Shareholder and bondholder interests appear to be aligned in their concern about TXU Corp.'s potential descent to junk, in an unusual occurrence given the recent slew of credit-damaging shareholder initiatives undertaken by corporate America. Stockholders are said to be pressuring the company to take steps to maintain its investment-grade rating, said analysts. This comes after TXU's $500 million share buyback earlier this month caused Standard & Poor's to place the triple-B rated energy company on credit watch negative explained Tobias Hsieh, director in the utilities and energy group at S&P. He declined to discuss shareholder plans.
"Often shareholders and bondholders have diverging interests, but in this particular situation there seems to be some equity investor concern about operating a major merchant energy companies with a below investment-grade parent rating," explained Margaret Jones, senior v.p. and fixed-income utilities analyst at ABN AMRO in New York. Hsieh added: "TXU is interested in doing something to prevent a downgrade." He declined comment on whether equity holders were pressuring the company to take action. Analysts noted equity holders are pressuring the company to better its credit picture and pointed to TXU's declining stock price as evidence of their dissatisfaction.
TXU's share price fell from a high of $87.25 around the start of the month to $78.99 Thursday, despite its buyback. A call to Kirk Oliver, cfo of TXU, was not immediately returned.
