PG&E Bond Prices Jump as Shares Dip
June 24 2019 - 3:09PM
Dow Jones News
By Matt Wirz
PG&E Corp. bond prices surged in heavy trading Monday even
as shares slipped, a divergence that some analysts said reflects
uncertainty about how much new equity the bankrupt California
utility needs to raise in order to address claims tied to past and
future wildfires.
About $290 million of the bonds changed hands, making PG&E
the most actively traded high-yield corporate, according to
MarketAxess. Its bond due 2034 hit 109.75 cents on the dollar, up
from 107.5 Friday and 101.38 at the start of last week. The
company's stock slipped 1.9%.
The company's shares and bonds both rallied last week after the
company reached its first major settlement with wildfire victims
and California Gov. Gavin Newsom proposed a plan for a
multibillion-dollar fund to cover fire-related liabilities.
Ultimate recoveries on PG&E shares and bonds will depend on
how the company raises capital to offset wildfire liabilities. Some
of the funding could come from increasing charges to electricity
ratepayers and from issuance of new bonds backed by the utility's
future revenues. But the larger the size of the state wildfire fund
-- options floated by Mr. Newsom range from $10.5 billion to $21
billion -- the more shareholders or bondholders will have to
contribute themselves.
If the fund is on the higher end, "we assume $9 billion of
traditional equity would need to be raised to fund PG&E's
contribution," Morgan Stanley & Co. analyst Stephen Byrd wrote
in a report published Monday.
Bondholders could pay such a sum through a rights offering, but
that would dilute existing shareholders, hedge-fund analysts said.
If the shareholders foot the bill themselves, the cash they spend
would eat into potential profits on the company stock
postbankruptcy, they said.
In the Treasury market, the yield on the 10-year note fell to
2.021% from 2.066% after the Federal Reserve Bank of Dallas
released a lukewarm reading of manufacturing activity. The WSJ
Dollar index lost 0.2%.
Write to Matt Wirz at matthieu.wirz@wsj.com
(END) Dow Jones Newswires
June 24, 2019 14:54 ET (18:54 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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