Oct. 29 (Bloomberg) -- New York’s Long Island Power Authority is offering to buy back as much as $2.5 billion of debt as part of a plan to restructure the utility, which was widely criticized after Hurricane Sandy left almost a million of its customers in the dark for weeks.
The offer was disclosed in filing with the Municipal Securities Rulemaking Board. It expires Nov. 18.
Governor Andrew Cuomo and lawmakers struck a deal in June for Newark, New Jersey-based Public Service Enterprise Group to take over operations of the state-owned authority on Jan 1.
As part of the plan, as much as half of the utility’s $7 billion of debt would be refinanced. The new bonds, backed by a new customer charge, will be structured to get higher credit ratings than current LIPA debt, which would lower borrow costs.
LIPA will select the debt it intends to purchase by Dec. 13 and pay bondholders on Dec. 17 with proceeds from the new sale, according to the filing. Goldman Sachs Group Inc. and Morgan Stanley are managing the purchase, the filing said.
LIPA’s current debt is rated Baa1 by Moody’s Investors Service, three levels above junk. Standard & Poor’s and Fitch Ratings rate the debt one level higher, at A-.
About $160 million of LIPA’s tax-exempt bonds callable in nine years and targeted by the authority traded on Oct. 24 at an average yield of about 2.2 percentage points above top-rated bonds, data compiled by Bloomberg show.
Hurricane Sandy struck the region a year ago today, knocking out power to 90 percent of LIPA’s customers as falling trees downed power lines and substations were flooded.
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