Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Financial News

Fortnightly Magazine - January 1 1997

that comes out of the split-up, can be leveraged much more highly than the generation business.

Meanwhile, the remaining Genco, with more equity in its capital structure, will look like the company the bondholders originally invested in (em enough, at least, to discourage them from derailing the transaction.

Articles found on this page are available to Internet subscribers only. For more information about obtaining a username and password, please call our Customer Service Department at 1-800-368-5001.

Bond indentures appear to present no serious obstacle to a breakup of vertically integrated utilities. The combination of unfunded property and retired bond credits, together with the ability to set up purchase money obligations on released property, appear to give many companies substantial flexibility.

The key (em whether trustees will resist releasing large segments of property, based on bondholder pressure, by finding implied covenants or invoking hyper-cautious or result-oriented interpretations, rather than objective contract interpretation.

The law appears to lie strongly on the side of the rights of companies to disaggregate; most indentures easily provide the means to reach a disaggregated state if management is willing.

T&D Spinoff Most Doable:

In this regard, a T&D spinoff of a heavily leveraged company may prove to be the most doable transaction, given the heavy concentration of the industry's investment in high-priced generation. The T&D business, as the regulated element that comes out of the split-up, can be leveraged much more highly than the generation business.

Meanwhile, the remaining Genco, with more equity in its capital structure, will look like the company the bondholders originally invested in (em enough, at least, to discourage them from derailing the transaction.

Articles found on this page are available to Internet subscribers only. For more information about obtaining a username and password, please call our Customer Service Department at 1-800-368-5001.

Pages