Black Hills Corp. Announces Pricing of $450 Million Debt Offering

Rhea-AI Summary

On May 13, 2024, Black Hills Corp. (NYSE: BKH) announced the pricing of a $450 million debt offering in the form of 6.00% senior unsecured notes due on January 15, 2035. The offering is expected to close on May 16, 2024, pending customary conditions. Net proceeds will be used to repay $600 million of outstanding notes maturing on August 23, 2024, with any surplus funds allocated for general corporate purposes. The offering is conducted via a prospectus supplement filed with the SEC, and copies are available through EDGAR or from Wells Fargo Securities and BofA Securities. This announcement does not constitute an offer to sell these securities in any unauthorized jurisdiction.

Positive

• Black Hills Corp. successfully priced a $450 million debt offering, indicating strong investor interest.
• The 6.00% interest rate on the notes is fixed, providing predictable debt servicing costs.
• The proceeds will primarily be used to refinance $600 million in maturing debt, which helps manage the company's debt maturity profile.
• Surplus funds from the offering may be used for general corporate purposes, adding financial flexibility.

Negative

• The company is taking on additional debt to address existing liabilities, which could increase financial risk.
• The interest rate of 6.00% on the new debt is relatively high, potentially leading to increased interest expenses.
• The $450 million raised does not fully cover the $600 million maturing debt, implying a need for additional financing or cash resources.

Insights

Financial Analyst

Black Hills Corp. has announced the pricing of a $450 million debt offering through the issuance of senior unsecured notes with a 6% interest rate, due January 2035. This move is primarily aimed at refinancing its existing $600 million notes, which are due in August 2024. The new debt issuance could be seen as a strategic move to manage liquidity and debt maturity profiles. The interest rate of 6% indicates current market conditions and the company's creditworthiness. Investors should note that while the refinancing can lower near-term financial stress, it extends the company's debt obligations well into the next decade. Moreover, the use of any remaining proceeds for general corporate purposes suggests an emphasis on operational flexibility.

For investors, it's pertinent to monitor how this debt issuance impacts Black Hills Corp’s balance sheet and its ability to generate sufficient cash flows to meet future obligations. Given the company's utility business model, which involves steady cash inflows, this refinancing could be beneficial, assuming stable revenue streams. However, the relatively high interest rate could signal increased risk or market volatility, warranting careful watch.

Utility Sector Analyst

From a utility sector perspective, Black Hills Corp.'s debt offering is a typical financial maneuver aimed at optimizing capital structure and ensuring sufficient liquidity to meet upcoming maturities. The company's decision to issue $450 million in notes speaks to the substantial capital requirements typical of utility companies, driven by ongoing investments in infrastructure and regulatory compliance. The 6% interest rate on the new notes is indicative of the prevailing interest rate environment and the company’s credit profile.

The refinancing move helps Black Hills Corp manage its risk profile by reducing the immediate pressure of a $600 million maturity due in a few months. It also reflects the company's efforts to maintain financial stability. Investors should consider the implications of extending debt maturity in understanding the company's long-term financial strategy and its ability to invest in growth while servicing debt.

Market Research Analyst

For retail investors, it's important to understand that Black Hills Corp.’s debt offering is part of its broader financial strategy. The company's plan to use the proceeds for refinancing existing debt and general corporate purposes suggests a focus on financial health and operational efficiency. Such moves, while seemingly routine, are vital in maintaining investor confidence and ensuring long-term sustainability. However, the 6% coupon rate may raise questions about the cost of borrowing and its potential impact on future earnings.

Investors should also pay attention to how this debt issuance aligns with the company's overall market strategy, considering the utility sector's regulatory environment and the need for ongoing capital expenditure. This refinancing can be seen as an effort to manage financial stability while possibly preparing for future growth initiatives.

RAPID CITY, S.D., May 13, 2024 (GLOBE NEWSWIRE) -- Black Hills Corp. (NYSE: BKH) today announced the pricing of a registered public debt offering of $450 million aggregate principal amount of 6.00% senior unsecured notes due Jan. 15, 2035. The company expects the offering to close on May 16, 2024, subject to customary closing conditions.

The company plans to use the net proceeds from the offering, together with available cash or short-term borrowings under its existing facilities, to repay its $600 million principal amount outstanding notes on or before their maturity on Aug. 23, 2024. Any remaining net proceeds may be used for general corporate purposes.

The offering is being made only by means of a prospectus supplement relating to the offering and accompanying base prospectus previously filed with the Securities and Exchange Commission, copies of which may be obtained for free by visiting EDGAR on the SEC Web site at www.sec.gov or, upon request, from Wells Fargo Securities, LLC., by calling toll-free at 1-800-645-3751 or BofA Securities, Inc., by calling toll-free at 1-800-294-1322.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor will there be any sale of any securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

Black Hills Corp.
Black Hills Corp. (NYSE: BKH) is a customer focused, growth-oriented utility company with a tradition of improving life with energy and a vision to be the energy partner of choice. Based in Rapid City, South Dakota, the company serves 1.34 million natural gas and electric utility customers in eight states: Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming.

Investor Relations
Jerome E. Nichols
605-721-1171
jerome.nichols@blackhillscorp.com

24-Hour Media Relations Line
888-242-3969

Caution Regarding Forward Looking Statements
This news release includes “forward-looking statements” as defined by the Securities and Exchange Commission, or SEC. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this news release that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward looking statements, including our expectations about the completion and timing of the transaction described in this news release. These forward-looking statements are based on assumptions which we believe are reasonable based on current expectations and projections about future events and industry conditions and trends affecting our business. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties that, among other things, could cause actual results to differ materially from those contained in the forward-looking statements, including without limitations, the risk factors described in Item 1A of Part I of our 2023 Annual Report on Form 10-K filed with the SEC, and other reports that we file with the SEC from time to time.

New factors that could cause actual results to differ materially from those described in forward looking statements emerge from time-to-time, and it is not possible for us to predict all such factors, or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any forward-looking statement. We assume no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or otherwise.

FAQ

What is the purpose of the $450 million debt offering announced by Black Hills Corp. on May 13, 2024?

The net proceeds from the $450 million debt offering will be used to repay $600 million of outstanding notes maturing on August 23, 2024, with any remaining funds used for general corporate purposes.

What is the interest rate and maturity date for the new debt issued by Black Hills Corp.?

The new debt has an interest rate of 6.00% and matures on January 15, 2035.

When is the expected closing date for Black Hills Corp.'s $450 million debt offering?

The closing date for the debt offering is expected to be May 16, 2024, subject to customary closing conditions.

Which financial institutions are involved in Black Hills Corp.'s debt offering?

Wells Fargo Securities, and BofA Securities, Inc. are involved in Black Hills Corp.'s debt offering.

Where can I find the prospectus for Black Hills Corp.'s $450 million debt offering?

The prospectus supplement and accompanying base prospectus are available on the SEC's EDGAR website or can be requested from Wells Fargo Securities, or BofA Securities, Inc.