Municipal debt of Hawaiian Electric falls after deadly Maui wildfire

Municipal bonds sold by a unit of Hawaiian Electric Industries, which operates the utility that serves Maui, are plunging amid scrutiny over the company’s possible role in the island’s deadly wildfire.

Investment-grade muni bonds sold by Hawaiian Electric Co. due in 2039 traded at about 65.7 cents on the dollar on Monday. That compares with above 80 cents in the days before the catastrophe, according to data compiled by Bloomberg.   

Separate muni debt due in 2049 traded as low as about 63 cents on the dollar on Tuesday, down from an average of 71 cents on Monday. 

Hawaiian Electric’s long-term rating was cut to junk on Tuesday by S&P Global Ratings, which cited class action lawsuits recently filed against the company and its subsidiaries that have “increased the risk of a material deterioration in HEI’s credit quality” if the plaintiffs prevail.

The wildfire devastated the historic West Maui town of Lahaina and killed at least 99 people with the toll expected to rise.

Hawaiian Electric has come under criticism for not turning off power despite weather forecasters’ warnings that dry, gusty winds could create critical fire conditions.

Plaintiffs attorneys are focusing on the utility’s equipment as a possible source of ignition, drawing comparisons to California investor-owned utility PG&E, which filed for bankruptcy in 2019 citing liability for deadly wildfires sparked by the firm’s equipment.

Hawaiian Electric’s stock extended declines Tuesday after plunging 34% a day earlier. No official cause has been identified for the fire, which has become the deadliest in the US in more than a century.

The company’s tax-exempt special purpose revenue bonds are issued through the Hawaii Department of Budget and Finance.

It had about $542 million of such obligations outstanding at the end of 2022, according to the firm’s Form 10-K annual report, which was posted on the Municipal Securities Rulemaking Board’s EMMA bond disclosure website.

Hawaiian Electric Co. most recently tapped the muni market in 2019 to refund debt with higher interest rates. 

The state’s attorney general said Friday that she was opening an investigation into how authorities responded to the wildfires.