American Water Works Company, Inc. - 10-Q filing on 2018-08-01

Long-Term Debt

6 Months Ended

Jun. 30, 2018

Note 7: Long-Term Debt

The following long-term debt was issued during the six months ended June 30, 2018:



Company	Type	Rate	Maturity	Amount
Other American Water subsidiaries	Private activity bonds and government funded debt—fixed rate (a)	0.00%-5.00%	2021-2048	$	15
Total issuances				$	15

(a) Approximately $14 million of this debt relates to the New Jersey Environmental Infrastructure Financing Program.

The following long-term debt was retired through sinking fund provisions, optional redemptions or payment at maturity during the six months ended June 30, 2018:



Company	Type	Rate	Maturity	Amount
American Water Capital Corp.	Senior Notes—fixed rate	6.25%	2018	$	110
American Water Capital Corp.	Private activity bonds and government funded debt—fixed rate	1.79%-2.90%	2021-2031	1
Other American Water subsidiaries	Private activity bonds and government funded debt—fixed rate	0.00%-5.40%	2018-2041	4
Other American Water subsidiaries	Mortgage bonds—fixed rate	9.13%	2021	1
Other American Water subsidiaries	Term Loan	4.83%-5.69%	2021	2
Other American Water subsidiaries	Mandatorily redeemable preferred stock	8.49%	2036	1
Total retirements and redemptions				$	119

The Company has four forward starting swap agreements, of which two were entered into on May 22, 2018, each with a notional amount of $100 million, to reduce interest rate exposure on debt expected to be issued in 2018. These forward starting swap agreements terminate in November 2018, and have an average fixed rate of 2.87%. The Company has designated these forward starting swap agreements as cash flow hedges with their fair value recorded in accumulated other comprehensive gain or loss. Upon termination, the cumulative gain or loss recorded in accumulated other comprehensive gain or loss will be amortized through interest, net over the term of the new debt.

The Company has employed interest rate swaps to fix the interest cost on a portion of its variable-rate debt with an aggregate notional amount of $5 million. The Company has designated these interest rate swaps as economic hedges accounted for at fair value with gains or losses deferred as a regulatory asset or regulatory liability. The net gain recognized by the Company for the three and six months ended June 30, 2018 and 2017 was de minimis.

No ineffectiveness was recognized on hedging instruments for the three and six months ended June 30, 2018 and 2017.

The following table provides a summary of the gross fair value for the Company’s derivative asset and liabilities, as well as the location of the asset and liability balances on the Consolidated Balance Sheets:

Derivative Instruments

Derivative Designation

Balance Sheet Classification

June 30, 2018

December 31, 2017

Asset derivative:

Forward starting swaps

Cash flow hedge

Other current assets

—

Liability derivative:

Forward starting swaps

Cash flow hedge

Other current liabilities