Wall Street's three major credit-rating agencies said yesterday that they are studying the latest twist in Constellation Energy Group's pending sale to decide whether changes should be made to the Baltimore company's bond ratings, a source of concern that helped push it to seek buyers this summer.
The proposed $4.7 billion takeover of Constellation, the parent of Baltimore Gas & Electric Co., by Warren Buffett's MidAmerican Energy Holdings Co. was cast into question this week with a proposal by Constellation's largest shareholder.
Electricite de France, a European utility that owns 9.5 percent of Constellation stock, offered to buy half of Constellation's nuclear power business for nearly the same price as MidAmerican offered for the whole company.
EDF's unsolicited bid prompted Fitch Ratings to shift Constellation's ratings yesterday from "stable" outlook to credit watch "evolving," which means the company's investment grade ratings can be downgraded, upgraded or remain the same.
Moody's reaffirmed that Constellation's ratings are under review for a possible downgrade; Standard & Poor's said the company's ratings remain on credit watch with developing implications.
"There's a huge amount of uncertainty, including how shareholders would vote for this thing," said Scott Solomon, a senior analyst at Moody's.
A shareholder meeting is scheduled Dec. 23. Constellation spokesman Rob Gould declined to comment yesterday on the ratings agencies' views.
Constellation struck its $26.50-per-share deal with MidAmerican in September, when a threat of another downgrade in the company's credit rating triggered a cash shortage that posed a "real risk of immediate bankruptcy," company officials said in documents filed this week with the Securities and Exchange Commission.
Because Constellation's commodities-trading business is required to post collateral to operate, further downgrades would have required Constellation to put up more cash than it could raise. The financial sector meltdown also increased pressure on Constellation's liquidity access.
EDF offered in September to buy the whole company for $35 a share, but Constellation officials decided MidAmerican's deal was the "only viable alternative," given Buffett's cash, according to SEC filings.
EDF's latest proposal calls for selling half of Constellation's nuclear power assets to the French firm for $4.5 billion, including an immediate down payment of $1 billion in cash, and also selling several non-nuclear power plants to the company for as much as $2 billion.
