American Water begins tender offer for up to $300 million 6.085% notes

By Marisa Wong

Madison, Wis., Sept. 10 - American Water Works Co., Inc. announced that its financing subsidiary, American Water Capital Corp., has begun a cash tender offer for up to $300 million of its outstanding $750 million 6.085% senior notes due 2017.

The tender offer is scheduled to expire at 11:59 p.m. ET on Oct. 7.

Holders who tender their notes by 5 p.m. ET on Sept. 23, the early participation date, will receive the total consideration, which will include a $30 early participation payment per $1,000 principal amount of notes accepted for purchase.

Holders tendering notes after the early participation date but on or before the expiration date will receive only the tender offer consideration, which is the total consideration less the early participation payment.

The total consideration will be determined using a fixed spread of 17 basis points over the yield of the bid-side price of the 1.5% U.S. Treasury notes due Aug. 31, 2018 and will be calculated at 1 p.m. ET on Sept. 24. Using a hypothetical yield of 1.712%, the total consideration would be $1,161.97 per $1,000 of notes.

The company said it will also pay accrued interest up to but excluding the payment date, which is expected to be Oct. 8.

Tendered notes may be withdrawn at or prior to 5 p.m. ET on Sept. 23.

If holders tender notes in an aggregate principal amount in excess of the maximum tender amount, the company will accept for purchase notes on a prorated basis.

The tender offer is not conditioned on any minimum amount of notes being tendered.

According to a press release, the tender offer is part of liability management activities designed to reduce 2017 maturities of American Water's consolidated debt. These activities also include a previously announced increase and extension of the company's revolving credit facility and an increase to its commercial paper program.

RBC Capital Markets, LLC (212 618-7822 or 877 381-2099) is the dealer manager for the tender offer. D.F. King and Co., Inc. (800 290-6426 or 212 269-5550) is the information agent and tender agent.

American Water is a water and wastewater utility company based in Voorhees, N.J.

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