The Long Island Power Authority plans to sell up to $975 million of general revenue bonds in late March or early April, in part to take out some of its auction-rate securities and possibly some other variable-rate debt.
The authority board approved the issue at its monthly meeting yesterday. It would include up to $205 million of new-money bonds.
Two weeks ago, all of LIPA's auctions failed, and since then, none have cleared. About $2.2 billion of the authority's approximately $7 billion of debt is variable rate. Of that, slightly less than $1 billion is in auction-rate mode.
The maximum reset interest rate on those bonds is pegged to the London Interbank Offered Rate, and prior to the failed auctions reset from an average of 3.1% to 3.4% and to between 3.8% and 4.7%, depending on the series.
The new rates increased weekly debt service by $100,000 compared to the rates before the auctions failed, said LIPA chief financial officer Elizabeth McCarthy.
"It's manageable in our budget, but we still want to address it as quickly as possible," she said. "The market's moving around and we're trying to be nimble."
LIPA disclosed its intention to redeem four of its 21 series of auction-rate securities last month. In addition to auction-rate securities, the refunded portion could include variable-rate demand bonds insured by insurers that could face downgrades, she said.
Hawkins Delafield & Wood LLP is bond counsel and Bear, Stearns & Co. is financial adviser.
The bonds' structure and underwriting team has not yet been selected.
