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Merrill Upgrades Xcel to 'Near-Term Neutral'


Merrill Lynch upgraded Xcel Energy (XEL) to near-term neutral from reduce/sell.

Analyst Steven Fleishman says the provision eliminates any chances of a cross-default from two lines of credit. He says the deal could have resulted in acceleration of outstanding borrowings in the event of a debt default by Xcel's unit, NRG Energy.

He says Xcel now has better flexibility to protect shareholders and creditors from uncertain outcomes for NRG. Fleishman notes Xcel didn't disclose if any other commitments were made to banks in order to eliminate the provision. While this removes the risk of cross-default by Xcel in the event of a NRG default or bankruptcy filing, he says it doesn't insulate Xcel from the risk associated with such an event. He is keeping his near-term neutral rating.


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