PIMCO: LA Bondholders Safe from Wildfire Losses

Los Angeles municipal bondholders will not face payment disruptions despite ongoing wildfires, according to PIMCO, a major U.S. bond fund manager.

The wildfires, which started on January 7, have caused massive damage, but PIMCO expects the financial impact to be manageable. The firm, which manages $2 trillion, believes that LA’s strong financial position will help absorb the losses.

LA’s Finances Remain Strong

PIMCO stated that Los Angeles city, county, school districts, and the state of California have the financial strength to manage the crisis. Key reasons include:

• A broad tax base – Property damage will not significantly reduce revenue.
• Federal aid – The Federal Emergency Management Agency (FEMA) will provide assistance.
• Healthy reserve funds – Local governments have enough liquidity to cover short-term costs.

LADWP Faces Credit Downgrade

While most local governments are financially stable, the Los Angeles Department of Water and Power (LADWP) is facing difficulties.

• LADWP was sued for allegedly mismanaging water supplies during the deadly Palisades Fire.
• S&P Global Ratings downgraded LADWP bonds by two notches due to potential liability claims.
• The risk of missed payments is low, but investors may demand higher returns due to legal uncertainties.

LADWP has not yet responded to the situation.

Despite these concerns, PIMCO reassured investors that Los Angeles bonds remain safe, and payments will continue without issue.