Puget Sound Said Facing Investor Pushback on Debt Buyback Dealby
Puget Sound Energy Inc.’s plan to buy back bonds at a discount is meeting resistance from some owners of the bonds, who are demanding better terms from Washington state’s largest electricity provider.
The company is trying to retire $250 million of 6.974 percent bonds coming due in 2067 in an effort to clean up its balance sheet, for which it also needs the backing of another series of more senior-ranking bonds. Some investors are pushing back against the purchase price and the fees the company is offering to win the required consents, according to people with knowledge of the matter who declined to be identified without authorization to speak publicly.
The company, which was taken private by a unit of Macquarie Group Ltd. in 2009, issued the hybrid securities in 2007 to get favorable treatment from credit ratings firms determining its leverage metrics. It provides electric and natural gas services mainly in the Puget Sound area in Washington state, which is home to companies such as Microsoft Corp., Amazon.com Inc. and Starbucks Corp.
"We believe it’s a fair offer," said Daniel Doyle, the chief financial officer of the company. "I respect the right of our bondholders to make a decision whether it makes sense for them or not. We will respect their decision and go forward."
The company is looking to remove variable-rate debt from its balance sheet, and prefers to have costs locked-in, according to Doyle. The 2067 notes become floating rate next year.
In the proposal announced last week, Puget Sound offered to buy back the notes at 85 cents on the dollar, which includes a 3 cent payment for creditors who agree to the proposal earlier for a covenant waiver needed for the repurchase. The company also needs the approval of investors holding the senior notes due in 2037 and has offered them a 1 cent fee.
Since the company revealed plans to repurchase the 2067 bonds, the debt has jumped six cents to 85 cents, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.