PG&E Bonds Jump on Settlement Talks -- Update

By Matt Wirz 

Prices of PG&E Corp.'s high-interest bonds are staging a major rebound, 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 114.5 cents on the dollar Thursday afternoon, 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 around 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 $12.63 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 on the benchmark 10-year note settled at 1.809%, up from 1.788% Wednesday. Yields rise as bond prices fall.

The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, ended a two-day slump and climbed about 0.1% to 90.26 Thursday from 90.20 on Wednesday, paralleling a rise in U.S. stocks.

Write to Matt Wirz at [e-mail]

(END) Dow Jones Newswires

January 16, 2020 18:33 ET (23:33 GMT)

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