The Long Island Power Company's $2.1 billion of bonds backed by payments from retail electric customers in its service is expected to price sometime this week, according to a person familiar with the deal.
The deal is unusual because it issues both taxable and tax-exempt bonds, two radically different structures, at the same time.
The $1.6 billion of triple-A, tax-exempt bonds or municipal bonds will be callable after 10 years, beginning on Dec. 2023. The structure will offer $481.72 million of triple-A rated, taxable bonds
Goldman Sachs and Morgan Stanley are lead underwriters on the deal, Utility Debt Securitization Authority Restructuring Bonds Series 2013, issued by LIPA’s New York's Utility Debt Securitization Authority.
According to Joseph Fichera, Chief Executive Officer at Saber Partners, the deal is “the best credit in muni market.” The “large and liquid” deal, “should get great spreads,” he added.
However, the issuer's relative inexperience could widen spreads and make the bonds a “cheap” buy for investors. The transaction is both a first for LIPA and the utility’s financial manager, FA Public Financial Management (PFM). So, its likely that a “learning curve” will be priced into the bonds.
LIPA’s self-imposed deadline to get the deal done by year-end could also add pressure to pricing spreads.