Ameren’s Generating Unit Bonds Plunge to Lowest Level on Record

Bonds of Ameren Corp.’s generating unit fell to their lowest level after the owner of Missouri’s largest utility said last month it was quitting the so-called merchant generation business, precipitating a rating cut.

Ameren Energy Generating Co.’s $300 million of 7 percent bonds due in 2018 plunged 12.75 cents to 65.5 cents on the dollar to yield 17.3 percent at 9 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. That’s the lowest level since the bonds were sold in June 2008.

Ameren will quit owning power plants that sell electricity at market rates and is taking a non-cash pretax charge of $1.5 billion to $2 billion in the fourth quarter, the St. Louis-based company said in a Dec. 20 regulatory filing. Moody’s Investors Service cut the unit’s senior unsecured rating two levels, to B2 from Ba3, and put the grade under review for a further reduction, the firm said in a Jan. 10 statement.

The downgrade and continuing review reflects Ameren’s “weak stand-alone metrics and uncertainty over its sustainability as a standalone entity,” Toby Shea, a credit analyst at Moody’s, said in the statement.