Judge Gives PG&E A Reprieve on Chapter 11 Control -- WSJ
May 24 2019 - 3:02AM
Dow Jones News
By Peg Brickley
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (May 24, 2019).
PG&E Corp. will stay in control of its bankruptcy proceeding
until Sept. 29, less time than it wanted, but long enough to find
out what California lawmakers will do this year about wildfire
liabilities facing the state's largest utility.
The company had requested until the end of November to find a
path out of chapter 11 protection, but creditors and California
Gov. Gavin Newsom said the company needed a push. Wednesday's
decision at a hearing in the U.S. Bankruptcy Court in San Francisco
was a reprieve for PG&E, which faced a threat of being stripped
of its exclusive right to propose a plan addressing more than $30
billion in wildfire damage claims.
The utility is facing pressure for action from Mr. Newsom and
many of its creditors and bondholders as well as fire victims.
Bankruptcy law gives companies that file for chapter 11 protection
a certain amount of time, called the "exclusivity period," to
propose a restructuring strategy without worrying about competing
proposals from those outside the company.
Had PG&E lost its exclusive control rights Wednesday, as
some creditors wanted, rivals would have been free to propose a
chapter 11 plan without the company's agreement.
"That would be a fundamental crisis in confidence," PG&E
lawyer Stephen Karotkin said at the hearing. Business partners
would be rattled and the markets would be upset, he said, if
PG&E's ability to steer its fate was called into question in
bankruptcy court.
"It's the worst thing that could happen," Mr. Karotkin said.
Judge Dennis Montali said he would be reluctant to strip
PG&E of control unless there was a viable alternative plan on
offer. One large group of creditors -- financial institutions that
want to recover insurance paid for fire damages -- signaled it
might be prepared to propose a chapter 11 plan if PG&E doesn't
move quickly to tackle its problems.
"If there comes a time when we are able to put forward a viable
plan, we will be back before the court," said Matthew Feldman, a
lawyer for the insurance group.
PG&E wanted exclusive control of its bankruptcy case until
Nov. 29, arguing it needs an additional six months to get relief
from California's stiff liability laws for utilities from the state
legislature. An official committee that represents financial
creditors said that was too much time, because PG&E should know
by the end of the legislative session in September whether its
lobbying efforts will succeed.
"Our thinking is that by the end of September the debtors should
be well aware of what action was taken and wasn't taken," said
Gregory Bray, lawyer for the financial creditors group.
If PG&E fails to negotiate a chapter 11 plan by Sep. 29, it
would have to return to court and demonstrate that it has made
enough progress to justify continued protection against competing
restructuring proposals.
"We view the extension to the end of September as a checkpoint,"
Mr. Bray said.
The fight over control brought wildfire victims and many
financial creditors into alignment against the company as they
complained about a lack of urgency. PG&E filed for bankruptcy
at the end of January.
Within months, thousands of people affected by fires in 2017
will lose insurance coverage for basic living expenses, said Cecily
Dumas, a lawyer for an official panel of fire victims.
"That will be a storm of fury of people who live in Northern
California, " she said.
After extending PG&E's exclusivity period, Judge Montali
also approved a $100 million fund for fire victims with urgent
living expense needs, a program that the victims' lawyers
challenged as insufficient and of questionable motivation.
Write to Peg Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
May 24, 2019 02:47 ET (06:47 GMT)
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