Item 1.01 Entry into a Material Definitive Agreement.
As previously disclosed, on January 29, 2019, PG&E Corporation (the “Corporation”) and its subsidiary, Pacific Gas and Electric Company (the “Utility,” and together with the Corporation, the
“Debtors”), filed voluntary petitions for relief under chapter 11 of title 11 (“Chapter 11”) of the United States Code in the U.S. Bankruptcy Court for the Northern District of California (the “Bankruptcy Court”). The Debtors’ Chapter 11 cases are
being jointly administered under the caption In re: PG&E Corporation and Pacific Gas and Electric Company, Case No. 19-30088 (DM) (the “Chapter 11 Cases”). On November 4, 2019, the Debtors filed a Joint Chapter 11 Plan of Reorganization (the
“Existing Plan”).
Also as previously disclosed, the Corporation separately entered into Chapter 11 Plan Backstop Commitment Letters with certain investors (the “Prior Backstop Commitment Letters”), under which such investors severally
committed to fund up to $14 billion of proceeds to finance the Existing Plan through the purchase of common stock of the Corporation.
On November 16, 2019, the Corporation entered into Chapter 11 Plan Backstop Commitment Letters (the “New Backstop Commitment Letters”) with each of
the entities set forth in Schedule 1 to Exhibit 10.1 of this Current Report on Form 8-K (the “New Backstop Parties”) , under which the New Backstop Parties have severally committed to fund up to $7.4 billion of proceeds to finance a revised Plan
(as defined below) through the purchase of common stock of the Corporation, subject to the terms and conditions set forth in each New Backstop Commitment Letter (the “New Backstop Commitments”). The New Backstop Commitment Letters supersede and
replace any prior backstop commitments of the New Backstop Parties or any of their affiliates. The New Backstop Commitment Letters contemplate that the Corporation will seek a total of $12 billion of New Backstop Commitments by no later than
December 6, 2019. The New Backstop Commitment Letters are substantially consistent with the terms of the Prior Backstop Commitment Letters except as described in this filing.
The New Backstop Commitment Letters provide that the Corporation will file a revised Chapter 11 plan of reorganization (the “Plan”) that includes Abrams Capital Management, L.P. (or certain funds and
accounts it manages) and Knighthead Capital Management LLC (or certain funds and accounts it manages) as plan proponents, and that provides for substantially the same classification and treatment of all claims (other than prepetition wildfire
claims that are not insurance subrogation claims or claims held by the public entities party to a previously disclosed plan support agreement with the Debtors) as provided in the Existing Plan.
The initial commitment premium for the New Backstop Commitments is 0.955% of the amount of the New Backstop Commitments. The initial term of the New Backstop Commitment Letters expires on January 20,
2020. The Debtors can extend the term of the New Backstop Commitment Letters to April 30, 2020 for an additional commitment premium of 1.591% of the amount of the New Backstop Commitments, to June 30, 2020 for an additional commitment premium of
3.182% of the amount of the New Backstop Commitments and to August 29, 2020 for an additional commitment premium of 0.636% of the amount of the New Backstop Commitments. All such commitment fees are cumulative. All commitment fees are payable in
shares of PG&E Corporation common stock to be issued on the effective date of the Plan (except in certain circumstances), and the number of such shares to be paid as commitment fees will be calculated using the backstop price described in the
New Backstop Commitment Letters.
Under the New Backstop Commitment Letters, the Corporation agrees that if the New Backstop Commitments are drawn, and the Corporation does not expect to conduct a third-party transaction to monetize any
net operating losses or deductions resulting from payment of prepetition wildfire-related claims (a “Tax Benefits Monetization Transaction”) on the effective date of the Plan, no later than five business days prior to the effective date of the
Plan, the Debtors shall form a trust which shall provide for periodic distributions of cash to the New Backstop Parties in amounts equal to (i) the tax benefits arising from the payment of wildfire-related claims in excess of (ii) the first $1.35
billion of tax benefits. The Corporation intends to explore a Tax Benefits Monetization Transaction.
The New Backstop Commitment Letters have conditions and termination rights substantially consistent with the Prior Backstop Commitment Letters, except as follows:
The foregoing description of the New Backstop Commitment Letters does not purport to be complete and is qualified in its entirety by reference to the New Backstop Commitment Letters. The form of the New
Backstop Commitment Letter is filed as Exhibit 10.1 hereto and incorporated herein by reference.