The financial earthquake rocking Wall Street sent shockwaves through Maryland Wednesday, bringing Baltimore’s Constellation Energy Group to its knees.
Constellation, the parent of Baltimore Gas & Electric Co., said it’s in discussions with possible “strategic partners” as its shares plummeted on fears of the company’s liquidity and credit relationship with Lehman Brothers. Lehman, the nation’s fourth-largest investment bank, filed for bankruptcy on Monday.
However, a report Wednesday by credit rating agency Standard & Poor’s said an outright sale of Constellation was at an “advanced stage.”
Shares of Constellation have slipped 56.5 percent since trading opened Monday, falling from $56.90 to $24.77 when the market closed Wednesday. Constellation traded as high as $107.97 per share at the beginning of the year.
The $21 billion energy giant on Monday detailed a minor credit connection to Lehman in a regulatory filing. Constellation has $150 million tied up in a Lehman subsidiary, according to the filing.
Though Constellation said Lehman’s bankruptcy “will not have a material adverse effect” on the company, investors recoiled on news of any financial connection between the firms. Constellation could not be reached for comment Wednesday.
“I’ve been totally shocked by the implosion and the meltdown of the stock over the last few days,” said Robert Wasilewski, a portfolio manager with Baltimore-Washington Financial Advisors. “I’m stunned, I don’t know what to say. People are just dumping [the stock].”
As Constellation’s shares were in freefall Wednesday, the company in a statement said it was “in active discussions with potential strategic partners” and had retained Morgan Stanley and UBS to help “evaluate strategic alternatives.” Companies seeking “strategic partners” are typically looking for a buyer, merger or acquisition.
Constellation on Wednesday confirmed a $2 billion credit facility and said its “credit exposure to financial institutions is limited.” The company said it had credit exposure to 14 financial institutions, and the total credit exposure was about $120 million.
But Standard & Poor’s said Wednesday it might change its ratings on the company and that it was increasingly urgent for Constellation to take actions to shore up its balance sheet.
“In the absence of rapid execution of these credit supportive actions, a multiple-notch downgrade is likely. We do not expect the company to withstand such a rating action,” S&P said.
State regulators declined comment Wednesday.
“Because a transaction may, under Maryland law, require approval by the commission, the commission cannot comment on these matters,” said Public Service Commission spokeswoman LaWanda Edwards. “The commission would give any filing appropriate consideration in light of the current environment and the best interest of Maryland citizens.”
Stocks took hits across the board Wednesday, as investors reacted to news of the government’s $85 billion bailout of American International Group. The world’s largest insurer had fallen on desperate times after insuring too many mortgage-backed securities. An AIG bankruptcy would have affected major banks and other financial companies that buy AIG insurance.
The Dow Jones Industrial Average fell another 449 points Wednesday, after falling 508 points on Monday.
“It’s just unbelievable,” said Bill Stone, chief investment strategist for PNC. “People do not care about any return on investment. They just care that they get their money back.”
Constellation Stock
Open Close Change Percent
Monday $56.90 $47.99 -$11.18 -19.6
Tuesday $47.67 $30.76 -$16.91 -35.5
Wednesday $30.63 $24.77 -$5.99 -19.5
[email protected]
[email protected]
