Fitch Revises LIPA Electric Sys Revs, Ser 2003 I-O to 'AAA/F1+'; Confirms Ser 03 D-H 'AAA/F1+'

Business Wire, April 24, 2008

NEW YORK -- Fitch Ratings confirms the long-term 'AAA' rating and assigns a short-term rating of 'F1 ' to the $293,600,000 Long Island Power Authority (LIPA), electric general revenue bonds, consisting of: $65,600,000 series 2003I, $47,000,000 series 2003J, $47,000,000 series 2003K, $47,000,000 series 2003L, $20,000,000 series 2003M, $47,000,000 series 2003N and $20,000,000 series 2003 O. Fitch also confirms the 'AAA/F1 ' assigned to the series 2003 D-H bonds originally rated in May of 2003. The long-term 'AAA' rating assigned to all of the series 2003 bonds is based on the support of a municipal bond insurance policy provided by Financial Security Assurance, Inc., that insures scheduled payments of principal and interest on the bonds until their final maturity date of Dec. 1, 2029. The short-term 'F1 ' rating is based on the liquidity support of an Amended and Restated Standby Bond Purchase Agreement (SBPA), provided by Dexia Credit Local, acting through its New York Branch.

On the effective date of May 1, 2008, the commitment amount of the SBPA will be increased from $293,625,000 to $587,225,000 to provide liquidity support to the series I-O bonds being converted from auction rate to a weekly variable rate mode in addition to the original series 2003 D-H bonds covered by the SBPA upon its issuance in May of 2003. The series 2003 I-O bonds will be converted on various dates to a weekly rate mode from the auction rate mode, commencing with the first conversion date scheduled on May 5, 2008 for series 2003 J and K, which will be followed by conversions on: May 6, for series 2003N; May 7 for series 2003L; May 8 for series 2003M and 2003O; and on May 9 for series 2003I. The bonds are subject to mandatory tender on each of these mode change dates.

The SBPA continues to provide for the payment of the principal portion of the purchase price and 34 days of interest at the maximum interest rate of 12%, based on a 365 day year. The SBPA has also provided for an extension of the stated expiration from May 29, 2008 to May 29, 2013. Fitch's short-term rating will expire on the earlier to occur of May 29, 2013, unless such date is further extended, or upon any prior termination of the SBPA. The remarketing agents for the series 2003D-H bonds are: Lehman Brothers for series 2003D and 2003F, Goldman Sachs & Co. for series 2003E; Citigroup Global Markets Inc. for series 2003G and UBS PaineWebber Inc, for series 2003H. The remarketing agents for the series I-O bonds are: Morgan Stanley for the series 2003I and 2003O bonds; Goldman, Sachs & Co., for the series 2003J bonds; Lehman Brothers, Inc., for the series 2003K bonds; Citigroup Global Markets Inc. for the series 2003L bonds; Wachovia Securities for the series 2003M bonds and JP Morgan Securities Inc. for the series 2003N bonds.

Upon conversion, the bonds will be issued in the weekly rate mode, but may be converted to a daily, commercial paper, auction, term or fixed rate mode. During the weekly rate mode, interest is payable on the first business day of each month, commencing June 2, 2008. While the bonds bear interest at the weekly rate, bond holders may tender their bonds for purchase on any business day with prior notice to the tender agent and the remarketing agent. The bonds are subject to mandatory tender on: (1) the business day after the last day of the interest period when the bonds are in the commercial paper rate mode; (2) any mode change date; (3) the business day after the last day of the interest rate period when the bonds are in the term rate mode; (4) the 2nd business day prior to the expiration of the liquidity facility; (5) the fifth business day prior to the termination date of a credit facility or liquidity facility; (6) the substitution date for a credit facility (other than a bond insurance policy securing the bonds in an auction, term or fixed rate mode) or a liquidity facility.

The bonds are also subject to optional and mandatory redemption as specified in the supplemental indenture and the certificate of determination.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.