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Illustration: Aïda Amer/Axios

Both Moody's and S&P Global downgraded PG&E from investment grade to junk this week, meaning the California utility is likely in for some major upheaval.

Why it matters: PG&E's problems are unique, but the company's recent trouble highlights a growing risk in the credit market for companies that technically have investment grade debt, but are teetering on the brink of junk status. A weakening economic and credit cycle could spark a slew of downgrades, with half of investment-grade debt in the lowest-rated rank.

The number of companies with debt just one level above junk has swelled 247% since the end of 2007, faster than the 190% increase for the overall credit market. But so far, only 7% of these companies has been downgraded, according to Fitch Ratings.

  • A downgrade would make it pricier for companies to tap into capital markets, which some rely on for growth and others just to keep things running. A downgrade to junk can also force fund managers who only hold investment grade debt to sell, and high-yield managers might not be interested until the price falls further.

The bottom line: Corporations have ratcheted up their debt load to the tune of $9 trillion since the financial crisis, thanks to easy money and a long period of low interest rates. S&P Global analysts noted recently that the booming credit cycle is "in its later stages."

Go deeper

Trump set to appear at Pennsylvania GOP hearing on voter fraud claims

President Trumpat the White House on Tuesday. Photo: Chip Somodevilla/Getty Images

President Trump is due to join his personal lawyer Rudy Giuliani in Gettysburg, Pennsylvania, Wednesday at a Republican-led state Senate Majority Policy Committee hearing to discuss alleged election irregularities.

Why it matters: This would be his first trip outside of the DMV since Election Day and comes shortly after GSA ascertained the results, formally signing off on a transition to President-elect Biden.

Scoop: Trump tells confidants he plans to pardon Michael Flynn

Photo: Alex Wroblewski/Getty Images

President Trump has told confidants he plans to pardon his former national security adviser Michael Flynn, who pleaded guilty in December 2017 to lying to the FBI about his Russian contacts, two sources with direct knowledge of the discussions tell Axios.

Behind the scenes: Sources with direct knowledge of the discussions said Flynn will be part of a series of pardons that Trump issues between now and when he leaves office.

Erica Pandey, author of @Work
10 hours ago - World

Remote work shakes up geopolitics

Illustration: Eniola Odetunde/Axios

The global adoption of remote work may leave the rising powers in the East behind.

The big picture: Despite India's and China's economic might, these countries have far fewer remote jobs than the U.S. or Europe. That's affecting the emerging economies' resilience amid the pandemic.