4. SureWest Request
In its petition, SureWest asks the Commission to initiate a rulemaking to consider authorizing an exemption of URF ILECs from the requirement that they obtain prior Commission approval pursuant to § 851, which requires them to request authority to encumber public utility assets for the purpose of securing debt. SureWest states that this requirement places SureWest at a disadvantage relative to is competitors and adversely affects its ability to raise capital in today's credit market. SureWest notes that its competitors, as "subsidiaries of large national holding companies with established credit rating for their debt offerings"10 are able to issue unsecured debt at a reasonable rate, therefore do not need to encumber their utility assets.
SureWest states that eliminating the requirement for prior Commission approval to encumber all utility assets to secure debt would promote the public interest because it would allow URF ILECs, such as SureWest, to raise capital at the best possible rates in the changing financing markets.
SureWest's finances are managed at the holding company level. Since the establishment of its parent (SureWest Communications) until recently, it had been able to issue debt on an unsecured basis, and therefore did not need to come to the Commission for authority to encumber assets. Now that lenders require its parent to issue secured debt, SureWest grants a security interest in all of its assets in connection with its parent's credit facilities and guarantees notes secured by these assets on behalf of its parent company. SureWest states that it would cost its parent, and ultimately itself and its ratepayers, between 300 and 500 basis points more to issue unsecured versus secured debt.11
SureWest also notes that because it must request authority to encumber its assets, it is unable "to respond nimbly to changes in the credit market"12 which adversely effects itself and its customers. In particular, SureWest references its most recent § 851 request (A.10-12-013) in which it took approximately two months for a decision to be issued by the Commission.13 SureWest also refers to past decisions in which we have granted URF ILECs partial relief,14 while granting its competitors more extensive relief.15 SureWest states that in these decisions, the Commission recognizes that the § 851 process does not suit the needs of the current telecommunications marketplace or its customers. SureWest concludes that the remaining applicable requirements of § 851 have a greater effect on it than on the other URF ILECs.
SureWest asserts that, in its most recent request to encumber assets to secure new indebtedness,16 it was unable to "nimbly" adjust the amount of indebtedness it had requested in that § 851 application, when, subsequent to filing its application, the lender offered to increase the amount of the loan. Since it would have had to amend its application, including notice of the amendment as well as allowance for a protest period regarding the amendment, SureWest decided not to amend its application. SureWest states that if it had been exempted from § 851 as requested in the current application, it would have been able to accept the increased loan amount. SureWest posits that, inherent in being required to receive Commission approval, its ability to take advantage of low interest rates is jeopardized, and it is placed at a competitive disadvantage.
SureWest assures that, if it's requested exemption is granted, the assets it encumbers to secure indebtedness could not be transferred without Commission approval.
10 P.11-11-012 at 6.
11 P.11-11-012 at 5.
12 P.11-11-012 at 8.
13 D.11-02-022.
14 See D.10-05-019.
15 See D.85-11-044 and D.97-01-015, in which the Commission exempted NDIECs and CLECs, respectively, from the § 851 requirement that it request authority to encumber utility assets to secure debt.
16 See A.10-12-013 and D.11-02-022. In that decision, the Commission granted SureWest Communications and SureWestUnit authority to encumber assets for the purpose of securing specific amounts and forms of debt.
