PCG PG&E Corporation

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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