PCG PG&E Corporation

Item 1.01 Entry into a Material Definitive Agreement.

As previously disclosed, on January 29, 2019 (the “Petition Date”), PG&E Corporation and its subsidiary, Pacific Gas and Electric Company (the “Utility,” and together with PG&E 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 December 12, 2019, the Debtors filed a Joint Chapter 11 Plan of Reorganization dated December 12, 2019 (the “Proposed Plan”).

On January 22, 2020, the Debtors entered into a Restructuring Support Agreement (the “RSA”) with those holders of senior unsecured debt of the Utility that are identified as “Consenting Noteholders” below and certain funds and accounts managed or advised by Abrams Capital Management, L.P. and certain funds and accounts managed or advised by Knighthead Capital Management, LLC (together, the “Shareholder Proponents”).  The RSA provides that the Proposed Plan will be amended to provide for, among other things, (i) the refinancing of the Utility’s senior unsecured debt in satisfaction of all claims arising out of the Utility Short-Term Senior Notes, the Utility Long-Term Senior Notes and the Utility Funded Debt, each as defined below and (ii) the reinstatement of the Utility Reinstated Senior Notes, as defined below (together with the Utility Short-Term Senior Notes and Utility Long-Term Senior Notes, the “Utility Senior Note Claims”), in each case upon the terms and conditions set forth in the RSA.  Under the RSA, the Debtors have also agreed to reimburse the holders of Utility Long-Term Senior Notes for debt placement fees and the members of the Ad Hoc Noteholder Committee for professional fees of up to $99 million upon the terms and conditions set forth in the RSA.  The following “Consenting Noteholders” that are holders of the Utility Senior Note Claims or signatories on behalf of funds and accounts managed or advised by them that are holders of the Utility Senior Note Claims are party to the RSA as of the date hereof:  Apollo Global Management LLC, Elliott Management Corporation, Oaktree Capital Management L.P., Farallon Capital Management LLC, Capital Group, Värde Partners Inc., Davidson Kempner Capital Management LP, Canyon Capital Advisors LLC, Third Point LLC, Pacific Investment Management Company LLC, Citadel Advisors LLC and Sculptor Capital Investments, LLC.  Any holder of Utility Senior Note Claims or Utility Funded Debt can become a party to the RSA by executing the joinder attached to the RSA.

The RSA provides for the following treatment of Utility Senior Note Claims and Utility Funded Debt to be incorporated into a revised version of the Proposed Plan:

 

Under the RSA, the Debtors must, among other things, (i) file a motion seeking approval of the RSA not later than three business days after the date of execution of the RSA and use commercially reasonable efforts to obtain Bankruptcy Court approval of the RSA (the “RSA Approval Order”) and (ii) use commercially reasonable efforts to file with the Bankruptcy Court an amended version of the Proposed Plan incorporating the provisions of the RSA (the “Amended Plan”) no later than February 1, 2020.

The RSA further provides that the Debtors must use their best efforts to cause various parties to the Debtors’ equity backstop commitment letters to transfer up to $2.0 billion of equity backstop commitments to certain of the Consenting Noteholders.

Under the RSA, each Consenting Noteholder must, among other things, (i) upon entry of the RSA Approval Order, withdraw any participation in and support for the competing Chapter 11 plan of reorganization filed by the Ad Hoc Committee of Senior Unsecured Noteholders on October 17, 2019 (the “Ad Hoc Noteholder Plan”), including by taking certain actions to defer further action on the make-whole and post-petition interest issues, (ii) immediately direct counsel for the Ad Hoc Noteholder Committee to suspend its motion to reconsider the Bankruptcy Court order approving the Debtors’ restructuring support agreements with holders of subrogated insurance claims (the “Subro RSA”) and the Official Committee of Tort Claimants and representatives of the individual wildfire victims (the “TCC RSA”) and oppose any and all efforts and procedures to terminate, vacate or modify the TCC RSA or the Subro RSA, (iii) immediately withdraw all discovery issued in connection with the Debtors’ motion to approve their exit financing and file a statement in support of such motion, (iv) immediately seek withdrawal of all filings submitted in any proceeding before the California Public Utility Commission (the “CPUC”) involving the Debtors and cease participation in any proceeding before the CPUC involving the Debtors, and (v) vote to accept the Amended Plan.  Further, each Consenting Noteholder and each of its affiliates and agents shall not, among other things, object to, delay, impede or take any other action to interfere with the approval of the Debtors’ disclosure statement or the solicitation of votes to accept, acceptance, confirmation, or implementation of the Amended Plan.  Each Consenting Noteholder further agreed, subject to certain exceptions, not to transfer any of its claims against the Debtors, unless the transferee either is a Consenting Noteholder, or before such transfer agrees in writing to become a Consenting Noteholder and to be bound by all the terms of the RSA.

The RSA will automatically terminate if the Effective Date of the Amended Plan does not occur on or prior to September 30, 2020 or December 31, 2020 if such later outside date is approved by the Bankruptcy Court.

The RSA may be terminated by a majority of the Consenting Noteholders under certain circumstances, including, among others, if (i) the treatment of the Utility Senior Note Claims or claims arising from Utility Funded Debt in the Amended Plan is, or is modified to be, inconsistent with the RSA, (ii) an order confirming the Amended Plan is not entered on or before June 30, 2020, (iii) PG&E Corporation and the Utility fail to achieve an investment grade rating on the new senior secured notes from at least one credit rating agency on the Effective Date, (iv) the Debtors’ equity backstop commitment letters representing a majority of the equity backstop commitments are terminated or (v) the Debtors or the Shareholder Proponents breach certain provisions of the RSA.  The RSA may be terminated by the Debtors or the Shareholder Proponents under certain circumstances, including, among others, if (i) the Consenting Noteholders do not hold, in the aggregate, more than 66.7% of the aggregate principal amount of Utility Long-Term Senior Notes and 66.7% of the aggregate principal amount of Utility Short-Term Senior Notes by 5:00 p.m. PT on January 28, 2020 or (ii) the Consenting Noteholders breach certain provisions of the RSA.

The foregoing description of the RSA does not purport to be complete and is qualified in its entirety by reference to the RSA, a copy of which is filed as Exhibit 10.1 hereto and incorporated herein by reference.

There can be no assurance that the Debtors will successfully consummate or implement the Amended Plan which will ultimately require a determination by the Bankruptcy Court that the Amended Plan satisfies the requirements for confirmation set forth in the Bankruptcy Code. Further, there can be no assurance that the conditions for confirmation of the Amended Plan and to the occurrence of the Effective Date (as defined in the Amended Plan) of the Amended Plan will be satisfied.