Morning Commentary: Pacific Gas & Electric in focus on downgrade to junk; Hornbeck up

By Abigail W. Adams

Portland, Me., Jan. 8 – Pacific Gas & Electric’s junk bonds were in focus and trading sharply lower on Tuesday after S&P Global Ratings downgraded the struggling utility company to junk.

Pacific Gas & Electric’s 6.05% senior notes due 2034 were “all over the place” in high-volume trading, a market source said.

However, the majority of trades were between 88 and 89 after the notes closed Monday at 92.

Pacific Gas & Electric’s 3½% senior notes due 2020 were also extremely active with the notes down 2 points to 90.

The 4.3% notes due 2045 dropped about 1½ points early in the session, the 3½% notes due 2025 dropped 3½ points and the 3¾% notes due 2024 dropped 4 points, according to a market source.

S&P cut its rating on Pacific Gas & Electric to B from BBB- due to the utility company’s announcement that it was exploring bankruptcy due to liability from the California wildfires of 2017 and 2018.

While Pacific Gas & Electric’s bonds were dropping, the overall market was strong with the tone improved.

Hornbeck Offshore Services’ 5 7/8% senior notes due 2020 popped after the company announced a partial exchange offer. The 5 7/8% notes were up 3 points to 63 on the partial takeout, a market source said.

Hornbeck is offering to exchange up to $200 million of its 5 7/8% notes for new 9½% second-lien term loans due 2025 with total consideration between $760 and $850 per $1,000 of notes.

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