Otter Tail secures new credit facilities totaling $390 million

Otter Tail (NASDAQ:OTTR) Corporation (NASDAQ:OTTR), a Minnesota-based energy company with a market capitalization of $3.17 billion, has entered into two amended and restated credit agreements, according to a recent SEC filing. According to InvestingPro analysis, the company maintains a "GREAT" financial health score, supported by strong liquidity and prudent debt management. The agreements, dated December 11, 2024, provide Otter Tail and its wholly owned subsidiary Otter Tail Power Company (OTP) with significant revolving credit facilities.

The Otter Tail Credit Agreement, led by U.S. Bank National Association, offers a $170 million unsecured revolving credit line, which can be increased to $290 million under certain conditions. This facility will support the company's refinancing efforts, capital expenditure needs, and general corporate purposes, including up to $40 million in letters of credit. The company's strong financial position is evidenced by its moderate debt-to-capital ratio of 0.24 and current ratio of 2.17, indicating robust liquidity management. The agreement is set to expire on December 11, 2029, and replaces the previous agreement scheduled to end in October 2027.

Interest rates on the credit line are variable and will be determined by a benchmark rate plus a margin, which is subject to adjustments based on the company's credit ratings. The agreement also imposes a commitment fee on the average unused portion of the facility. Otter Tail Corporation is bound by several covenants, including a cap on its debt-to-capitalization ratio and restrictions on certain corporate activities such as mergers, asset sales, and transactions with related parties.

Similarly, OTP's Fifth Amended and Restated Credit Agreement provides a $220 million unsecured revolving credit facility, with potential expansion to $300 million. It also includes up to $50 million in letters of credit and carries similar terms regarding interest rates, commitment fees, and covenants. As of the agreement's effective date, OTP had $31.1 million in outstanding debt and $8.8 million in outstanding letters of credit.

The new credit facilities are guaranteed by Otter Tail Corporation's material subsidiaries and are subject to customary conditions, including the maintenance of certain financial ratios. These agreements provide the company and its subsidiary with increased financial flexibility as they continue to operate and expand their services. For deeper insights into Otter Tail's financial health and detailed analysis of its debt management strategy, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 US stocks with expert analysis and actionable intelligence.

The company experienced a 7% decrease in diluted earnings per share (EPS) to $2.03, compared to the same quarter in the previous year. However, despite this downturn, the company's year-to-date earnings have increased by 4%. Earnings varied across segments, with a 16% increase in the Electric segment, an 8% drop in the Plastics segment, and a significant 71% decrease in the Manufacturing segment.

These recent developments led Otter Tail to adjust its EPS guidance for 2024, showing confidence in the performance of the Plastics segment. The company also highlighted its strong liquidity position, with $544 million available, and reaffirmed its commitment to defending against ongoing class action lawsuits.

In the face of these challenges, Otter Tail remains focused on its strategic plan, which emphasizes renewable generation and transmission investments, and expects a net income of $45 million to $50 million from the PVC segment by 2026 or later.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.