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Rating Action:

Moody's assigns P-1 to LIPA's Electric System Revenue Notes Series 2015 GR-4, GR-5 and GR-6; and affirms P-1 on Series 2015 GR-2

13 Mar 2018

New York, March 13, 2018 -- Moody's Investors Service has assigned P-1 ratings to the Long Island Power Authority (LIPA) Electric System Revenue Notes Series 2015 GR-4, consisting of Series 2015GR-4A (Taxable) and Series 2015GR-4B (Tax-Exempt), Series 2015 GR-5, consisting of Series 2015GR-5A (Taxable) and Series 2015GR-5B (Tax-Exempt), and Series 2015 GR-6, consisting of Series 2015GR-6A (Taxable) and Series 2015GR-6B (Tax-Exempt), and affirmed the P-1 rating on LIPA's Electric System Revenue Notes Series 2015-GR2 in connection with the substitution of the LOC supporting such Series.

RATINGS RATIONALE

The 2015 GR-4 Notes are supported by a letter of credit (LOC) from Royal Bank of Canada (RBC). The 2015 GR-5 Notes are supported by a LOC from Citibank, N.A. (Citibank). The 2015 GR-6 Notes are supported by a LOC from Barclays Bank PLC (Barclays). The current LOC supporting the Series 2015-GR 2 Notes will be replaced with a LOC from State Street Bank and Trust Company (SSB). Upon such substitution of the LOC, and the issuance of the RBC, Citibank and Barclays LOCs the ratings on the Notes will be based on the credit quality of the banks providing the LOCs as well as the structure and legal protections of the transactions which provide for timely payment of principal and interest to Note holders.

Moody's current short-term counterparty risk assessment (CR Assessment) of each LOC bank is P-1 (cr).

FACTORS THAT COULD LEAD TO AN UPGRADE

• Not applicable.

FACTORS THAT COULD LEAD TO A DOWNGRADE

• Moody's downgrades the short-term CR Assessment of the bank providing the letter of credit for such Series.

The 23rd Supplemental Electric System General Revenue Bond Resolution (Resolution) authorizes the issuance of up to $200 million of Series 2015 GR-4 Notes, $100 million of Series 2015 GR-5 Notes, $100 million of Series 2015 GR-6 Notes and increases the authorized amount of Series 2015 GR-2 Notes to $100 million. For each Series the combined amount of Taxable Notes (e.g. GR-2A, GR-4A, GR-5A & GR-6A) and Tax-Exempt Notes (e.g. GR-2B, GR-4B, GR-5B & GR-6B) may not exceed the authorized amount for such Series or the amount provided for under the applicable LOC. The Notes may only be issued on an interest-bearing basis. The Issuing and Paying Agent (IPA), The Bank of New York Mellon, will issue commercial paper notes upon receipt of issuance instructions from LIPA. Each Note issued must mature not less than 271 days and not more than 275 days from the date of issuance and in no event shall the maturity be later than nine months from the date of issuance. The maturity date must occur no later than the business day preceding the expiration date or termination date of the applicable LOC. Each Series 2015 Note shall be subject to mandatory redemption on a date selected by LIPA at the time of issuance. Such redemption date shall be no earlier than one day and no later than 270 days from the date of issuance. In no event shall such redemption date be later than the date which is two business days prior to the termination or expiration date of the applicable LOC.

The RBC LOC is sized for $215,277,778 which represents $200,000,000 available for the payment of principal and $15,277,778 available for interest, calculated at 275 days of interest at 10%. The SSB, Citibank and Barclays LOCs are each sized for $107,638,889 which represents $100,000,000 available for the payment of principal and $7,638,889 available for interest, calculated at 275 days of interest at 10%. Conforming draws for the payment of principal and interest received by a LOC bank by 11:00 a.m. (Eastern Time) will be paid no later than 2:30 p.m. (Eastern Time) on the same business day. Drawings on the letters of credit will be reinstated upon receipt by the banks of reimbursement proceeds from LIPA. The IPA is instructed to draw on the applicable LOC in accordance with its terms in order to receive funds sufficient to pay principal and interest on each maturity or redemption date.

In the event of a default under the applicable reimbursement agreement, each bank may, at their option, send either a a No-Issuance Notice or a Final Drawing Notice to the IPA. Upon the receipt of a No-Issuance notice, the IPA shall cease issuing the affected Series of Notes and continue to draw on the applicable LOC as such Notes mature. In the event of a No Issuance Notice the applicable LOC remains in place to the final maturity of all Notes outstanding. Upon receipt of the Final Drawing Notice, the IPA will cease issuing the affected Series of Notes and shall immediately, but in no event later than the business day prior to the termination date of the applicable LOC draw in an amount sufficient to provide for the payment of principal plus interest to accrue to the maturity for all of the affected Series of Notes outstanding. The IPA shall hold such LOC funds uninvested to pay the affected Series of Notes as they mature.

In addition under the Citibank reimbursement agreement the bank may send a Restricted Issuance Notice. Upon receipt of a Restricted Issuance Notice, the IPA is restricted from issuing Series GR-5 of Notes in excess of the amount of such Notes then currently outstanding. The Citibank LOC does not terminate as a result of a Restricted Issuance Notice.

Each LOC shall terminate on the earliest of: (i) the stated expiration date ( for GR-4 and GR-5 March 12, 2021, for GR-2 March 11, 2022, and for GR-6 March 14, 2022), unless extended; (ii) the date on which the applicable bank receives written notice from the IPA that an alternate credit facility has been issued and is in effect; (iii) the date on which the applicable bank receives notice from the IPA that there are no longer any of the applicable Series of Notes outstanding and that the IPA elects to terminate such LOC; or (iv) the earlier of (a) the 15th calendar day after the date on which the IPA receives the Final Drawing Notice from the bank, or (b) the date on which the drawing resulting from the delivery of the Final Drawing Notice is honored by the bank.

A LOC may be substituted provided that all Notes supported by such LOC mature prior to the effective date of the substitute LOC.

The principal methodology used in these ratings was Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts published in May 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Michael J. Loughlin
Vice President - Senior Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Joann Hempel
VP - Senior Credit Officer
Public Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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