Short-term Borrowings and Long-term Debt

6 Months Ended

Jun. 30, 2011

Short-term Borrowings and Long-term Debt [Abstract]

Short-term Borrowings and Long-term Debt

(10)           Short-term Borrowings and Long-term Debt

(a) Short-term Borrowings

Receivables Facility. Availability under CERC’s receivables facility, which terminates on September 14, 2011, ranges from $160 million to $375 million, reflecting seasonal changes in receivables balances.  As of December 31, 2010 and June 30, 2011, the facility size was $160 million and $300 million, respectively. As of both December 31, 2010 and June 30, 2011, there were no advances under the receivables facility.

Inventory Financing. In October 2009, Gas Operations entered into asset management agreements associated with its utility distribution service in Arkansas, north Louisiana and Oklahoma that extend through March 31, 2012. Pursuant to the provisions of the agreements, Gas Operations sells natural gas and agrees to repurchase an equivalent amount of natural gas during the winter heating seasons at the same cost, plus a financing charge. These transactions are accounted for as a financing and they had an associated principal obligation of $53 million and $39 million as of December 31, 2010 and June 30, 2011, respectively.

(b) Long-term Debt

CERC Corp. Senior Notes.  In January 2011, CERC Corp. issued $250 million aggregate principal amount of senior notes due 2021 with an interest rate of 4.50% and $300 million aggregate principal amount of senior notes due 2041 with an interest rate of 5.85%.  The proceeds from the issuance of the notes were used for the repayment of $550 million of CERC Corp.’s 7.75% senior notes at their maturity in February 2011. Accordingly, the $550 million senior notes due in February 2011 are reflected as long-term debt as of December 31, 2010.

CERC Corp. Exchange Offer. Also in January 2011, CERC Corp. issued an additional $343 million aggregate principal amount of 4.50% senior notes due 2021 and provided cash consideration of $114 million in exchange for $397 million aggregate principal amount of its 7.875% senior notes due 2013.  The premium of $58 million paid on exchanged notes has been deferred and will be amortized to interest expense over the life of the 4.50% senior notes due 2021.

Revolving Credit Facility.  As of both December 31, 2010 and June 30, 2011, CERC Corp. had no outstanding borrowings under its $915 million credit facility.  As of December 31, 2010 and June 30, 2011, CERC Corp. had commercial paper outstanding of $183 million and $70 million, respectively, which was backstopped by its credit facility.  CERC Corp. was in compliance with all debt covenants as of June 30, 2011.  As a result of the June 29, 2012 expiration date of the revolving credit facility, commercial paper borrowings backstopped by such facility have been classified as long-term debt as of December 31, 2010 and short-term borrowings as of June 30, 2011.

CERC Corp.’s $915 million credit facility’s first drawn cost is the London Interbank Offered Rate (LIBOR) plus 45 basis points based on CERC Corp.’s current credit ratings.  The facility contains a debt to total capitalization covenant, limiting debt to 65% of its total capitalization.

Under CERC Corp.’s $915 million credit facility, an additional utilization fee of 5 basis points applies to borrowings any time more than 50% of the facility is utilized.  The spread to LIBOR and the utilization fee fluctuate based on CERC Corp.’s credit rating.