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Author: andyz151 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 117  
Subject: Re: Calling all Andyz Date: 11/11/2002 10:12 PM
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Ed,

Sorry, its been crazy for the last month, I move out of DC and into Virginia last week, who knew I had so much stuff ;-)

For what it is worth, I am keeping XEL. By severing any cross liabilities with NRG, they have really limited their down side. Consider it like this: NRG has filed for Bankruptcy protection. Who gets what? Well XEL owns all the equity, i.e. they bought back all the shares [man I bet those share holders who grumbled when XEL bought the shares back are happy campers today]. But the bond holders and the banks get first dibs on the assets, not XEL. So by servering all cross liabilities, XEL is on the hook for its equity investment, just like any ordinary stock holder in a company that goes bankrupt. [Ok that is a tad simplistic but it illustrates the point.]

So where is the down side to XEL? None really from the actual bankruptcy, but there is also no upside to their earnings that NRG was suppose to provide. This means that XEL is going to have a hard time growing earnings. They are now going to be just a plan old utility again. One that pays about 7% right now.


Don't follow AGR sorry.

Andy
The upside is that they can renegotiate the debt at favorable terms and keep NRG. If they can do this, and keep the NRG assets for a time when they are valuable again and providing income to the bottom line then XEL will get a pop, if not, well they are still paying 7% with minimum risk - in my opinion - of a further dividend cut [they earning about 1.50 a share and pay .75 a share so they cover the dividend very well]

ILA is priced for a rate cut. Mr. Market is valuing them at such a low rate that a further cut seems inevitable [if not an elimination of the dividend] Not sure why but ILA has held steady at below 5 for too long. XEL has increased about 50% from its low - a low that didn't last long. I would sell ILA and keep XEL - but that is based on the income, I think ILA will reduce theirs and XEL will maintain theirs. Of course you could wait til the next dividend is declared at ILA and go from there. If they don't cut their dividend, I would be you will a big pop in their price.

LU - SELL. Don't see a recovery anytime soon. If you love this company, sell now and buy a bunch back in 31 days. I sold at 42 at a lost and SO glad I did. Too much debt, too much competition too few buyers right now and for a while to come given all the bankrupt teleco assets up for sale right now.

Andy

PS sorry for any typos, tried to answer this but am kind of tired tonight.
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