Moody's Investors Service believes that the restoration costs from the aftermath of Storm Sandy could further weaken the Long Island Power Authority's (LIPA: A3, negative) financial condition particularly if liquidity measures are not strengthened and rate recovery, disaster relief and insurance compensation payments are not received in a timely manner.

Based on conversations with LIPA management, the utility has about $500 million of cash on hand, but cash liquidity will be reduced by an estimated $250 million following the debt service payment expected to be made on December 1st. LIPA does not have a debt service reserve fund in its indenture -- a credit weakness noted in Moody's assignment of the A3 rating.

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