Free Writing Prospectus, dated May 1, 2018

Filed pursuant to Rule 433 under the Securities Act of 1933

Supplementing the Preliminary Prospectus, dated April 24, 2018

Registration Statement Nos. 333-223108 and 333-223108-01

 

PSNH Funding LLC 3
(Issuing Entity)

 

Pricing Term Sheet

 

$635,663,200 Rate Reduction Bonds (“RRBs”)

 

Issuing Entity:

PSNH Funding LLC 3

 

 

Sponsor, Depositor and Servicer:

Public Service Company of New Hampshire (“PSNH”)

 

 

Indenture Trustee:

The Bank of New York Mellon

 

 

Structuring Agent:

Goldman Sachs & Co. LLC

 

 

Joint Bookrunners:

Goldman Sachs & Co. LLC and Citigroup Global Markets Inc.

 

 

Co-Managers:

Barclays Capital Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated

 

 

Expected Ratings (Moody’s / S&P / Fitch):

Aaa(sf) / AAA(sf) / AAA(sf)(1)

 

 

Closing Date / Settlement Date:

May 8, 2018(2)

 

 

Interest Payment Dates:

February 1 and August 1 of each year beginning February 1, 2019

 

 

Applicable Time:

2:25 PM (Eastern time) on May 1, 2018

 

 

Proceeds:

The net proceeds of this offering are estimated to be approximately $628,901,923, after deducting underwriting discounts and commissions and upfront transaction costs. The total price to the public is $635,646,206. The total amount of the underwriting discounts and commissions is $2,587,149. The total amount of proceeds to the Issuing Entity before deduction of expenses (estimated to be $4,157,133) is $633,059,056.

 


(1)  A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time

(2)  The Issuing Entity expects to deliver the RRBs against payment for the RRBs on or about May 8, 2018, which will be the fifth business day following the date of pricing of the RRBs. Since trades in the secondary market generally settle in two business days, purchasers who wish to trade RRBs on the date of pricing or the succeeding two business days will be required, by virtue of the fact that the RRBs initially will settle in T+5, to specify alternative settlement arrangements to prevent a failed settlement.

 



 

 

 

Expected

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds to

 

Rate

 

Weighted

 

 

 

Scheduled

 

 

 

 

 

 

 

 

 

Issuing

 

Reduction

 

Average

 

Principal

 

Final

 

Final

 

 

 

Initial

 

Underwriting

 

Entity

 

Bonds, Series

 

Life

 

Amount

 

Payment

 

Maturity

 

Interest

 

Price to

 

Discounts and

 

(Before

 

2018-1

 

(Years)

 

Offered

 

Date

 

Date

 

Rate

 

Public(3)

 

Commissions

 

Expenses)

 

Tranche A-1

 

3.02

 

$

235,900,000

 

02/01/2024

 

02/01/2026

 

3.094

%

99.99780

%

0.407

%

$

234,934,697

 

Tranche A-2

 

7.02

 

$

111,600,000

 

08/01/2026

 

08/01/2028

 

 3.506

%

99.99611

%

0.407

%

$

111,141,447

 

Tranche A-3

 

11.64

 

$

288,163,200

 

02/01/2033

 

02/01/2035

 

 3.814

%

99.99741

%

0.407

%

$

286,982,912

 

 

 

 

Tranche A-1

 

Tranche A-2

 

Tranche A-3

 

CUSIP

 

69363P AA8

 

69363P AB6

 

69363P AC4

 

ISIN

 

US69363PAA84

 

US69363PAB67

 

US69363PAC41

 

 

The RRBs will be ready for delivery in book-entry form through the facilities of The Depository Trust Company against payment in New York, New York on or about May 8, 2018.

 

Expected Amortization Schedule
Outstanding Principal Balance Per Tranche

 

Payment Date

 

Tranche A-1 Balance

 

Tranche A-2 Balance

 

Tranche A-3 Balance

 

Closing Date

 

$

235,900,000.00

 

$

111,600,000.00

 

$

288,163,200.00

 

February 1, 2019

 

$

205,173,077.96

 

$

111,600,000.00

 

$

288,163,200.00

 

August 1, 2019

 

$

183,568,210.89

 

$

111,600,000.00

 

$

288,163,200.00

 

February 1, 2020

 

$

161,963,343.82

 

$

111,600,000.00

 

$

288,163,200.00

 

August 1, 2020

 

$

140,358,476.75

 

$

111,600,000.00

 

$

288,163,200.00

 

February 1, 2021

 

$

118,753,609.68

 

$

111,600,000.00

 

$

288,163,200.00

 

August 1, 2021

 

$

97,148,742.61

 

$

111,600,000.00

 

$

288,163,200.00

 

February 1, 2022

 

$

75,543,875.54

 

$

111,600,000.00

 

$

288,163,200.00

 

August 1, 2022

 

$

53,939,008.47

 

$

111,600,000.00

 

$

288,163,200.00

 

February 1, 2023

 

$

32,334,141.40

 

$

111,600,000.00

 

$

288,163,200.00

 

August 1, 2023

 

$

10,729,274.33

 

$

111,600,000.00

 

$

288,163,200.00

 

February 1, 2024

 

$

 

$

100,724,407.26

 

$

288,163,200.00

 

August 1, 2024

 

$

 

$

79,119,540.19

 

$

288,163,200.00

 

February 1, 2025

 

$

 

$

57,514,673.12

 

$

288,163,200.00

 

August 1, 2025

 

$

 

$

35,909,806.05

 

$

288,163,200.00

 

February 1, 2026

 

$

 

$

14,304,938.98

 

$

288,163,200.00

 

August 1, 2026

 

$

 

$

 

$

280,863,271.91

 

February 1, 2027

 

$

 

$

 

$

259,258,404.84

 

August 1, 2027

 

$

 

$

 

$

237,653,537.77

 

February 1, 2028

 

$

 

$

 

$

216,048,670.70

 

August 1, 2028

 

$

 

$

 

$

194,443,803.63

 

February 1, 2029

 

$

 

$

 

$

172,838,936.56

 

August 1, 2029

 

$

 

$

 

$

151,234,069.49

 

February 1, 2030

 

$

 

$

 

$

129,629,202.42

 

August 1, 2030

 

$

 

$

 

$

108,024,335.35

 

February 1, 2031

 

$

 

$

 

$

86,419,468.28

 

August 1, 2031

 

$

 

$

 

$

64,814,601.21

 

February 1, 2032

 

$

 

$

 

$

43,209,734.14

 

August 1, 2032

 

$

 

$

 

$

21,604,867.07

 

February 1, 2033

 

$

 

$

 

$

 

 


(3)  Interest on the bonds will accrue from May 8, 2018 and must be paid by the purchaser if the RRBs are delivered after that date.

 



 

Expected Sinking Fund Schedule
Scheduled Principal Payment Per Tranche

 

Payment Date

 

Tranche A-1 Scheduled
Principal Payment

 

Tranche A-2 Scheduled
Principal Payment

 

Tranche A-3 Scheduled
Principal Payment

 

February 1, 2019

 

$

30,726,922.04

 

$

 

$

 

August 1, 2019

 

$

21,604,867.07

 

$

 

$

 

February 1, 2020

 

$

21,604,867.07

 

$

 

$

 

August 1, 2020

 

$

21,604,867.07

 

$

 

$

 

February 1, 2021

 

$

21,604,867.07

 

$

 

$

 

August 1, 2021

 

$

21,604,867.07

 

$

 

$

 

February 1, 2022

 

$

21,604,867.07

 

$

 

$

 

August 1, 2022

 

$

21,604,867.07

 

$

 

$

 

February 1, 2023

 

$

21,604,867.07

 

$

 

$

 

August 1, 2023

 

$

21,604,867.07

 

$

 

$

 

February 1, 2024

 

$

10,729,274.33

 

$

10,875,592.74

 

$

 

August 1, 2024

 

$

 

$

21,604,867.07

 

$

 

February 1, 2025

 

$

 

$

21,604,867.07

 

$

 

August 1, 2025

 

$

 

$

21,604,867.07

 

$

 

February 1, 2026

 

$

 

$

21,604,867.07

 

$

 

August 1, 2026

 

$

 

$

14,304,938.98

 

$

7,299,928.09

 

February 1, 2027

 

$

 

$

 

$

21,604,867.07

 

August 1, 2027

 

$

 

$

 

$

21,604,867.07

 

February 1, 2028

 

$

 

$

 

$

21,604,867.07

 

August 1, 2028

 

$

 

$

 

$

21,604,867.07

 

February 1, 2029

 

$

 

$

 

$

21,604,867.07

 

August 1, 2029

 

$

 

$

 

$

21,604,867.07

 

February 1, 2030

 

$

 

$

 

$

21,604,867.07

 

August 1, 2030

 

$

 

$

 

$

21,604,867.07

 

February 1, 2031

 

$

 

$

 

$

21,604,867.07

 

August 1, 2031

 

$

 

$

 

$

21,604,867.07

 

February 1, 2032

 

$

 

$

 

$

21,604,867.07

 

August 1, 2032

 

$

 

$

 

$

21,604,867.07

 

February 1, 2033

 

$

 

$

 

$

21,604,867.07

 

 



 

Weighted Average Life Sensitivity

 

 

 

Expected

 

-5%
(2.69 Standard Deviations
from Mean)

 

-15%
(10.13 Standard Deviations
from Mean)

 

Rate
Reduction
Bonds

 

Weighted
Average Life
(yrs)

 

Weighted Average Life
(yrs)

 

Change (Days)

 

Weighted Average Life
(yrs)

 

Change (Days)

 

Tranche A-1

 

3.02

 

3.02

 

0

 

3.02

 

2

 

Tranche A-2

 

7.02

 

7.02

 

0

 

7.02

 

0

 

Tranche A-3

 

11.64

 

11.64

 

0

 

11.64

 

0

 

 

For the purposes of preparing the above chart, the following assumptions, among others, have been made: (i) the forecast error stays constant over the life of the RRBs and is equal to an overestimate of electricity usage of -5% (2.69 standard deviations from mean) or -15% (10.13 standard deviations from mean); (ii) the Servicer makes timely and accurate filings to make a periodic adjustment as described in the Preliminary Prospectus to the RRB Charges semi-annually; (iii) charge-off rates for persons and entities within PSNH’s franchise service territory purchasing directly or otherwise obtaining or being supplied directly with retail electric service for end use consumption, including those served under special contract (such persons and entities, “Customers”) are held constant at approximately 0.68% for the residential service rate class (comprised of approximately 435,447 customers as of December 31, 2017), approximately 0.68% for the general service rate class (comprised of approximately 75,528 customers as of December 31, 2017), approximately 0.68% for the primary general service rate class (comprised of approximately 1,396 customers as of December 31, 2017), approximately 0.68% for the large general service rate class (comprised of approximately 119 customers as of December 31, 2017) and approximately 0.68% for the outdoor lighting rate class (comprised of approximately 815 customers as of December 31, 2017); (iv) days sales outstanding are based upon historical averages; (v) operating expenses are equal to projections; (vi) there is no acceleration of the Final Maturity Date (as defined in the table above, the “Final Maturity Date”) of the RRBs; (vii) a permanent loss of all Customers has not occurred; and (viii) the issuance date is May 8, 2018. There can be no assurance that the weighted average lives of the RRBs will be as shown.

 

Subject to the terms and conditions in the underwriting agreement among the Issuing Entity, PSNH and the underwriters, for whom Goldman Sachs & Co. LLC and Citigroup Global Markets Inc. are acting as representatives, the Issuing Entity has agreed to sell to the underwriters, and the underwriters have severally agreed to purchase, the principal amount of the RRBs listed opposite each underwriter’s name below:

 

Underwriter

 

Tranche A-1

 

Tranche A-2

 

Tranche A-3

 

Total

 

Goldman Sachs & Co. LLC

 

$

117,950,000

 

$

55,800,000

 

$

144,081,200

 

$

317,831,200

 

Citigroup Global Markets Inc.

 

$

82,565,000

 

$

39,060,000

 

$

100,858,000

 

$

222,483,000

 

Barclays Capital Inc.

 

$

17,693,000

 

$

8,370,000

 

$

21,612,000

 

$

47,675,000

 

Merrill Lynch, Pierce, Fenner & Smith Incorporated

 

$

17,692,000

 

$

8,370,000

 

$

21,612,000

 

$

47,674,000

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

235,900,000

 

$

111,600,000

 

$

288,163,200

 

$

635,663,200

 

 



 

The underwriters may allow, and dealers may reallow, a discount not to exceed the percentage listed below for each Tranche.

 

 

 

Selling Concession

 

Reallowance Discount

 

Tranche A-1

 

0.240

%

0.120

%

Tranche A-2

 

0.240

%

0.120

%

Tranche A-3

 

0.240

%

0.120

%

 

After the initial public offering, the public offering prices, selling concessions and reallowance discounts may change.

 

PSNH Funding LLC 3 and PSNH have filed a registration statement (including a prospectus) with the Securities and Exchange Commission (“SEC”) for the offering to which this communication relates.  Before you invest, you should read the prospectus in that registration statement and other documents PSNH Funding LLC 3 and PSNH have filed with the SEC as exhibits to the registration statement for more complete information about PSNH Funding LLC 3 and the offering.  You may get these documents for free by visiting EDGAR on the SEC web site at www.sec.gov.  Alternatively, PSNH Funding LLC 3, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling Goldman Sachs & Co. LLC collect at 212-357-9453.