Shares of the embattled utility company, PG&E, tumbled as much as 17% on Tuesday after S&P Global relegated the utility’s credit rating to junk, with a negative outlook on the back of its potential liability in the California wildfires.
S&P downgraded the rating on PG&E and its subsidiary Pacific Power & Gas from BBB-, the lowest tier of investment-grade ratings, to B (which is deep into junk territory) citing political and regulatory pressure and uncertainty surrounding its potential liabilities.
To make matters more challenging, PG&E's is likely to face much higher interest rates in the event they need to borrow money to fund penalties and operations. S&P Global also indicated limiting PG&E’s capital access to secured debt issuance, citing credit risk and speculation of a potential bankruptcy, thereby further limiting its financing options.
Much like its stock shares, PG&E’s largest bond, a $3 billion note due in March 2034 with a 6.05% coupon, dropped to a record-low bid price of $0.915 on the dollar while its yield rose to nearly 7%.