Moody's: M&A Increases Bondholder Risk
A Moody's Investors Service report, Moody's Assesses Risk in Utility Combinations and Spin-Offs, finds that mergers and acquisitions (M&A) do not mitigate the higher business risk posed by electric deregulation. The report also claims that financial risk only declines to the extent that management uses merger-related savings to reduce leverage.
Utilities pursue mergers to boost shareholder returns; regulators approve mergers to secure benefits for customers, such as lower rates. Bondholders run a distant third.