Debt

9 Months Ended

Sep. 30, 2020

DEBT

Short-Term Debt

At September 30, 2020, NW Holdings and NW Natural had short-term debt outstanding of $223.0 million and $150.0 million, respectively. NW Holdings' short-term debt consisted of $73.0 million in revolving credit agreement loans at NW Holdings, a $150.0 million 364-day term loan at NW Natural, and no commercial paper outstanding. The weighted average interest rate on short-term debt outstanding at September 30, 2020 was 0.89% and 0.75% at NW Holdings and NW Natural, respectively.

On March 23, 2020, NW Natural entered into a $150.0 million 364-day term loan credit agreement. NW Natural borrowed the full amount thereunder. The proceeds of which are expected to be used for general corporate purposes and to provide additional liquidity. All principal and unpaid interest under the Term Loan is due and payable on March 22, 2021. NW Natural may prepay the principal and interest, and amounts prepaid may not be reborrowed. The Term Loan requires that NW Natural maintain credit ratings with Standard & Poor’s and Moody’s Investor Services. A change in NW Natural’s debt ratings may result in a change to the interest rate on the Term Loan but is not an event of default. The Term Loan requires NW Natural to maintain a consolidated indebtedness to total capitalization ratio of 70% or less. Failure to comply with this covenant would entitle the banks to terminate their lending commitments and to accelerate the maturity of all amounts outstanding. NW Natural was in compliance with the covenant requiring the maintenance of an indebtedness to total capitalization ratio as of September 30, 2020, with a consolidated indebtedness to total capitalization ratio of 57.0%.

Subsequent Event

On October 30, 2020, NW Natural repaid the $150.0 million 364-day term loan in full, which was funded by issuing short-term commercial paper.

Long-Term Debt

At September 30, 2020, NW Holdings and NW Natural had long-term debt outstanding of $955.4 million and $917.1 million, respectively, which included $7.6 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 2021 through 2050, interest rates ranging from 2.82% to 9.05%, and a weighted average interest rate of 4.60%.

In March 2020, NW Natural issued $150.0 million of FMBs with an interest rate of 3.60%, due in 2050. In February 2020, NW Natural retired $75.0 million of FMBs with an interest rate of 5.37%.

In June 2019, NW Natural Water, a wholly-owned subsidiary of NW Holdings, entered into a two-year term loan agreement for $35.0 million, due in 2021. The loan carried an interest rate of 0.74% at September 30, 2020, which is based upon the two-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, 2020, with a consolidated indebtedness to total capitalization ratio of 58.0%.

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 2019 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	2020		2019		2019
Gross long-term debt	$	962,994	$	906,757	$	886,776
Unamortized debt issuance costs	(7,586)		(6,072)		(5,712)
Carrying amount	$	955,408	$	900,685	$	881,064
Estimated fair value(1)	$	1,118,565	$	997,096	$	957,268

(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	2020		2019		2019
Gross long-term debt	$	924,700	$	869,700	$	849,700
Unamortized debt issuance costs	(7,586)		(6,072)		(5,712)
Carrying amount	$	917,114	$	863,628	$	843,988
Estimated fair value(1)	$	1,080,663	$	959,906	$	919,835

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