Constellation Energy Group third-quarter earnings out today. Didn't get to them earlier. The headline: Unwinding trading positions and selling businesses could raise enough cash for CEG to avoid bankruptcy if shareholders reject the planned merger of one of Maryland's biggest companies with Warren Buffett's MidAmerican Energy Holdings. The multibillion-dollar poker game between Baltimore and Omaha is still on. Background can be found in this column, "Omaha sage could get a Baltimore 'never mind'" Pequot Capital's Catapult Capital's David Frank put Constellation CEO Mayo Shattuck on the spot at the very end of the conference call. Emphasis is mine:

FRANK: “But it would be a safe bet that if you are able to complete some portion if not all of these transactions, your coverage to collateral requirement in a downgrade would be maybe two or three times [what's necessary]. So I guess my question to Mayo would be: this sounds great. Wouldn’t this then obviate the purpose and the need for the merger with Mid-American?"

SHATTUCK: "Well David, you get to the fundamental point, obviously. We intend to merge with Mid-American. We’re proceeding down that path. We also have the obligation as an independent company right now to operate ourselves prudently. So yes, we’re going down both paths so to speak. But we also think there's alignment between the two and we think it’s important that we manage the company that way." Moves to raise liquidity and survive a bond downgrade "are really consistent with what we'd be doing independently anyway," Shattuck said

FRANK: "Right. And I understand, your comments with regard to the merger you basically have to say. But I also know you wouldn't want to willingly sell this company at less than two times trough EBITDA. So I guess as as shareholder of the company, if you’re successful in executing on all of these plans, I would certainly vote against this deal and I hope we get a resounding 'no' because your company is certainly worth far more standalone than it is under this price."

As Shattuck said: This is the fundamental point. If CEG shareholders reject Buffett's $26.50, bargain basement price, will CEG have enough cash to survive the bond downgrade that would almost certainly follow? Buffett's betting that the answer is no, or at least that shareholders won't have the guts to find out. But Constellation is upgrading its cash and credit position, a third-quarter trading loss of $210 million (everybody wondered what was going on in the trading book) and shrinkage of a UBS/RBS borrowing facility from $2 billion to $1.2 billion notwithstanding.

According to Constellation's projections, selling various businesses, getting collateral returned and setting up credit lines could give it access to more than $3.5 billion by the end of the year. But at that point if its bonds were downgraded to junk status, its collateral requirements would be only $1.1 billion. Sure, there's no promise it can sell the stuff soon enough. Shareholder vote is expected for December or January. Financial markets are still crazy. But this is going to be very interesting.