Pinnacle West Announces Proposed Offering of $450 Million of Convertible Senior Notes Due 2027
Pinnacle West Capital Corp. (NYSE: PNW) has announced its intention to offer $450 million in convertible senior notes due 2027 through a private placement under the Securities Act of 1933. An additional $67.5 million may be offered within 13 days of the initial issue. The proceeds will be used for general corporate purposes, including debt repayment, working capital, and investments in its subsidiary, Arizona Public Service Company. The notes are senior unsecured obligations, convertible under certain conditions, with interest payable semiannually. Conversion settlements can be in cash, common stock, or a combination of both. The offering targets qualified institutional buyers and is not registered under the Securities Act or state securities laws, limiting its sale in the U.S. or to U.S. persons.
- Announcement of $450 million convertible senior notes offering, potentially raising significant capital.
- Additional $67.5 million option for initial purchasers, enhancing flexibility in capital acquisition.
- Funds intended for general corporate purposes, including debt repayment and working capital.
- Interest payable semiannually, assuring regular income to note holders.
- Conversion settlement options include cash, common stock, or a combination, providing flexibility.
- Convertible notes are senior unsecured obligations, posing potential higher risk compared to secured notes.
- Dependence on market conditions for the offering's success, creating uncertainty.
- No assurance of completion on anticipated terms or at all, introducing potential risk.
- Notes and resulting stock issuances not registered under the Securities Act, limiting tradability.
Insights
Pinnacle West's announcement of a
From a debt management perspective, this move provides Pinnacle West with flexibility. The proceeds are earmarked for general corporate purposes such as debt repayment or refinancing, which can improve liquidity and reduce interest obligations in the short term. The terms of conversion, including the interest rate and conversion rate, will influence the attractiveness of the notes to institutional buyers and could set the stage for future equity dilution or strengthened financial standing, depending on market conditions.
Investors should watch for the final terms of the notes and evaluate how the market perceives this offering. A favorable interest rate would indicate strong market confidence, while higher rates could suggest underlying risks or uncertainties.
The convertible notes offering by Pinnacle West highlights an important strategic financial maneuver. For market watchers, this indicates the company's proactive approach to leveraging market conditions for raising capital. Convertible notes are particularly appealing because they give investors the option to convert debt into equity, typically at a premium, which can attract a wider range of investors looking for both income and potential capital appreciation.
From a market perspective, the use of proceeds for general corporate purposes such as investments in Arizona Public Service Company suggests a commitment to furthering operational efficiency and capacity. This can be seen as a positive sign, indicating that the company is focusing on growth and stability. However, the potential for dilution exists if the notes convert into equity, which could affect existing shareholders' value. Investors should consider this along with the company's current growth trajectory and profitability metrics before forming an opinion.
In terms of broader market impact, if the offering is well-received, it could set a positive precedent for other utility companies considering similar financial strategies.
Pinnacle West intends to use the net proceeds from the offering of the convertible notes for general corporate purposes, which may include repayment or refinancing of debt, working capital and investments in its operating subsidiary, Arizona Public Service Company.
The convertible notes will be senior unsecured obligations of Pinnacle West and will be convertible at the option of the holders of such convertible notes upon satisfaction of certain conditions and during certain periods. Interest will be payable semiannually in arrears. Pinnacle West will settle conversions of the convertible notes by paying cash up to the aggregate principal amount of the convertible notes to be converted and paying or delivering, as the case may be, cash, shares of its common stock, no par value, or a combination of cash and shares of its common stock, at its election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the convertible notes being converted. The interest rate, the initial conversion rate, and other terms of the convertible notes will be determined by negotiations between Pinnacle West and the initial purchasers of the convertible notes.
The offering is being made to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act. Any offers of the convertible notes will be made only by means of a private offering memorandum. None of the convertible notes or any shares of the common stock issuable upon conversion of the convertible notes have been or are expected to be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold in
This press release does not constitute an offer to sell or the solicitation of an offer to buy these securities, nor will there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
General Information
Pinnacle West Capital Corp., an energy holding company based in
FORWARD-LOOKING STATEMENTS
This press release may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements concerning the timing and completion of the offering of the convertible notes and the anticipated use of proceeds from the offering. These forward-looking statements are often identified by words such as “estimate,” “predict,” “may,” “believe,” “plan,” “expect,” “require,” “intend,” “assume,” “project,” “anticipate,” “goal,” “seek,” “strategy,” “likely,” “should,” “will,” “could,” and similar words. Because actual results may differ materially from expectations, we caution readers not to place undue reliance on these statements. A number of factors could cause future results to differ materially from historical results, or from outcomes currently expected or sought by Pinnacle West or Arizona Public Service Company (“APS”). These factors include, but are not limited to, the factors discussed in the most recent Pinnacle West/APS Form 10-K and 10-Q along with other public filings with the Securities and Exchange Commission, which readers should review carefully before placing any reliance on our financial statements or disclosures. Neither Pinnacle West nor APS assumes any obligation to update these statements, even if our internal estimates change, except as required by law.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240528211061/en/
Media Contact: Alan Bunnell (602) 250-3376
Analyst Contact: Amanda Ho (602) 250-3334
Source: Pinnacle West Capital Corp.
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