PG&E Continues Fall After Credit Rating Cut To Junk Status

Things went from bad to worse Tuesday for PG&E Corporation PCG and its investors after a credit rating downgrade sent shares tumbling for the second straight day.

After Monday's close, S&P Global cut PG&E Corp’s credit rating from BBB- to B, a move that drops the company’s debt from investment grade to “highly speculative” non-investment grade, or “junk” status.

S&P said PG&E could be subject to further credit downgrades in coming weeks “if management does not clearly articulate specific steps it will take to preserve credit quality over the long term.”

Hardly A Surprise

The rating cut wasn’t particularly surprising after a pair of troubling reports sent PG&E shares plummeting more than 20 percent Monday. CNBC reported the company could face a minimum of $30 billion in liabilities related to California wildfires in 2017 and 2018, citing unnamed sources. The CNBC report followed a Reuters story over the weekend suggesting the utility is considering a bankruptcy filing and will potentially be taking a major financial charge in Q4.

In June, California found PG&E equipment was responsible for starting dozens of fires throughout the state in 2017. The state is now investigating whether PG&E equipment was responsible for starting 2018’s Camp Fire, the most destructive wildfire in California history.

A potential $30 billion in liability for PG&E would far outpace its market cap of $8.8 billion.

On Monday, Height Capital Markets analyst Clayton Allen predicted a potential rating cut to junk status.

“We argue bankruptcy may be a substantive solution for several of PCG’s woes, and should be considered a credible risk by shareholders,” Allen said.

Following Tuesday’s 10-percent drop, PG&E stock is now down 65 percent overall in the past three months.

Related Links:

PG&E Stock Slammed Following Reports Of Massive Wildfire Liability, Potential Bankruptcy

Morgan Stanley Updates Outlook For PG&E After Mixed Wildfire Developments