Drawing the short straw

The perennial complaint from bondholders that their interests are often overlooked in favour of shareholders has again been illustrated by the game of hot potato involving Midlands Electricity and the problems surrounding Northumbrian Water’s bonds. Hardeep Dhillon reports

Back in 2000, Midlands Electricity was a profitable and, to all intents and purposes, a viable going concern. The business profile of the utility was supported by predictable revenues and underpinned by the regulated electricity distribution operations. A year earlier, the company had sold off its supply business, which further bolstered its profile.

In August 2000, when US energy firm FirstEnergy made a bid for Midlands, the company was in possession of a respectable single-A minus