The Long Island Power Authority is slated to sell $1 billion in restructuring bonds through its Utility Debt Securitization Authority in mid-October.
The deal is designed to lower the costs of the utility’s nearly $8 billion in outstanding debt.
The negotiated sale of tax-exempt restructuring bonds is scheduled to begin Wednesday with a retail order period followed Thursday by institutional pricing.
The securitization authority, which also sold $2.1 billion in refunding bonds for LIPA in December 2013, is authorized by New York State legislation to issue up to $4.5 billion.
LIPA CFO Tom Falcone said one or two additional refinancings could take place during 2016 depending how low interest rates are.
“We want to cut the cost of existing debt,” said Falcone.
Falcone said the UDSA’s first issue of $2.1 billion in 2013 cut the cost of debt around 1% and saved around $130 million for LIPA customers. The utility, whose operations were taken over by PSEG Long Island in 2014, is expected to have around $7.9 billion in total debt outstanding by the end of this year, according to Falcone. Around $1.2 billion of that debt is associated with the never-opened Shoreham Nuclear Power Plant that was built by the utility’s predecessor, Long Island Lighting Company.
Bank of America Merrill Lynch is the lead manager with Public Financial Management acting as financial advisor. The bonds are rated triple-A by Moody’s Investors Service and Fitch Ratings.
The LIPA Board of Trustees will be considering a proposed three-year plan of rate hikes that would total a cumulative 5% jump this fall recommended by the New York Department of Public Service. Falcone said the three-year rate plan would enable infrastructure investments of $1.8 billion to go along with reducing debt.
