Note 7 – Long-Term Debt

Carrying amounts of long-term debt and related estimated fair values as of September 30, 2018 and December 31, 2017 are disclosed in the following table. Southwest’s revolving credit facility (including commercial paper) and the variable-rate Industrial Development Revenue Bonds (“IDRBs”) approximate their carrying values, as they are repaid quickly (in the case of credit facility borrowings) and have interest rates that reset frequently. These are categorized as Level 1 due to Southwest’s ability to access similar debt arrangements at measurement dates with comparable terms, including variable/market rates. The fair values of Southwest’s debentures, senior notes, and fixed-rate IDRBs were determined utilizing a market-based valuation approach, where fair values are determined based on evaluated pricing data, such as broker quotes and yields for similar securities adjusted for observable differences. Significant inputs used in the valuation generally include benchmark yield curves, credit ratings and issuer spreads. The external credit rating, coupon rate, and maturity of each security are considered in the valuation, as applicable. The fair values of debentures and fixed-rate IDRBs are categorized as Level 2 (observable market inputs based on market prices of similar securities). The Centuri secured revolving credit and term loan facility and Centuri other debt obligations (not actively traded) are categorized as Level 3, based on significant unobservable inputs to their fair values. Because Centuri’s debt is not publicly traded, fair values for the secured revolving credit and term loan facility and other debt obligations were based on a conventional discounted cash flow methodology and utilized current market pricing yield curves, across Centuri’s debt maturity spectrum, of other industrial bonds with an assumed credit rating comparable to the Company’s.



	September 30, 2018					December 31, 2017
	Carrying Amount			Fair Value		Carrying Amount			Fair Value
(Thousands of dollars)
Southwest Gas Corporation:
Debentures:
Notes, 4.45%, due 2020	$	125,000		$	126,808	$	125,000		$	129,273
Notes, 6.1%, due 2041	125,000			147,874		125,000			158,304
Notes, 3.875%, due 2022	250,000			251,003		250,000			256,163
Notes, 4.875%, due 2043	250,000			262,023		250,000			283,243
Notes, 3.8%, due 2046	300,000			273,843		300,000			302,970
Notes, 3.7%, due 2028	300,000			293,304		—			—
8% Series, due 2026	75,000			93,836		75,000			96,063
Medium-term notes, 7.78% series, due 2022	25,000			27,686		25,000			28,714
Medium-term notes, 7.92% series, due 2027	25,000			29,693		25,000			31,542
Medium-term notes, 6.76% series, due 2027	7,500			8,596		7,500			8,882
Unamortized discount and debt issuance costs	(12,037		)			(9,350		)
	1,470,463					1,173,150
Revolving credit facility and commercial paper	150,000			150,000		150,000			150,000
Industrial development revenue bonds:
Variable-rate bonds:
Tax-exempt Series A, due 2028	50,000			50,000		50,000			50,000
2003 Series A, due 2038	50,000			50,000		50,000			50,000
2008 Series A, due 2038	50,000			50,000		50,000			50,000
2009 Series A, due 2039	50,000			50,000		50,000			50,000
Unamortized discount and debt issuance costs	(1,842		)			(2,119		)
	198,158					197,881
Less: current maturities	—					—
Long-term debt, less current maturities - Southwest Gas Corporation	$	1,818,621				$	1,521,031
Centuri:
Centuri term loan facility	$	189,002		$	195,247	$	199,578		$	207,588
Unamortized debt issuance costs	(941		)			(1,111		)
	188,061					198,467
Centuri secured revolving credit facility	78,217			78,277		56,472			56,525
Centuri other debt obligations	72,171			71,966		47,952			48,183
Less: current maturities	(33,429		)			(25,346		)
Long-term debt, less current maturities - Centuri	$	305,020				$	277,545
Consolidated Southwest Gas Holdings, Inc.:
Southwest Gas Corporation long-term debt	$	1,818,621				$	1,521,031
Centuri long-term debt	338,449					302,891
Less: current maturities	(33,429		)			(25,346		)
Long-term debt, less current maturities - Southwest Gas Holdings, Inc.	$	2,123,641				$	1,798,576

Southwest has a $400 million credit facility that is scheduled to expire in March 2022. Southwest designates $150 million of capacity related to the facility as long-term debt and has designated the remaining $250 million for working capital purposes. Interest rates for the credit facility are calculated at either the London Interbank Offered Rate (“LIBOR”) or an “alternate base rate,” plus in each case an applicable margin that is determined based on Southwest’s senior unsecured debt rating. At September 30, 2018, the applicable margin is 1% for loans bearing interest with reference to LIBOR and 0% for loans bearing interest with reference to the alternative base rate. At September 30, 2018, $150 million was outstanding on the long-term portion (including the commercial paper program, discussed below) and $9 million was outstanding on the short-term portion of this credit facility (see Note 8 – Short-Term Debt).

Southwest has a $50 million commercial paper program. Any issuance under the commercial paper program is supported by Southwest’s current revolving credit facility and, therefore, does not represent additional borrowing capacity. Borrowings under the commercial paper program are designated as long-term debt. Interest rates for the program are calculated at the then current commercial paper rate. At September 30, 2018, as noted above, $50 million was outstanding under the commercial paper program.

In March 2018, Southwest issued $300 million in 3.7% Senior Notes at a discount of 0.185%. The notes will mature in April 2028. A portion of the proceeds were used to repay amounts then outstanding under the revolving portion of the credit facility and the remainder to repay amounts then outstanding under the commercial paper program.

Centuri has a $450 million senior secured revolving credit and term loan facility that is scheduled to expire in November 2022. This facility includes a revolving credit facility and a term loan facility. The line of credit portion of the facility is $250 million; amounts borrowed and repaid under the revolving credit facility are available to be re-borrowed. The term loan facility portion has a limit of approximately $200 million. The limit on the term loan facility was reached in November 2017; therefore, no further borrowing is permitted under this term loan facility. The $450 million revolving credit and term loan facility is secured by substantially all of Centuri’s assets except those explicitly excluded under the terms of the agreement (including owned real estate and certain certificated vehicles). Centuri assets securing the facility at September 30, 2018 totaled $675 million. At September 30, 2018, $267 million in borrowings were outstanding under the Centuri facility. Additionally, for the nine months ended September 30, 2018, Centuri entered into equipment loans for approximately $40 million with a maturity date of May 2023 under an existing agreement.