Fitch cuts Constellation, Baltimore Gas

Fitch Ratings has downgraded Constellation Energy Group, Inc.'s long-term issuer default rating and senior unsecured notes to BBB- from BBB, its junior subordinated notes to BB+ from BBB- and its short-term issuer default rating and commercial paper to F3 from F2.

The agency also downgraded Baltimore Gas and Electric Co.'s long-term issuer default rating and preferred stock to BBB from BBB+ and its senior unsecured notes/pollution control revenue bonds to BBB+ from A-. BGE Capital Trust II's preferred stock was lowered to BBB from BBB+.

The ratings were removed from Rating Watch evolving, and the outlook is stable.

The agency said the downgrade reflects a review of the expected future corporate cash flows from Constellation's businesses and the amount of debt expected under two scenarios. In the first scenario, the company sells its 49.99% joint venture interest in Constellation Energy Nuclear Generation to Electricite de France. The second scenario considers the consequences if the sale is not completed.

Fitch said the first scenario would result in greater near-term debt reduction and more favorable credit ratios in 2010-2011, but the second scenario would have more robust cash flow and potential debt reduction in 2012 and thereafter.

The removal of the ratings from Rating Watch evolving reflects the company's accomplishment of the divestiture of its Houston and London commodity trading businesses and a material reduction of its trading exposures and collateral and contingent collateral needs relating to trading exposures, the agency said.

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