PG&E Bonds Hit Three-Month High on Settlement Talks
January 16 2020 - 12:40PM
Dow Jones News
By Matt Wirz
Prices of PG&E Corp.'s high-interest bonds are approaching
three-month records, lifted by expectations that bondholders and
the bankrupt utility will reach a settlement in their dispute over
recoveries on the debt.
PG&E's $3 billion 6.05% bond due in 2034 changed hands at
114.25 cents on the dollar Thursday morning, up from 113.81
Wednesday and around 110 on Monday. The company disclosed in a
bankruptcy-court hearing Tuesday that it was in "constructive
negotiations" with bondholders.
The 6.05% bond last traded at these levels in October, before
the Kincade Fire in California sparked a steep selloff in
PG&E's shares and bonds, according to trade data from
MarketAxess.
A committee of PG&E bond investors, which includes Elliott
Management Corp. and Pacific Investment Management Co., has argued
in court filings that the company's restructuring must pay
bondholders what they would have been entitled to absent a
bankruptcy. In that scenario, bonds that bear a higher rate of
interest would recover more than debt issued at a lower rate.
PG&E's $600 million 2.95% bond due 2026 fell slightly
Thursday to 100.50 cents on the dollar from 100.75 Wednesday,
according to data from MarketAxess. The utility's stock edged down
to $12.69 Thursday from $12.75 Wednesday but is up significantly
from its $11.07 close on Monday.
If PG&E reaches a compromise with the group, it would likely
keep its higher-cost bonds outstanding rather than issuing new debt
to retire the bonds, according to research by CreditSights. Such a
deal would raise the company's debt expense from what it proposed
in its plan of reorganization but would cut down the amount of new
bonds PG&E will have to sell, CreditSights said
Meanwhile, Treasury-bond yields rose Thursday amid a flurry of
positive economic data, including steady growth in December retail
sales and lower jobless claims in the week ended Jan. 11. The yield
of the 10-year note was trading around 1.806% Thursday, up from a
close of 1.788% Wednesday, according to Tradeweb.
The WSJ Dollar Index, which measures the U.S. currency against a
basket of 16 others, climbed Thursday to 90.28 from 90.20 on
Wednesday, paralleling a rise in U.S. stocks.
Write to Matt Wirz at matthieu.wirz@wsj.com
(END) Dow Jones Newswires
January 16, 2020 12:25 ET (17:25 GMT)
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