Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Section 2 – Financial Information
Item 2.03 - Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On February 1, 2002, Chugach issued $60 million of 2002 Series B Bonds. The bonds were expected to mature on February 1, 2012 and bore interest at a rate set for 28-day auction periods. The bonds could have been converted, at our discretion, to a daily, seven-day, 35-day, three-month or a semi-annual period or a flexible auction period. The bonds were subject to optional and mandatory redemption and to mandatory tender for purchase prior to maturity.
Chugach had $29.6 million of 2002 Series B Bonds outstanding on March 20, 2008. The interest rate on the 2002 Series B Bonds was subject to a reset mechanism every 28 days through an auction process. Recent events affecting bond insurers, including Chugach’s bond insurer, MBIA, have injected some level of uncertainty regarding the success of the auction process.
On February 20, 2008, the auction was held and failed to obtain sufficient clearing bids. Therefore, the current bondholders continued to hold the bonds and the rate on the 2002 Series B Bonds was set at 4.677% and stayed in effect until March 20, 2008. The failure of the auction did not constitute an event of default under any financing arrangement.
On March 5, 2008, bondholders were notified of the intent of Chugach to redeem the entire outstanding principal amount of the 2002 Series B Bonds. The Board of Directors authorized the redemption using funds obtained from one or more new borrowings under Chugach’s existing lines of credit with CoBank, ACB or National Rural Utilities Cooperative Finance Corporation (NRUCFC).
On March 20, 2008 Chugach redeemed the $29.6 million outstanding principal amount of the 2002 Series B Bonds using our NRUCFC line of credit at an initial rate of 3.46%. Repayment of the NRUCFC line of credit is required by March 15, 2009. Accordingly, outstanding borrowings continue to be classified as long-term. Management is currently evaluating long-term financing options.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: | March 26, 2008 | CHUGACH ELECTRIC ASSOCIATION, INC. |
| Interim Chief Executive Officer |
