Buy the Debt, Sell the Stock

Per the AP, again:

The company now expects to earn between $2.90 and $3.30 per share for the year. A company spokesman said the prediction includes the impact of the recent sale of a portion of its nuclear business. Constellation Energy Group agreed on Wednesday to sell half of its nuclear-power business to Electricite de France SA for $4.5 billion, scuttling a deal struck in September with Warren Buffett's MidAmerican Energy Holdings Co.

Constellation also said it may cut its dividend by 50 to 60 percent to improve cash flow and pay down debt. It last paid a dividend of 47.75 cents in October.

At this point I don't see the advantage of owning the stock @ 24 yielding a little over 3% when you could own the bond, cegpra @ $19, yielding 11%.   They would have to increase their dividend 20% a year for 5 years to get back to the 47.75 cents.  Meanwhile, their new sense of stewardship which is motivating them to pay down debt can only help the bond rating.  If by some chance they got the firm up to investment grade, it would be a windfall for the preferred.  If things don't work out as well, the debt is senior to the stock and we know someone would buy the other 1/2 of the nuclear plants.