Rate Covenant Test - If during any fiscal year, the EBITDA of Pennichuck Water
shall not equal at least 1.1 times all amounts paid or required to be paid during that
year (“Amounts Paid”), then the Company shall undertake reasonable efforts to
initiate a rate-making proceeding with the NH Public Utilities Commission, to rectify
this coverage requirement in the succeeding fiscal years. Thereby, the ratio of
EBITDA to Amounts Paid must be equal to or greater than 1.1; as of December 31,
2016 and 2015, the Rate Covenant coverage ratio was 1.93 and 2.10, respectively.
Pennichuck East’s loan agreement for its unsecured notes payable to a bank of $8.5 million
and $6.5 million at December 31, 2016 and 2015, respectively, contains a minimum debt
service coverage ratio requirement of 1.25. At December 31, 2016 and 2015, this ratio was
1.29 and 1.64, respectively. Also, Pennichuck East is required to maintain a maximum ratio
of total debt to total capitalization of 65%; at December 31, 2016 and 2015, this ratio was
56% and 50%, respectively.
The Company’s revolving credit loan facility with TD Bank contains a covenant that requires
the Company to maintain a minimum fixed charge coverage ratio of at least 1.0; at December
31, 2016 and 2015, the fixed charge coverage ratio was 1.05 and 1.07, respectively. The
Company is also required to maintain an equity capitalization ratio of not less than 35%; at
December 31, 2016 and 2015, the equity capitalization ratio was 36% and 37%, respectively.
Under this agreement, the Company is also precluded from declaring or paying dividends, or
making any other payment or distribution of its equity without the bank’s prior written
consent, except for: (1) its obligations under Rate Order No. 25,292 as it pertains to the
Company’s specific obligations under the City Bond Fixed Revenue Requirement
(“CBFRR”) which provides for payments of approximately $707,000 per month of the note
payable to the City of Nashua (the “City’”), and quarterly dividends to the City for the
remainder of this annual obligation, as defined by the order; and (2) a specific allowance,
under Rate Order No. 25,292, whereby the Company is allowed to make distributions to the
City from current earnings and profits in excess of the CBFRR, to provide funds to allow the
City to reimburse itself for the costs incurred by the City relating to its efforts in pursuing the
eminent domain proceedings from January 2002 through August 2009; provided, however,
that such amount shall not exceed $500,000 in any fiscal year, or $5,000,000 in the aggre-
gate, of all such distributions. No special dividend was declared or paid in 2016 or 2015.
Short-term borrowing activity under this revolving credit loan facility for the years ended
December 31, 2016 and 2015 was:
(in thousands) 2016 2015
Established line as of December 31, $ 10,000 $ 10,000
Maximum amount outstanding during period 1,118 229
Average amount outstanding during period 73 1
Amount outstanding as of December 31, - -
Weighted average interest rate during period 2.22% 2.01%
Interest rate as of December 31, 2.251% 1.981%
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