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Jul 24, 2023

Bankruptcy ‘Most Plausible’ Outcome For Hawaiian Electric As Stock Slides And Allegations Over Maui Fire Grow, Wells Fargo Says

Hawaiian Electric’s stock collapse in the aftermath of its alleged role in the deadly Maui wildfires reached historic levels Friday as the utility company faced another downgrade to its credit

Hawaiian Electric’s stock collapse in the aftermath of its alleged role in the deadly Maui wildfires reached historic levels Friday as the utility company faced another downgrade to its credit rating—and Wells Fargo says bankruptcy may be the most likely path forward for the beleaguered firm.

Hawaiian Electric announced the suspension of its dividends Thursday, amid mounting backlash.

Shares of Hawaiian Electric fell nearly 20% to below $10 in early trading after a glut of troubling news late Thursday, when Maui County sued the company for negligence for its alleged inactivity in the disaster earlier this month that claimed at least 115 lives, and Hawaiian Electric announced it drew $370 million in credit facilities and it will suspend quarterly dividend payments.

Hawaiian Electric’s stock is now down 75% this month, falling to its lowest share price since 1984.

With the firm “potentially under severe financial duress,” a Chapter 11 reorganization bankruptcy filing is the “most plausible path forward” for Hawaiian Electric ahead of its “inevitable liquidity crunch,” Wells Fargo analysts, led by Jonathan Reeder, wrote in a note to clients Friday.

The Maui County suit is “particularly troublesome” for Hawaiian Electric, the bank added, setting an $8 price target and a “hold” rating for the power company.

$3.9 billion. That’s how much for which Hawaiian Electric could be on the hook if found liable for the wildfires, the research firm Capstone estimated last week. Considering that’s about four times as large as its market value, Hawaiian Electric’s risk of filing for bankruptcy is “growing,” Capstone noted.

Hawaiian Electric’s market capitalization is down from over $4 billion to $1.1 billion this month. S&P, Moody’s and Fitch all slashed their ratings for Hawaiian Electric this month. In addition to Maui County, shareholders and local residents have also sued Hawaiian Electric for failing to safeguard against wildfire risks. A Hawaiian Electric spokesperson told the Associated Press on Thursday it’s “very disappointed that Maui County chose this litigious path while the investigation is still unfolding.”

Utilities are the worst-performing of the S&P 500’s 11 sectors over the last month, sliding 8% compared to the index’s 4% loss over the stretch.