Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
As previously reported in a Form 8-K filed by Otter Tail Corporation on June 14,
2021 (the "June 2021 8-K"), Otter Tail Power Company ("OTP"), a wholly owned
subsidiary of Otter Tail Corporation, entered into a Note Purchase Agreement
(the "Note Purchase Agreement") on June 10, 2021, with the purchasers named
therein (the "Purchasers"), pursuant to which OTP agreed to issue to the
Purchasers, in a private placement transaction, $230 million aggregate principal
amount of senior unsecured notes consisting of (a) $40 million in aggregate
principal amount of its 2.74% Series 2021A Senior Unsecured Notes due November
29, 2031 (the "Series 2021A Notes"), (b) $100 million in aggregate principal
amount of its 3.69% Series 2021B Senior Unsecured Notes due November 29, 2051
(the "Series 2021B Notes") and (c) $90 million in aggregate principal amount of
its 3.77% Series 2022A Senior Unsecured Notes due May 20, 2052 (the "Series
2022A Notes"; and together with the Series 2021A Notes and the Series 2021B
Notes, the "Notes").
On May 20, 2022, OTP issued the Series 2022A Notes pursuant to the Note Purchase
Agreement for aggregate proceeds of $90 million. OTP will use the proceeds from
the issuance to refinance existing indebtedness, fund capital expenditures, and
for other general corporate purposes. The Series 2021A Notes and Series 2021B
Notes were previously issued on November 29, 2021.
As reported in the June 2021 8-K, the Note Purchase Agreement allows OTP to
prepay all or part of the Notes (in an amount not less than 10% of the aggregate
principal amount then outstanding) at 100% of the principal amount so prepaid,
together with unpaid accrued interest and a make-whole amount. If no default or
event of default exists under the Note Purchase Agreement, any prepayment made
by OTP of all of the (a) Series 2021A Notes then outstanding on or after May 29,
2031, (b) Series 2021B Notes then outstanding on or after May 29, 2051, or (c)
Series 2022A Notes then outstanding on or after November 20, 2051 will be made
without any make-whole amount. The Note Purchase Agreement also requires OTP to
offer to prepay all outstanding Notes at 100% of the principal amount together
with unpaid accrued interest in the event of a Change of Control (as defined in
the Note Purchase Agreement).
As reported in the June 2021 8-K, the Note Purchase Agreement contains a number
of restrictions on the business of OTP that were effective on execution of the
Note Purchase Agreement. These include restrictions on OTP's abilities to merge,
sell substantially all of its assets, create or incur liens on its assets,
guarantee the obligations of any other party, and engage in transactions with
affiliates. The Note Purchase Agreement also contains other negative covenants
and events of default, as well as certain financial covenants. Specifically, OTP
may not permit its Interest-bearing Debt (as defined in the Note Purchase
Agreement) to exceed 60% of Total Capitalization (as defined in the Note
Purchase Agreement), determined as of the end of each fiscal quarter. OTP is
also restricted from allowing its Priority Indebtedness (as defined in the Note
Purchase Agreement) to exceed 20% of Total Capitalization, determined as of the
end of each fiscal quarter.
The summary in this Item 2.03 of the material terms of the Note Purchase
Agreement is qualified in its entirety by reference to the full text of the Note
Purchase Agreement, a copy of which was filed as Exhibit 4.1 to the June 2021
8-K and is incorporated herein by reference.
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