Hawaiian Electric Muni Debt Risks Junk Cut, Barclays Says.

A unit of Hawaiian Electric Industries that is under scrutiny for its possible role in the deadly Maui wildfires could end up seeing its municipal bonds slashed to high-yield from investment-grade, according to Barclays Plc muni and ESG strategists.

Hawaiian Electric Co. and its subsidiaries have roughly $500 million in special purpose municipal debt and it’s “quite possible” those bonds could be downgraded to below investment-grade in the near future, reads Barclays’ note out Wednesday. S&P Global Ratings cut Hawaiian Electric Industries to junk earlier this week.

“In that case we might see heavy forced selling from investors that are not able to hold high yield muni debt,” strategists led by Clare Pickering wrote. “If this happens in late August or early September, the secondary market might not be deep enough to absorb heavy selling if it materializes, which might cause outsize price swings.”

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Bloomberg Markets

By Amanda Albright

August 17, 2023

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