Standard & Poor's has taken the Long Island Power Authority off of credit watch negative but has retained a negative outlook on its A-minus rating.
S&P put LIPA's bond debt on negative watch on July 2.
S&P analyst David Bodek noted that LIPA's recent securitization of $2 billion of debt reduced the balance-sheet debt by about 28% and also improved debt service coverage and leverage ratios for the non-securitized $5 billion in debt.
S&P's negative outlook stems from its view that "the agreement to submit to a rate freeze, the absence of post-securitization [electric] bill reductions, and the uncertainties associated with untested regulatory oversight of rates could limit LIPA's financial flexibility and potentially erode credit metrics for the debt."
Bodek sees the lack of electric bill reduction to be a negative for LIPA because customers and politicians may be unhappy with what they perceive as LIPA's continued high rates.
