Paradise, the California town ravaged by wildfires, warns of the lack of municipal obligation

Paradise, Calif., the town destroyed by the 2018 Camp Fire, says it is close to default, raising concerns among municipal bond investors about how global warming will adds risk to their $4 trillion market.

A downed power line sparked the fire, which spread through the wooded hillsides parched by a long drought. The city received $219 million in utility settlement money P&E Corp. in 2020, but Paradise recently revealed to bondholders that “no assurance can be given” that it will repay approximately $5 million that one of its agencies borrowed years ago. The agency’s cash is running out, and local officials have earmarked settlement funds for reconstruction, not debt repayment. S&P Global Ratings downgraded the bond’s rating six notches to triple C in June, pushing it deeper into undesirable territory.


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