Oncor Issues $250M in Senior Secured Notes

The Texas-based electric utility will use the proceeds to repay commercial paper and fund corporate expenses.

February 05, 2025

Oncor Expands Debt Issuance Amid Financial Strategy Shift

Oncor Electric Delivery Company LLC has announced the issuance of $250 million in senior secured notes as part of a broader financial strategy that includes an additional planned $150 million issuance later this month. The move, detailed in a recent regulatory filing, aims to optimize the company’s capital structure while maintaining flexibility for ongoing corporate expenses and debt repayment.

The senior secured notes, designated as Series H Notes, carry an interest rate of 5.15% per annum and mature on May 1, 2029. Interest will be payable semi-annually, with the first payment scheduled for November 1, 2025. These notes were issued under a Note Purchase Agreement finalized on January 30, 2025, with various institutional purchasers.

The agreement also outlines the forthcoming issuance of Series I Notes, which will total $150 million and carry an interest rate of 5.59% per annum. These notes are expected to be issued on or before February 28, 2025, and will mature on May 1, 2034.

Both series of notes will be secured through a lien on Oncor’s assets, specifically infrastructure used for electricity transmission and distribution. This lien falls under the company’s Deed of Trust, originally established in 2008 and subsequently amended to accommodate evolving financing needs.

Debt Reduction and Capital Management

Oncor plans to allocate proceeds from these new debt issuances toward repaying outstanding commercial paper under its existing financing program. The strategy aligns with the company’s broader focus on maintaining liquidity, reducing short-term debt obligations, and securing stable long-term financing at competitive rates.

The terms of the Note Purchase Agreement include standard financial covenants designed to ensure Oncor remains in compliance with debt obligations. Specifically, the company must maintain a senior debt-to-total capitalization ratio of no greater than 0.65 to 1.00. Additionally, Oncor is restricted from engaging in certain mergers, asset sales, or consolidations that could materially impact its financial standing.

The agreement also includes provisions for optional prepayment, allowing Oncor to retire debt early under specified conditions, as well as make-whole payments designed to compensate noteholders for lost interest if the company opts for early repayment.

Further Borrowing Activity

In addition to the note issuances, Oncor has drawn $300 million from its Accounts Receivable Securitization Facility (AR Facility), a financing structure backed by MUFG Bank, Ltd. The facility allows Oncor to use receivables from retail electric providers as collateral to secure loans. The latest borrowing brings the total outstanding amount under the AR Facility to $300 million.

This borrowing is part of an agreement originally established in April 2023, with a scheduled termination date of April 28, 2027. However, the facility can be extended annually with lender approval. The borrowed funds will be used for general corporate purposes, including further repayment of commercial paper.

The AR Facility carries variable interest rates, with loans either funded through asset-backed commercial paper issued by conduit lenders or based on a secured overnight financing rate (SOFR) with an additional margin. Oncor’s wholly owned subsidiary, Receivables LLC, manages this facility independently, ensuring that creditors have a priority claim on its assets before any funds become available to the parent company.

Future Outlook

With its latest financial maneuvers, Oncor continues to fortify its capital position while managing ongoing obligations. The structured approach to debt issuance and receivables financing underscores the company’s focus on balancing long-term capital costs with operational needs.

While rising interest rates have increased financing costs across the utility sector, Oncor’s ability to secure funding at competitive rates highlights confidence from institutional investors. The upcoming issuance of the Series I Notes will be closely watched as a further indication of the company’s financial positioning in the evolving energy landscape.