Aqua America talks $725 million $50-par tangible equity units to yield 6%-6.5%, up 17.5%-22.5%

By Abigail W. Adams

Portland, Me., April 15 – Aqua America Inc. plans to price $725 million of $50-par three-year tangible equity units after the market close Wednesday with price talk for a dividend of 6% to 6.5% and a threshold appreciation price of 17.5% to 22.5%, according to a market source.

RBC Capital Markets LLC and Goldman Sachs & Co. LLC are the active bookrunners for the registered offering, which carries a greenshoe of $108.75 million.

BofA Merrill Lynch, Morgan Stanley & Co. LLC and Wells Fargo Securities LLC are also joint bookrunners.

Each equity unit will consist of a prepaid stock purchase contract and an amortizing note with a maturity of April 30, 2022.

The equity units are callable if the acquisition of Peoples Gas has not closed within a certain time frame subject to a make-whole conversion rate.

The notes are also callable on or after Jan. 30, 2020 at the early mandatory settlement rate, which will be the maximum rate unless stock is above a 130% threshold.

There is dividend and take-over protection.

The tangible equity units are pricing concurrently with a $1 billion common stock offering.

The units will be listed for trade on the New York Stock Exchange under the symbol “WTR-U.”

Proceeds from the combined offerings, together with the proceeds from future debt financing and the private placement of common stock, will be used to fund the acquisition of Peoples Gas and complete the redemption of $314 million of Aqua’s outstanding notes, according to a company press release.

Aqua America is a Bryn Mawr, Pa.-based water utility.

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