In announcing the completion Friday of a $250 million debt financing for Puget Sound Energy’s (PSE) utility operations, CEO Stephen Reynolds said the completion and favorable terms indicate the market likes the private investment consortium’s purchase of PSE, which he expects to close Feb. 6. The first mortgage bond issuance was placed with more than 35 institutional investors, carrying a seven-year term and 6.75% coupon.

“Successful completion of this bond offering with its relatively low coupon in very difficult capital markets demonstrates positive market reaction to the pending close of our merger with Puget Holdings LLC” (a group of long-term investors led by a North American unit of Australia’s Macquarie Infrastructure Partners), Reynolds said.

“The upgrade of PSE’s corporate credit rating to ‘BBB’ by Standard & Poor’s [Ratings Services] immediately after we announced the merger closing date also improved the bond credit ratings and enabled an attractive interest rate on the debt,” Reynolds said.

Net proceeds from the bond sale will be used primarily to repay outstanding short-term debt incurred to partially fund the utility’s capital expenditures, including the $240 million Mint Farm natural gas-fired plant in Longview, WA. PSE purchased Mint Farm in December, using previously secured bank financing before the global credit crisis hit, Reynolds said.

Earlier in January, PSE announced that its pending $7.4 billion sale to a consortium of private investment groups should close Feb. 6. The investors and PSE’s parent, Puget Energy, made the announcement Jan. 16 (see Daily GPI, Jan. 21).

Puget Holdings LLC, the acquiring company made up of the Macquarie-led investment groups and Bellevue, WA-based Puget Energy, has committed to state regulators to support the PSE utility’s $5 billion capital program during the next five years as it attempts to narrow a gap between growing demand and its resource base in western Washington state, where it serves more than 1 million electric and about 750,000 natural gas customers.

Puget Holdings is comprised of a New York City-based unit of the Australian investment firm Macquarie Infrastructure Partners, and includes Macquarie Capital Group, the Canada Pension Plan Investment Board, British Columbia Investment Management Corp., Alberta Investment Management Corp. and Macquarie-FSS Infrastructure Trust.

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