You have created a new Distribution Center (DC) that points to the localhost (the LiveUpdate Administrator (LUA) server itself). When the connection is tested, it fails.
The "Login credentials for distribution access to location:" are mis-configured.
Configure the Login ID to be lua and the password to be lua.
For version LUA 2.3.3 or later, The default distribution center password is changed and it is now:
l!veUpd@te33
Applies To
LUA 2.3.1.82 - 2.3.13