January 17, 2019 / 12:25 PM / 3 months ago

Fitch says PG&E's bankruptcy will not hurt California's credit rating

(Reuters) - Fitch Ratings said on Thursday power company PG&E Corp’s (PCG.N) planned bankruptcy will not at this point hurt the credit quality of California.

FILE PHOTO: PG&E crew work on power lines to repair damage caused by the Camp Fire in Paradise, California, U.S. November 21, 2018. REUTERS/Elijah Nouvelage/File Photo

The credit ratings agency, however, said the state’s wildfires and the inverse condemnation rule will remain a long-term risk for the publicly-owned utilities.

Inverse condemnation is an old California rule that exposes the state’s utilities to liabilities from wildfires regardless of their negligence, as long as their equipment is involved.

Earlier in the day, shareholder BlueMountain Capital Management LLC said the U.S. power company’s decision to file for bankruptcy was unnecessary.

BlueMountain said nearly two months after the Camp Fire around 18 Wall Street analysts had found the company solvent with a consensus equity valuation of $20 billion.

“At the very least, the board should wait to take its case to shareholders at the upcoming annual meeting,” the asset manager said in a letter to PG&E’s board. The company’s shareholders are scheduled to meet on May 22.

Earlier this week, the biggest U.S. power utility by customers said it was preparing for Chapter 11 bankruptcy protection as soon as this month amid pressure from potentially crushing liabilities linked to California’s catastrophic wildfires in 2017 and 2018.

“We expect this (bankruptcy) process will assure access to the financial resources necessary to support the safe and reliable gas and electric services our customers need,” the company said in an emailed statement on Thursday.

BlueMountain said the utility should consider asset sales or alternative financing, if needed.

The asset manager held a 0.8 percent stake in PG&E, as of Sept. 30, according to Eikon data from Refinitiv.

PG&E’s shares, which have slumped more than 52 percent this week, closed down about 10 percent at $6.36 on Thursday.

Reporting by Debroop Roy in Bengaluru; Editing by Shinjini Ganguli and Arun Koyyur

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