Baltimore Gas and Electric Co. completed the largest public financing in its nearly 180-year history yesterday, when it sold $250 million worth of preferred stock through a trust that it recently established in Delaware.
BGE Capital Trust I's preferred securities sale will retire $93 million worth of outstanding preference stock, and the utility intends to use the balance of the proceeds for as yet unidentified general corporate purposes.
"This is a new type of security for BGE, but other utilities have been using them for 10 years or more," said Chuck Starkey, a BGE principal financial analyst. "It allows BGE to deduct dividend distributions from its corporate taxes."
The new securities carry a 7.16 percent interest rate, while the old preference stock had interest rates ranging from 6.75 percent to 7.78 percent.
BGE expects to save $1 million a year from the 10 million shares issued by the trust, which the company formed in late May.
The utility stressed that the trust's creation was in no way linked to BGE's deliberations about establishing a holding company in Delaware. BGE began contemplating creating a holding company there after state lawmakers in Annapolis defeated a bill that would have allowed the formation of holding companies in Maryland.
As a holding company, BGE contends, it would have greater financial flexibility, particularly in relation to its unregulated subsidiaries. Under Maryland law, BGE must receive approval from state regulators to raise money for its Constellation Enterprises Inc. subsidiaries.
Maryland is the only state that prohibits utility holding companies.
BGE last sold stock publicly in 1995. Yesterday's stock issue was underwritten by Merrill Lynch, Pierce, Fenner & Smith Inc. and a consortium of six investment firms that included Legg Mason Wood Walker Inc.
Pub Date: 6/11/98