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American Water (AWK) Unit to Offer $900 Million Senior Notes
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American Water Works Company, Inc.’s (AWK - Free Report) subsidiary, American Water Capital Corp. ("AWCC"), recently announced its intention to offer $900 million aggregate principal amount of its Exchangeable Senior Notes due 2026 (the "notes") in a private placement (the "offering"). AWCC also plans to grant the initial purchasers of the notes an option to buy, within a 13-day period beginning on, and including, the first date on which the notes are issued, up to an additional $135 million aggregate principal amount of the notes.
The senior notes will carry an annual interest of 3.625%, payable semi-annually in arrears on Jun 15 and Dec 15 of each year, beginning Dec 15, 2023. Unless earlier exchanged or repurchased, the notes are scheduled to mature on Jun 15, 2026. Post subtracting the initial purchasers’ discount, but before deducting estimated offering expenses payable, AWCC estimates receiving proceeds of around $888.8 million.
Subsequently, the company is expected to utilize the net proceeds from the offering to address general corporate purposes that may comprise the repayment of borrowings as part of its commercial paper program.
The total long-term debt was $10,487 million as of Mar 31, 2023, down 4.01% from $10,926 million as of Dec 31, 2022. AWK is working to reduce its debt level, which will, in turn, lower debt servicing expenses and boost margins.
Long-Term Investment Plan
American Water aims to invest in the range of $14-$15 billion in the 2023-2027 period and $30-$34 billion for the 10-year period of 2023-2032 to strengthen and expand its water and wastewater infrastructure. American Water expects a five-year adjusted EPS compound annual growth rate of 7-9% for 2023-2027. Nearly 100% of its net income is generated from regulated operations.
Price Performance
Shares of AWK have witnessed a relatively narrower decline than the broader industry over the past six months.
Image Source: Zacks Investment Research
Zacks Rank & Key Picks
American Water currently has a Zacks Rank #4 (Sell).
Some better-ranked utilities are Consolidated Water Co Ltd. (CWCO - Free Report) , Global Water Resources Inc. (GWRS - Free Report) and Atmos Energy Corp. (ATO - Free Report) . Consolidated Water sports a Zacks Rank #1 while Global Water and Atmos Energy carry a Zacks Rank #2 (Buy) at present.
CWCO’s long-term (three- to five-year) earnings growth rate is pegged at 8%. The Zacks Consensus Estimate for 2023 earnings per share (EPS) indicates an increase of 79.6%.
GWRS’ long-term earnings growth rate is pegged at 15%. The Zacks Consensus Estimate for 2023 EPS indicates an increase of 29.2%.
ATO’s long-term earnings growth rate is pegged at 7.5%. The Zacks Consensus Estimate for fiscal 2023 EPS indicates an increase of 7.7%.
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American Water (AWK) Unit to Offer $900 Million Senior Notes
American Water Works Company, Inc.’s (AWK - Free Report) subsidiary, American Water Capital Corp. ("AWCC"), recently announced its intention to offer $900 million aggregate principal amount of its Exchangeable Senior Notes due 2026 (the "notes") in a private placement (the "offering"). AWCC also plans to grant the initial purchasers of the notes an option to buy, within a 13-day period beginning on, and including, the first date on which the notes are issued, up to an additional $135 million aggregate principal amount of the notes.
The senior notes will carry an annual interest of 3.625%, payable semi-annually in arrears on Jun 15 and Dec 15 of each year, beginning Dec 15, 2023. Unless earlier exchanged or repurchased, the notes are scheduled to mature on Jun 15, 2026. Post subtracting the initial purchasers’ discount, but before deducting estimated offering expenses payable, AWCC estimates receiving proceeds of around $888.8 million.
Subsequently, the company is expected to utilize the net proceeds from the offering to address general corporate purposes that may comprise the repayment of borrowings as part of its commercial paper program.
The total long-term debt was $10,487 million as of Mar 31, 2023, down 4.01% from $10,926 million as of Dec 31, 2022. AWK is working to reduce its debt level, which will, in turn, lower debt servicing expenses and boost margins.
Long-Term Investment Plan
American Water aims to invest in the range of $14-$15 billion in the 2023-2027 period and $30-$34 billion for the 10-year period of 2023-2032 to strengthen and expand its water and wastewater infrastructure. American Water expects a five-year adjusted EPS compound annual growth rate of 7-9% for 2023-2027. Nearly 100% of its net income is generated from regulated operations.
Price Performance
Shares of AWK have witnessed a relatively narrower decline than the broader industry over the past six months.
Image Source: Zacks Investment Research
Zacks Rank & Key Picks
American Water currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked utilities are Consolidated Water Co Ltd. (CWCO - Free Report) , Global Water Resources Inc. (GWRS - Free Report) and Atmos Energy Corp. (ATO - Free Report) . Consolidated Water sports a Zacks Rank #1 while Global Water and Atmos Energy carry a Zacks Rank #2 (Buy) at present.
CWCO’s long-term (three- to five-year) earnings growth rate is pegged at 8%. The Zacks Consensus Estimate for 2023 earnings per share (EPS) indicates an increase of 79.6%.
GWRS’ long-term earnings growth rate is pegged at 15%. The Zacks Consensus Estimate for 2023 EPS indicates an increase of 29.2%.
ATO’s long-term earnings growth rate is pegged at 7.5%. The Zacks Consensus Estimate for fiscal 2023 EPS indicates an increase of 7.7%.