AEP Texas Inc. and AEP Texas Restoration Funding LLC entered into an underwritten agreement to offer $235.3 million of senior secured system restoration bonds in two tranches.
The company will offer $117.6 million of 2.06% series A-1 bonds, due February 2027 and $117.6 million of 2.29% series A-2 bonds, due August 2031. Interest on both series of securities is payable semiannually on Feb. 1 and Aug. 1 each year, starting Feb. 1, 2020. The offering is expected to close on Sept. 18, according to a prospectus.
The notes are expected to be rated Aaa(sf) by Moody's and AAA(sf) by S&P Global Ratings.
AEP Texas Restoration will use the proceeds to pay the expenses of the issuance and sale of the system restoration bonds and to purchase transition property from AEP Texas. In accordance with the financing order, AEP Texas will use the proceeds it receives from the sale of the transition property to reduce its recoverable distribution-related system restoration costs. The remaining proceeds will be used to repay any outstanding short-term debt and fund capital expenditures to support utility operations and services.
Goldman Sachs & Co. LLC, Citigroup Global Markets Inc., Loop Capital Markets LLC and Samuel A Ramirez & Co. Inc. are the underwriters.
Both AEP Texas and AEP Texas Restoration are owned by American Electric Power Co. Inc.
