Hardly, market observers say. The energy mess already has rattled financial markets. BofA denied the rumors, and its shares have recovered. But a continuing crisis could renew investors' worries about the exposure that it and other big banks face in California. Both utilities have not paid millions of dollars owed to bondholders and power generators.
Bankers are nervous too, and they' ve rebuffed the utilities' requests for credit lines.
Power generators could force the issue. A trip to bankruptcy court probably wouldn't solve California's energy crisis, and the state's two big utilities adamantly argue that bankruptcy isn't the answer. But for some investors, a filing could have its bright side. It would allow the financial markets to focus on bankruptcy rules, instead of drifting in uncertainty, which the markets don't like, explains Klee. For bond mutual funds that hold the utilities' debt and for diversified funds that include the utilities' stock and bonds, the impact of a bankruptcy filing would depend on whether or not the loans were secured and the extent of exposure to such utility holdings.