September 18, 2008 / 6:00 PM / 11 years ago

UPDATE 1-Constellation deal should restore confidence

(Adds action by Standard & Poor’s, recasts)

NEW YORK, Sept 18 (Reuters) - Fitch Ratings and Standard & Poor’s said on Thursday that Constellation Energy Group’s CEG.N acquisition by MidAmerican Energy Holdings will likely restore confidence in the company as a trading counterparty.

Fitch affirmed its investment grade ratings on Constellation, while S&P left the company on review for its ratings to be potentially raised, lowered or left unchanged.

MidAmerican, a unit of Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) (BRKb.N), said on Thursday that it would buy Constellation for about $4.7 billion in cash. For details, see [ID:nN18377942]

Constellation put itself up for sale earlier this week as investor fears about the liquidity of its trading business drove its shares down nearly 60 percent over three days.

“Constellation was facing significant capital and financing constraints given high and volatile commodity prices and the attendant risks surrounding market price, volumes, counterparty credit, and liquidity for collateral postings,” Fitch said in a statement.

MidAmerican “has the resources to manage and effectively operate Constellation’s global commodity activities,” Fitch said.

Fitch rates Constellation “BBB,” the second-lowest investment grade. The outlook is stable, indicating a rating change is not anticipated over the coming one-to-two years.

S&P left its ratings under review for change from “BBB,” also the second-lowest investment grade, saying that the deal will require approvals from shareholders and regulators.

“We view the announcement as a potentially favorable credit development for Constellation,” S&P added. (Reporting by Karen Brettell; Editing by Tom Hals)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below