NEW YORK -- Credit ratings agency Standard & Poor's Ratings Services has placed its ratings for utility company Duke Energy (DUK) on watch for a possible downgrade in response to a sudden leadership change after its acquisition of Progress Energy.
Duke Energy completed its acquisition of Progress Energy on Monday, forming the nation's largest electric company. But the company said Bill Johnson, who was tapped to lead the combined company as president and chief executive, decided to leave by "mutual agreement."
Duke CEO Jim Rogers, who was expected to be executive chairman, was named CEO of the new company.
On Tuesday S&P said it was placing its "A-" corporate credit and issue ratings on Duke Energy on CreditWatch with negative implications in response to the "abrupt change" in leadership. That means the company could downgrade the ratings. An "A-" rating is an investment grade rating that indicates a company has a strong capacity to meet financial requirements.In addition, the company revised its watch on Progress Energy's "BBB+" ratings to developing from positive, indicating an upgrade is less likely. A "BBB+" rating indicates a company has adequate capacity to pay back debt but is also vulnerable to a weak economy. "The sudden shift in management raises concerns about effective corporate governance, successful handling of the anticipated merger integration, and the ongoing effective management of pending challenges that face the combined entity," said Standard & Poor's credit analyst Dimitri Nikas.