By Tyler Durden | 11 January 2018
ZERO HEDGE — For PG&E, just like for AIG ten years ago, this is the beginning of the end.
As we discussed on Tuesday, one of the biggest surprises involving the ongoing collapse of troubled California utility PG&E is how it was possible, that with the company reportedly contemplating a DIP loan ahead of a possible bankruptcy filing which sent PCG stock plunging and its bonds cratering to all time lows, that rating agencies still had the company rated as investment grade.
Late on Monday, this question got some closure after S&P became the first rating agency to take a machete to its rating for PG&E, when it downgraded the company by five notches, from BBB- to B, the fifth-highest junk rating while warning that more cuts are imminent. But while S&P slashed PG&E’s IG ratings, Fitch and Moody bizarrely had yet to do so, well over a month into the company’s death spiral. And when they do, both management, shareholders and bondholders would have nightmare on their hands because a similar “junking” by Moody’s to high-yield would result in a rerun of the AIG death spiral, as at least once cash collateral call for PG&E of at least $800 million – to guarantee power contracts – would be triggered according to a regulatory filing. […]