Mr. Steven A. Bolton
Corporation Counsel
January 30, 2019
Page Two
Shareholder Approval of Borrowings Required. Under Article IX of Pennichuck’s Articles of
Incorporation, the City, acting in its capacity as Pennichuck’s sole shareholder, must approve:
“(3) any action to (A) create, incur or assume any indebtedness for borrowed
money or guarantee any such indebtedness of any person, (B) issue or sell
any debt securities or warrants or other rights to acquire any debt securities
of the [Pennichuck] Corporation or any of its Subsidiaries, or (C) guarantee
any debt securities of any person.”
Proposed Borrowings. Pennichuck requests the City’s approval for a loan from the Trust Fund
to PWW. The specifics of this loan are described below:
° under the proposal, PWW would enter into a new long-term loan from the Trust Fund
in the principal amount of $5,500,000 to fund the Merrimack River Raw Water Intake
project.
The Lender. The funds for this loan will be provided by the New Hampshire Drinking Water and
Groundwater Trust Fund. The Trust Fund is administered by the New Hampshire Department of
Environmental Services (“NHDES”). The Trust Fund provides public and private water systems
the opportunity to borrow funds on favorable terms at interest rates that are below commercial loan
rates. Pennichuck has received confirmation from the NHDES that funding is available for this
project.
Terms of the Borrowings. The loan will have favorable terms, which will be reflected in a
written Loan Agreement and Promissory Note issued by PWW, as required by the Trust Fund.
Amounts advanced pursuant to the loan during the construction period will accrue interest at a
rate of 1% per annum, and the total accrued interest will be due upon substantial completion of
the project. The terms of the Trust Fund loan will require repayment of the loan principai pius
interest over a period not to exceed 40 years, commencing six months after the project is
substantially complete. The current interest rate on the Trust Fund borrowing is 3.38% per
annum, though the final rate is not locked in until the loan commences its repayment period. The
loan will be unsecured. The corporate parent, Pennichuck, will provide an unsecured corporate
guaranty of the repayment of the loan in accordance with the terms of a Guaranty Agreement.
Approval by Pennichuck and PWW. The loan to finance the project and the guaranty of the
loan have been approved by the respective Boards of Directors of Pennichuck and PWW.
Pennichuck recommends that the City authorize (i) PWW to enter into the loan under the Trust
Fund, and (ii) Pennichuck to enter into the Guaranty Agreement for the loan.
