Investors Present Chapter 11 Plan for PG&E -- WSJ
June 26 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 (June 26, 2019).
PG&E Corp. bondholders have challenged the California
utility over control of its bankruptcy proceeding, offering Wall
Street's version of a solution to wildfire liabilities estimated at
$30 billion or more.
Investors including Elliott Management Corp. and Pacific
Investment Management Co. filed court papers outlining a chapter 11
plan that would include up to $18 billion for victims of blazes
linked to PG&E's equipment.
Bondholders say they would raise $30 billion, most of it in the
form of equity investment, to help PG&E pay off its damages,
according to court papers.
Ratepayers wouldn't pay more, California's green power future
would be assured and Gov. Gavin Newsom would see the state's
largest utility exit from bankruptcy by next year, if PG&E and
its creditors accept the offer, the bondholders say.
PG&E is looking at all options, according to a statement
from the company.
Providers of wind and solar power that count PG&E as a big
customer were thrown into financial jeopardy when PG&E filed
for chapter 11 bankruptcy in January. The utility earlier this
month won a round in court when Bankruptcy Judge Dennis Montali
said he, not the Federal Energy Regulatory Commission, would decide
whether PG&E can get out from its alternative power
contracts.
The San Francisco utility has been under pressure to produce a
chapter 11 exit plan quickly, with Mr. Newsom and others
complaining about a lack of action from a company blamed for years
of fires that took lives and homes.
The Jan. 29 bankruptcy filing gave PG&E a limited period of
exclusive chapter 11 plan rights, but that time runs out near the
end of September.
At a hearing in May, Judge Montali said he would take seriously
a request to open the door to competing restructuring proposals, if
such a request was accompanied by a concrete offer.
Tuesday, an ad hoc group of bondholders outlined terms of an
offer, and said its members are "an obvious source of new capital"
that PG&E has been ignoring. They have set their challenge for
a court hearing July 23.
The offer that arrived Tuesday in the U.S. Bankruptcy Court in
San Francisco likely won't be the only one to be floated in
PG&E's bankruptcy proceeding. At least two other major groups
of investors with money riding on the outcome of the case are
exploring the possibilities.
Rich in assets and cash flow and an irreplaceable element of
California's power grid, PG&E is considered a prime opportunity
for Wall Street investors, despite its poor safety record.
In addition to the $16 billion to $18 billion trust for wildfire
damages, the Elliott and Pimco bondholder group says its plan calls
for a $4 billion contribution to a broad-based wildfire fund for
utilities serving California.
Bondholders say customers wouldn't see higher bills, and they
would get to nominate a board member for PG&E. Ratepayer groups
have criticized the company for paying dividends to shareholders
while they say it let the aged power structure fall into
disrepair.
Other members of the bondholder group include large
private-equity funds and distressed debt players, including Apollo
Global Management LLC, Centerbridge Partners LP, and Citadel
Advisors LLC, all of them with hundreds of millions of dollars
invested in PG&E bonds.
In March, Pimco had nearly $2 billion tied up in PG&E senior
bonds, and had provided $700 million of the bankruptcy loan.
Elliott had money riding on PG&E's stock, as well as nearly
$1.2 billion invested in bond debt.
Write to Peg Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
June 26, 2019 02:47 ET (06:47 GMT)
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