Hawaiian Electric Is in Talks With Restructuring Firms
The utility is facing mounting litigation alleging it was negligent before and during the Maui wildfires Linemen were at work in Maui after deadly wildfires that caused heavy damage. Photo: Rick Bowmer/Associated Press By Alexander Gladstone Updated Aug. 16, 2023 5:46 pm ET | WSJ Pro Hawaiian Electric is speaking with firms that specialize in restructuring advisory work, exploring options to address the electric utility’s financial and legal challenges arising from the Maui wildfires, said people familiar with the matter. Hawaiian Electric is facing a selloff in its stock and bonds, and has been hit with lawsuits alleging that its actions both before and during the wildfires exacerbated the devastation Maui residents have suffered. The company is
Linemen were at work in Maui after deadly wildfires that caused heavy damage.
Photo: Rick Bowmer/Associated Press
Hawaiian Electric is speaking with firms that specialize in restructuring advisory work, exploring options to address the electric utility’s financial and legal challenges arising from the Maui wildfires, said people familiar with the matter.
Hawaiian Electric is facing a selloff in its stock and bonds, and has been hit with lawsuits alleging that its actions both before and during the wildfires exacerbated the devastation Maui residents have suffered.
The company is in discussions over the strategies the company can pursue and to determine whether it needs to hire legal and financial advisers, the people said. Hawaiian Electric didn’t respond to requests for comment.
More customer lawsuits are expected in coming weeks to increase the costs of defending and settling claims for Hawaiian Electric just as its access to financing is being threatened.
S&P Global Ratings downgraded Hawaiian Electric’s credit rating to junk on Tuesday, saying the wildfires destroyed a significant segment of the company’s customer base and will take many years to restore. S&P also said that wildfire lawsuits seeking compensation for injuries, deaths and property damage will weigh on the company’s credit quality.
Lawsuits filed by Maui residents since last week’s blazes have alleged that Hawaiian Electric failed to shut off its power lines as Hurricane Dora approached the island despite the risk that high winds could break tree branches and spark wildfires.
Official probes into the fires’ origins are expected. Investigators are likely to consider several possible sources that sparked the blazes, including a campfire, lightning, transmission equipment and the electrical grid, according to longtime fire investigators and electrical-grid experts.
Electric utilities can face major consequences if they are deemed to share in any responsibility for the spread of wildfires. When California utility PG&E’s equipment was linked to wildfires that swept the state in 2017 and 2018, it used chapter 11 to forge settlements worth $25.5 billion with property owners, insurers and other plaintiffs that protected the value of its stock.
Wildfires have led to legal trouble for other West Coast utilities, including Pacific Power, which was recently found liable and ordered to pay $90 million in damages to a group of plaintiffs in a jury trial related to a spate of 2020 blazes. Pacific Power, owned by Berkshire Hathaway’s
PacificCorp, has disputed that its equipment sparked those fires and is fighting claims from a broader proposed class of plaintiffs.Certain of Hawaiian Electric’s creditors have also been speaking to attorneys with restructuring expertise, seeking to understand the risks to their investments, according to another person involved in the discussions.
As of June 30, Hawaiian Electric and its subsidiaries had roughly $3.5 billion in total debt to banks and bondholders. The company’s bonds due 2037 have plummeted since the fires, changing hands at 69 cents on the dollar Wednesday, down from 95 cents last week. Hawaiian Electric stock closed at $14.57 Wednesday, down by more than half since the wildfires.
As the death toll from the Maui wildfire continues to rise, WSJ’s Alicia A. Caldwell reports that local residents are questioning the federal response. The White House said more than 300 FEMA employees were on the ground. Photo: Yuki Iwamura/AFP/Getty Images
—Andrew Scurria and Jodi Xu Klein contributed to this article.
Write to Alexander Gladstone at [email protected]
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