Dominion Resources will hold an invitation-only, one-and-a-half-day conference exclusively for fixed-income analysts and investors in its hometown of Reston, Va. in November, says Scott Hetzer, senior v.p. and Treasurer. Utility analysts say it is highly unusual for an issuer to devote so much time to the fixed-income community. One assumed that the meeting is an attempt to mend fences with fixed-income investors. Dominion lowered earnings guidance just a few days after issuing its 5.7% notes of '12 on Sept. 9. Dominion included a last minute step-up coupon to compensate investors in the event of a possible ratings downgrade, which caused spreads to snap back after some initial widening. The analyst's other, admittedly "cynical" explanation for the meeting was that keeping equity investors away would allow the company to pacify bond investors without alienating the equity side.
Hetzer says the company shares information equally with all investors, and that the conference was planned several months ago. He says it is intended to show fixed-income investors that they are just as important as equity investors, and to build on an already strong relationship the company has with the fixed-income side. He says if equity people were invited, the fixed-income people would not have a full opportunity to talk with the company.
Kevin Morley, a manufacturing analyst and U.S. head of investment-grade research at Credit Suisse First Boston, says fixed-income only events occur regularly, particularly when companies are in a tight liquidity situation, but companies tend not to advertise them to avoid alienating those not invited. He says Qwest Communications had planned an exclusive fixed-income only event, but was ultimately forced to hold a telephone conference instead due to complaints from investors who were not invited.
Other analysts see the conference as a sign of the increasing importance of credit analysis in the post-Enron environment. "We have always been second class citizens. We haven't moved up to first class; we just get more leg room in coach," says Shawn Burke, analyst at HSBC Securities.