Research Update: Exelon Generation Co.'s Ratings Still On Watch Negative

Exelon Generation Co.'s (ExGen) 'BBB' long-term corporate credit rating remains on CreditWatch with negative implications following parent Exelon Corp.'s hostile bid to acquire NRG Energy Inc. (B+/Watch Pos/B-2). The CreditWatch listing reflects Exelon's willingness to increase its business risk profile by acquiring a merchant power generation company with a significantly weaker business profile and considerably greater leverage. NRG's board and management have continued to oppose the Exelon proposal at the offered exchange ratio, resulting in a proxy fight. Exelon has recently proposed expanding NRG's board to 19 from 13, and nominating nine directors to the board, after NRG's shareholders tendered roughly 51% of their outstanding shares in response to Exelon's exchange offer. Even though the exchange ratio has moved in

...Exelon Generation Co.'s (ExGen) '###' long-term corporate credit rating remains on CreditWatch with negative implications following parent Exelon Corp.'s hostile bid to acquire NRG Energy Inc. (B+/Watch Pos/B-2). The CreditWatch listing reflects Exelon's willingness to increase its business risk profile by acquiring a merchant power generation company with a significantly weaker business profile and considerably greater leverage. NRG's board and management have continued to oppose the Exelon proposal at the offered exchange ratio, resulting in a proxy fight. Exelon has recently proposed expanding NRG's board to 19 from 13, and nominating nine directors to the board, after NRG's shareholders tendered roughly 51% of their outstanding shares in response to Exelon's exchange offer. Even though the exchange ratio has moved in favor of Exelon since the offer made in Nov. 2008, the risk to the proposal is the NRG shareholder vote because the effective offer price is lower than where NRG traded...

Research Update