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Things went from bad to worse Tuesday for PG&E Corporation (NYSE: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.
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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.
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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
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.