On Wednesday, Evercore ISI maintained its In Line rating and $16.00 stock price target for Hawaiian Electric (NYSE:HE). The firm addressed the utility company's need to secure $1.7 billion in financing to mitigate its "going concern" risk before filing its annual financial statements by the deadline of March 3, 2025. There is a grace period of approximately one month, which would prevent an immediate event of default following the filing, even if the concern isn't resolved by then.
Hawaiian Electric's Special Purpose Revenue bonds are not subject to an event of default trigger, but all other debts at the holding company and utility level would be impacted. The company has expressed confidence in its ability to close a transaction involving the divestiture of American Savings Bank (ASB), even in the face of potential opposition, by pursuing strategic alternatives for the asset.
Temporary Chief Financial Officer (CFO) Scott DeGhetto's contract is set to conclude on January 1, 2025, unless there are changes to the leadership plans. DeGhetto is expected to continue serving as an advisor until April 1, 2025, to assist with the transition of Paul Ito back into the CFO role for the broader company. Ito is currently the CFO of Hawaiian Electric's utility sector and will resume his previous position once DeGhetto's term ends.
The timeline for bank transactions, which typically take 6 to 8 months to close, may extend beyond the period when the "going concern" risk needs to be addressed. The auditor's interpretation of whether an announced deal is probable of being implemented will play a crucial role in this process.
Hawaiian Electric's management transition occurred in the aftermath of a wildfire in September 2023, when the company appointed Scott DeGhetto, a former investment banker, as its CFO, temporarily replacing Paul Ito. This strategic move was part of the company's broader efforts to stabilize its financial standing and address the challenges ahead.
In other recent news, Hawaiian Electric Industries (NYSE:HE) has agreed to pay approximately $1.99 billion as part of a legal settlement related to the devastating wildfires in Maui. Despite the settlement, Hawaiian Electric and other defendants have not admitted any legal liability. The payments are expected to commence from mid-2025, pending judicial review and approval.
Moreover, Evercore ISI has reiterated its In Line rating on Hawaiian Electric shares amid ongoing court processes. The firm's assessment follows news of discussions between Central Pacific Financial (NYSE:CPF) and Hawaiian Electric regarding the potential purchase of the latter's subsidiary, American Savings Bank.
Hawaiian Electric reported a second-quarter net loss of $1.30 billion, largely due to a wildfire-related charge of $1.71 billion. The company is also considering strategic options for its American Savings Bank unit. These are the recent developments concerning Hawaiian Electric.
InvestingPro Insights
As Hawaiian Electric (NYSE:HE) navigates its complex financial situation, InvestingPro data reveals several key metrics that investors should be aware of. The company's market capitalization stands at $1.35 billion, reflecting the market's current valuation of the utility firm.
Despite facing financial challenges, Hawaiian Electric has maintained dividend payments for an impressive 53 consecutive years, with a current dividend yield of 11.76%, which is a significant return for shareholders. This commitment to dividends is underscored by the company's ability to cover its short-term obligations, as its liquid assets exceed short-term liabilities.
However, the company's financials show signs of strain, with a negative gross profit margin of -29.79% over the last twelve months as of Q2 2024, and an operating income margin of -40.28%, indicating that expenses have outpaced revenues. The company's debt burden is also significant, with a P/E ratio of -1.17, suggesting that it may have trouble making interest payments on its debt. These financial challenges are reflected in the stock's high price volatility, a characteristic that investors should consider when evaluating the company's risk profile.
For those looking to delve deeper into Hawaiian Electric's financial health, there are additional InvestingPro Tips available that can provide further insight into the company's performance and potential strategies for investors.
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