Paradise, Calif., the town destroyed by the 2018 Camp Fire, says it is close to a debt default, heightening municipal bond investors’ concerns over how a warming planet is adding risk to their $4 trillion market.
A downed power line sparked the fire, which spread through forested hills baked dry by a lengthy drought. The town received $219 million in settlement money from utility PG&E Corp. in 2020, but Paradise recently disclosed to bondholders that “no assurances can be given” that it will repay about $5 million that one of its agencies borrowed years ago. The agency’s cash is close to running out, and local officials have earmarked the settlement funds for reconstruction, not debt repayment. S&P Global Ratings slashed the bonds’ rating by six notches to triple-C in June, pushing it deeper into junk territory.