PG&E

If you’re a company that has filed for bankruptcy, then it’s in your best interest to pay your creditors, the bondholders as less of on interest as you can. Of course, this is not why the bondholders bought the bonds, but if you’re going bankrupt, then the way to save money is to pay as less interest as you can on what you owe.

A California bankruptcy court has sided with PG&E and has ruled that the interest rate the firm owes to its bondholders is about 2.59%. The decision will reduce PG&E’s interest burden by $550 million.

Bond funds Elliot Management Corp. and PIMCO are the major bondholders, and they believe they’re owed the original interest rates when the bonds were issued - almost 6.05%. Since the bond matures in 2034, the claim by the firms is that PG&E should pay a premium for retiring on its debt early.

This is a perfect example of when the interests of shareholders and the firm do not align. In a perfect world, they do, because the firm raises debt in the promise of delivering a high rate of interest at the time of maturation for a bond. But incentives can quickly change when you’re responsible for lives, damages, and wildfires because of corporate negligence.

This is a loss for bondholders, but a win for PG&E, continuing the epic saga of - sometimes corporations are unable to do what they promised they would do. So if you’re investing in bonds, make sure to read the asterisk on the legal paperwork in the terms and conditions agreement that says the terms might not be valid if we’re filing for bankruptcy.

Oil

The market for oil is one that is more sensitive to changing political winds than any other. Today we saw Oil jump to almost $70 a barrel after a US airstrike ordered by President Trump killed a top Iranian General in Iraq.

According to the defence department, the strike killed Qassem Soleimani, the Iranian General who led the Revolutionary Guards’ Quds force. Even though the strike did not impact an oil production facility, the futures market for crude is pricing in increased tension in the middle east, and thus, uncertainty in future oil production.

In the past week, tensions have risen between us an Iran, ever since an Iran backed Iraqi militia stormed the US embassy in Baghdad to protest US airstrikes earlier this week. US Defense Secretary Mark Esper also said that the US would be ready to deploy more forces in Iraq after an attack on the embassy.

Collectively, Iran and Iraq are responsible for the global production of 6.7 million barrels a day of oil, more than 20% of the OPEC output. Exports from the nations go via the Strait of Hormuz, an area that is likely to be compromised if tensions rise.

Office Activism

Here is an interesting story about Amazon, that has threatened to fire some of its employees that have spoken about Amazon’s lack of action against climate change. The argument from Amazon’s end is that employees are speaking about the company’s internal affairs in public.

According to Bloomberg, two were threatened with termination and four were told not to speak to the press, or speak about the company on social media. Here’s the irony - the employee spoke to Washington Post, which is owned by - you guessed it - Jeff Bezos.

Apparently, the firm’s policy to not talk publicly about what the firm should do is longstanding. Employees are “encouraged to work within their teams,” and may suggest “improvements to how we operate through those internal channels.”

Is this to say that employers only care about profits and not the planet? Or is this simply the case of image management and “controlling the narrative”? I’ll let you decide.