The Long Island Power Authority (LIPA) has priced its first utility bond securitization that is backed by payments from retail electric customers.
The LIPA reform legislation only permits the utility provider do a securitization once, so the deal will be a one-off said a spokesperson at the company.
The deal, Utility Debt Securitization Authority Restructuring Bonds Series 2013, issued $1.6 billion of tax-exempt bonds maturing in 2014 and $481.9 million of taxable bonds. All were rated 'AAA' by Fitch Ratings. The tax-exempt notes have a 5% coupon and were priced above par to yield 4.4%.
LIPA said in a press release published Dec. 12 that this is significantly lower than its current cost of financing, which is graded at the single-A level.
The notes issue by the securitization trust are secured by a separate cents-per-kWh charge on customers' bills that will initially be set at 1.25¢ per kWh. The charge will be reset in January of 2015, and reviewed every six months thereafter.
The trust also sold a total of $482.9 million of triple-A rated, taxable bonds. The series T-1, 4.91-year bonds were issued with a 2.042% coupon; the 5.92-year, Series T-2 bonds were issued with a 2.559% coupon; the 6.79-year, Series T-3 bonds were issued with a 2.937% coupon; and the 8.77-year, Series T-4 bonds were issued with a 3.435% coupon according to a pricing document.
Goldman Sachs and Morgan Stanley were the lead underwriters on the deal.
"We are very pleased with the overwhelming amount of investor interest,” LIPA chief financial officer Michael Taunton stated in the press release. "This securitization deal allows us to strengthen our financial health, reduce debt service costs, and reinvest the savings achieved back into the business with the overall goal of providing superior customer service, maintaining top reliability in the state, and continuing to be among the leaders in the area of energy efficiency and renewable energy.”