outside the United States pursuant to Regulation S under the Securities Act. The Notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States or to, or for the benefit of, U.S. persons absent registration under, or an applicable exemption from, the registration requirements of the Securities Act and applicable state securities laws.

This announcement does not constitute an offer to sell or a solicitation of an offer to buy the Notes or any other security and shall not constitute an offer, solicitation or sale in any state or jurisdiction in which, or to any persons to whom, such an offer, solicitation or sale would be unlawful. Any offers of the Notes will be made only by means of a private offering memorandum.

About Algonquin Power & Utilities Corp. and Liberty Utilities

Algonquin Power & Utilities Corp., parent company of Liberty Utilities, is a diversified international generation, transmission, and distribution utility with approximately $18 billion of total assets. APUC is committed to providing safe, secure, reliable, cost-effective, and sustainable energy and water solutions through its portfolio of generation, transmission, and distribution utility investments to over one million customer connections, largely in the United States and Canada. In addition, APUC owns, operates, and/or has net interests in over 4 GW of installed renewable energy capacity.

APUC's common shares, preferred shares, Series A, and preferred shares, Series D are listed on the Toronto Stock Exchange under the symbols AQN, AQN.PR.A, and AQN.PR.D, respectively. APUC's common shares, Series 2019-A subordinated notes and equity units are listed on the New York Stock Exchange under the symbols AQN, AQNB, and AQNU, respectively.

Visit APUC at www.algonquinpower.com and follow us on Twitter @AQN_Utilities.

Forward-Looking Statements

Certain written statements included herein constitute "forward-looking information" within the meaning of applicable securities laws in each of the provinces and territories of Canada and the respective policies, regulations and rules under such laws and "forward-looking statements" within the meaning of applicable securities laws in the United States, including Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (collectively, "forward-looking statements"). The words "will", "may", "shall", "expects", "intends" and similar expressions are often intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Specific forward-looking statements contained herein include, but are not limited to statements regarding the ranking of the Notes, closing of the offering and the use of proceeds therefrom. These statements are based on factors or assumptions that were applied in drawing a conclusion or making a forecast or projection, including assumptions based on historical trends, current conditions and expected future developments. Since forward-looking statements relate to future events and conditions, by their nature they rely upon assumptions and involve inherent risks and uncertainties. Each of APUC and Liberty Utilities cautions that although it is believed that the assumptions are reasonable in the circumstances, actual results may differ materially from the expectations set out in the forward-looking statements. Material risk factors and assumptions include those set out in APUC's most recent annual and interim Management's Discussion and Analysis and most recent Annual Information Form, filed with securities regulatory authorities in Canada and the United States. Given these risks, undue reliance should not be placed on these forward-looking statements, which apply only as of their dates. Other than as specifically required by law, neither APUC nor Liberty Utilities undertakes any obligation to update any forward-looking statements to reflect new information, subsequent or otherwise.

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SOURCE Algonquin Power & Utilities Corp.

FAQ

What did Algonquin Power & Utilities Corp. announce?

Algonquin Power & Utilities Corp. announced the pricing of $500 million aggregate principal amount of 5.577% senior notes due January 31, 2029, and $350 million aggregate principal amount of 5.869% senior notes due January 31, 2034 by its U.S. regulated distribution utility holding company, Liberty Utilities Co.

What will the net proceeds be used for?

The net proceeds from the sale of the Notes will be used to repay indebtedness and/or for other general corporate purposes.

What type of obligations are the Notes?

The Notes are unsecured and unsubordinated obligations of Liberty Utilities and will rank equally with all of Liberty Utilities' existing and future unsecured and unsubordinated indebtedness.

Is APUC a guarantor or obligor of the Notes?

APUC is not a guarantor or obligor of the Notes.

When is the offering expected to close?

The offering is expected to close on January 12, 2024, subject to the satisfaction of customary closing conditions.