PCG PG&E Corporation

By Soma Biswas 

PG&E Corp. and certain shareholders are fighting back against a restructuring strategy by Elliott Management Corp. and other bondholders that would hand them nearly full control of the utility when it exits bankruptcy.

PG&E's lawyers argued in court papers Thursday that the bondholders' chapter 11 proposal can't be confirmed because it gives them a vote and a voice in the bankruptcy proceeding they don't deserve. Elliott and the other bondholders aren't at risk of being paid less than they are owed and therefore can't vote on or propose a restructuring plan, the company said.

The bondholder group which includes Elliott and Pacific Investment Management Co. have outlined a proposal to raise $30 billion in equity, including $18 billion that would go to victims of the California wildfires caused by PG&E equipment, while asking the bankruptcy court supervising PG&E's restructuring to end the company's exclusive right to propose exit terms.

The Elliott group's plan would result in the bondholders recovering more than 100% of the face value of their bonds, a group of PG&E shareholders said in court papers that also opposed the Elliott plan. Creditors are entitled to recover no more than 100% of the money owed to them under the bankruptcy code.

Under the code, only creditors who haven't been paid back in full or who are impaired can vote on or propose a company's reorganization plan in bankruptcy.

PG&E said the bondholders are trying to improve their rank in the company's capital structure. Under Elliott's proposed plan, the company would swap their unsecured notes for new secured debt. Instead, the company said it could simply reinstate the unsecured notes, making the bondholders whole.

The company also took issue with the bondholders' request for a $650 million backstop fee for purchasing equity and the interest rate on the debt they would receive.

The group of PG&E shareholders weighing in against the Elliott restructuring plan on Thursday argued the company is "solvent by billions of dollars," and that the bondholder group is simply trying to take over PG&E at a "fire sale price."

PG&E's unsecured notes are all trading close to or over par, while the company's market capitalization is roughly $9 billion.

PG&E said it is in the process of "refining" a different restructuring plan that includes a new cash equity infusion and the issuance of securitized debt, funded by future cash flows from PG&E, which will enable the company to meet California lawmakers' June 2020 deadline to leave bankruptcy.

Last week California Gov. Gavin Newsom signed legislation creating a multibillion-dollar fund that would pay for damage from any future wildfires caused by the state's largest utilities, including PG&E, Southern California Edison Co. and San Diego Gas & Electric Co., but doesn't pay victims of the 2017 and 2018 fires linked to PG&E equipment.

The PG&E bondholder group includes some of the biggest debt investors in the world, including Apollo Global Management LLC, Citadel Advisors LLC and Capital Research and Management Co., court filings show.

They have been at odds with a group of equity holders including Abrams Capital Management LP, Knighthead Capital Management LLC and Redwood Capital Management LLC that worked with PG&E to install a new chief executive earlier this year.

San Francisco-based PG&E has been under pressure to produce a chapter 11 exit plan quickly, with Governor 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 on Sept. 26.

Write to Soma Biswas at soma.biswas@wsj.com

(END) Dow Jones Newswires

July 19, 2019 16:49 ET (20:49 GMT)

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