Debt

9 Months Ended

Sep. 30, 2019

DEBT

Short-Term Debt

At September 30, 2019, NW Holdings had short-term debt outstanding of $65.6 million and NW Natural had $45.5 million of commercial paper outstanding, respectively. The carrying cost of commercial paper approximates fair value using Level 2 inputs. See Note 2 in the 2018 Form 10-K for a description of the fair value hierarchy. At September 30, 2019, NW Natural's commercial paper had a maximum remaining maturity of eight days and average remaining maturity of four days.

Long-Term Debt

At September 30, 2019, NW Holdings and NW Natural had long-term debt outstanding of $900.7 million and $863.6 million, respectively, which included $6.1 million of unamortized debt issuance costs at NW Natural. NW Natural's long-term debt consists of first mortgage bonds (FMBs) with maturity dates ranging from 2019 through 2049, interest rates ranging from 2.822% to 9.050%, and a weighted average interest rate of 4.745%.

In June 2019, NW Natural issued $90.0 million of FMBs with an interest rate of 3.869%, due in 2049 and $50.0 million of FMBs with an interest rate of 3.141%, due in 2029. In September 2019, NW Natural retired $10.0 million of FMBs with an interest rate of 8.310%.

In June 2019, NW Natural Water, a wholly-owned subsidiary of NW Holdings, entered into a new two-year term loan agreement for $35.0 million, due in 2021. The loan carried an interest rate of 2.65% at September 30, 2019, which is based upon the three-month LIBOR rate. The loan is guaranteed by NW Holdings and requires NW Holdings to maintain a consolidated indebtedness to total capitalization ratio of 70% or less. Failure to comply with this covenant would entitle the lenders to terminate their lending commitments and accelerate the maturity of all amounts outstanding. NW Holdings was in compliance with this covenant at September 30, 2019, with a consolidated indebtedness to total capitalization ratio of 53.4%.

Fair Value of Long-Term Debt

NW Holdings' and NW Natural's outstanding debt does not trade in active markets. The fair value of long-term debt is estimated using the value of outstanding debt at natural gas distribution companies with similar credit ratings, terms, and remaining maturities to NW Holdings' and NW Natural's debt that actively trade in public markets. Substantially all outstanding debt at NW Holdings is comprised of NW Natural debt. These valuations are based on Level 2 inputs as defined in the fair value hierarchy. See Note 2 in the 2018 Form 10-K for a description of the fair value hierarchy.

The following table provides an estimate of the fair value of NW Holdings' long-term debt, including current maturities of long-term debt, using market prices in effect on the valuation date:



	NW Holdings
	September 30,						December 31,
In thousands	2019			2018			2018
Gross long-term debt	$	906,757		$	815,534		$	741,813
Unamortized debt issuance costs	(6,072		)	(5,940		)	(5,577		)
Carrying amount	$	900,685		$	809,594		$	736,236
Estimated fair value⁽¹⁾	$	997,096		$	834,796		$	762,335

⁽¹⁾Estimated fair value does not include unamortized debt issuance costs.

The following table provides an estimate of the fair value of NW Natural's long-term debt, including current maturities of long-term debt, using market prices in effect on the valuation date:



	NW Natural
	September 30,						December 31,
In thousands	2019			2018			2018
Gross long-term debt	$	869,700		$	814,700		$	739,700
Unamortized debt issuance costs	(6,072		)	(5,940		)	(5,577		)
Carrying amount	$	863,628		$	808,760		$	734,123
Estimated fair value⁽¹⁾	$	959,906		$	833,962		$	760,222

⁽¹⁾Estimated fair value does not include unamortized debt issuance costs.