The stock of Hawaiian Electric Industries Inc. (HE) took another hit in premarket trade on Friday, dropping an additional 21%. This comes after Standard & Poor's (S&P) downgraded the company's rating, sending it further into junk territory. The downgrade is a result of ongoing issues stemming from the devastating Maui wildfires.
Legal Troubles
In response to the fires, Maui County has filed a lawsuit against the utility company. The lawsuit claims that Hawaiian Electric Industries failed to take necessary precautions by not shutting off power during high winds and dry conditions. This negligence is believed to have contributed to the spread of the wildfires.
Financial Measures
To address its financial challenges, Hawaiian Electric Industries has decided to suspend its dividend payments in order to conserve cash. Additionally, the company has tapped into almost all of its $375 million revolving credit facilities. These measures are being taken to alleviate near-term liquidity risks.
S&P's Assessment
Standard & Poor's issued a statement expressing their views on management's decisions. While acknowledging the steps taken to mitigate liquidity risks, S&P also sees these actions as confirmation of the company's inconsistent access to capital markets. They consider this access fundamental to the successful operation of a utility business.
Credit Rating Downgrade
As a consequence of the wildfires, S&P has downgraded Hawaiian Electric Industries' credit rating from BB- to B-. The rating agency has also placed the company on CreditWatch negative, leaving open the possibility of further downgrades in the future. This initial downgrade to junk status occurred on August 16.
Stock Performance
Reflecting the ongoing challenges faced by the company, its stock has seen a significant decline of 72% year-to-date. In contrast, the broader market, represented by the S&P 500, has experienced a gain of 14%.
With uncertain prospects and ongoing legal troubles, Hawaiian Electric Industries Inc. faces an uphill battle in regaining investor confidence and stabilizing its business operations.
