PG&E Makes Final Push to Stay in Charge of Chapter 11
14 August 2019 - 10:15AM
Dow Jones News
By Peg Brickley and Soma Biswas
Faced with losing control of a multibillion-dollar bankruptcy
process, PG&E Corp. promised to swiftly file a chapter 11 exit
plan with financial backing in a bid to keep the company's fate in
its own hands.
Two contingents of creditors are anxious to propose their own
strategy to lift PG&E out of bankruptcy, and they need a judge
to clear the way. The utility owner has opposed the request, and
asked to hold on to the exclusive right to file a chapter 11 plan.
Bondholders and other investors said PG&E's pledge of a fast
chapter 11 exit plan, which came after the company had spent six
months under bankruptcy protection, only proves that competition is
needed to push the embattled company toward a chapter 11 exit.
Judge Dennis Montali is expected to rule Wednesday in the U.S.
Bankruptcy Court in San Francisco on creditors' requests to present
their own restructuring strategies for PG&E, which filed for
chapter 11 in January.
The company filed papers on Monday, saying it has ample access
to financing to cover the damages from years of wildfires linked to
its equipment, and enough to end its costly bankruptcy. PG&E
promised to file a chapter 11 exit plan by Sept. 9.
At a court hearing on Tuesday, PG&E lawyer Stephen Karotkin
said financing offers continued to roll in as investors line up to
support the company.
By Tuesday morning, 33 different Wall Street institutions were
offering more than $13 billion in financing commitments to help
PG&E pay down the damage caused by its equipment, Mr. Karotkin
said.
Under fire from bondholders, PG&E outlined terms of a plan
with certain shareholders that values the company's stock at a
minimum price of $17.80 per share. A competing plan from
bondholders including Elliott Management Corp. and Pacific
Investment Management Co. values the shares at $6 at most,
according to a lawyer for shareholders.
Shareholder lawyer Bruce Bennett slammed the bondholders' plan,
saying they would pocket $1.5 billion in unnecessary interest
payments, hundreds of millions of dollars in fees and control over
PG&E at the expense of its current owners.
Insurance companies that have paid fire damage claims and
hedge-fund manager Baupost Group LLC, which bought insurance
claims, also have floated a chapter 11 plan, saying it will push
progress in the case.
At one point at Tuesday's hearing, PG&E's lawyer described
the company as an "honest broker" of the interests of its
creditors, provoking laughter in the courtroom.
If Judge Montali opens the door to competing chapter 11 plans,
PG&E can still propose its own version of a restructuring, and
can hope to draw support from those entitled to vote. The crucial
votes will come from people with claims for death, injury or damage
because of the fires that swept through California in 2017 and
2018.
Bondholders have offered to raise up to $18.4 billion for
wildfire damage under their plan, which would hand them majority
control of the company. PG&E has refused to talk to the
bondholders, according to their lawyer, Abid Qureshi.
PG&E's lawyer said the company has sound business reasons
for ignoring the bondholders. "They are not here as altruistic
players. They are here to acquire the company at a discount, at a
substantial discount," Mr. Karotkin said.
Victims of the 2017 and 2018 wildfires linked to PG&E
equipment said none of the three plans will pass muster and will be
voted down for providing insufficient cash for fire claims.
"There are a lot of hedge funds and private-equity funds that
would like to own this company," said Cecily Dumas, a lawyer for
the official committee that speaks for fire victims. "We are far
apart from everybody."
The three proposals are based on estimates of what the fire
damages will be and will likely change in the coming months as
bankruptcy proceedings produce a final figure PG&E will have to
pay.
Estimates run from $18 billion under the bondholder plan, to $30
billion in PG&E's reports to the Securities and Exchange
Commission, to more than $50 billion, according to the computations
of fire victims.
On Wednesday, PG&E is scheduled to oppose fire victims
clamoring for jury trials to test how much the utility is to blame
and set a price on damages.
PG&E is under the gun to get a chapter 11 plan confirmed by
January to leave enough time for its regulators to review the terms
before a June 30, 2020, deadline set by California lawmakers. If
PG&E misses the deadline, it can't participate in a wildfire
fund signed into law by California Gov. Gavin Newsom.
Write to Peg Brickley at peg.brickley@wsj.com and Soma Biswas at
soma.biswas@wsj.com
(END) Dow Jones Newswires
August 13, 2019 20:00 ET (00:00 GMT)
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