New Mexico News
| PNM Says It Borrowed $7M in Long-Term Debt |
| Posted by () on May 21 2008 at 8:08 PM |
PNM Resources, the parent company of Public Service Company of New Mexico, said it was recently able to borrow $7 million in long-term debt, but at significantly higher interest rates than the current norm.
PNM announced May 9 that it had successfully marketed $350 million in senior unsecured notes at 7.95 percent interest. It also said it successfully remarketed $247 million in senior notes and an additional issuance of $102.7 million in senior notes, which will constitute a single series of notes, at 9.25 percent interest.
Paul Fremont, senior analyst with Jeffries & Co. investment and securities, called those interest rates “astronomically high.”
“With the remarketing, all those instruments are having difficulty right now. But, if you look at the straight debt, 6 percent is the rate for a comparable instrument in the market today,” he said.
Frederick Bermudez, PNM Resources' investor communications manager, said the remarketed notes had previously been offered at 6.75 percent.
“(PNM Resources Treasurer) Terry Horn and the banks managing the offering worked very hard to find investors and the interest rate was a factor. Even when we went below 8 percent, some banks (potential investors) pulled out,” he said.
The fact that investors are requiring higher interest reflects the effects of recent downgrades of PNM Resources credit rating by three top rating agencies in the country, as well as investors' perception of the risk of investing in PNM Resources, he said.
“I think it does reflect the riskier, non-regulated business. It's not seen as secure as PNM (the regulated utility). It does reflect the performance of the businesses in Texas,” Bermudez said.
Fremont said the difficulty of obtaining credit could affect PNM Resources' ability to serve its customers.
“New Mexico is seen as having a very fast-growing population right now, with PNMR needing to make fairly huge investments just to keep up. This doesn't bode well for their ability to finance those investments, unless there's an improvement in their situation,” he said.
The money will be used for corporate purposes, including the repayment of short-term debt.
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