PG&E Restructuring Plan Upped to $45B by Creditors

By and Katherine Doherty | May 31, 2019

A group of PG&E Corp. creditors could preempt the embattled California utility’s own attempt to claw its way out of bankruptcy by presenting a restructuring plan that could be worth at least $45 billion, according to people familiar with the matter.

The plan builds on a proposal floated earlier this year. The updated plan includes substantially more cash for compensating existing wildfire victims, establishing a new statewide wildfire liability fund and recapitalizing PG&E, said the people, who asked not to be identified because the details are private.

The plan could be presented to the bankruptcy judge before a rival plan being developed by PG&E’s newly reconstituted board and management is finalized to help accelerate the utility’s exit from court protection, the people said.

The ad-hoc committee of creditors, led by Pacific Investment Management Co., Elliott Management Corp. and Davidson Kempner Management, originally floated a $35 billion plan with lawmakers and other stakeholders. Representatives for PG&E and Pimco weren’t immediately available for comment. Representatives for Elliott and Davidson Kempner declined to comment.

PG&E shares fell as much as 2.9% to $17.26 before the start of regular trading in New York.

The original proposal included a $14 billion cash trust to pay claims tied to the deadly 2017 and 2018 wildfires that forced the utility to declare bankruptcy, people familiar with the matter said at the time. It also contemplated establishing a $13 billion statewide wildfire fund that would be financed by PG&E and other California utilities. It also would have provided $8 billion to recapitalize the San Francisco-based company, allowing it to refinance its debtor-in-possession loan and other maturities.

The plan called for about $18.5 billion in funds to be provided by the creditor group, with roughly half in equity and half in debt-linked securities.

The current plan evolved from that proposal after the group met with various stakeholders and each pool of money grew by 30% to 50%, the people said. The precise total couldn’t be ascertained but is in excess of $45 billion, the people said.

The plan also contemplates the long-term governance of PG&E, including at the board and management level, and is mainly neutral to consumers with respect to electricity rates, the people said.

The committee’s proposal would be pitted against the plan being prepared by PG&E’s recently reconstituted board and new Chief Executive Officer Bill Johnson. The creditors group includes Dan Loeb’s Third Point, Howard Marks’s Oaktree Capital Management and Leon Black’s Apollo Global Management LLC.

In a typical bankruptcy, the company would be granted a period of exclusivity to devise its own plan to emerge from Chapter 11 protection. While it’s unusual for a court to terminate that exclusivity period, that occurred the last time PG&E was restructured in a case overseen by the same bankruptcy judge.

In a May 22 hearing, the judge said he ended exclusivity in PG&E’s previous reorganization after a viable, competing proposal surfaced. In the second-biggest utility bankruptcy, Energy Future Holdings Corp. also lost the exclusive right to propose a reorganization plan in 2015.

The ad-hoc committee of senior secured noteholders supported the extension of PG&E’s exclusivity period. The committee said in a May 15 court filing that PG&E, as far as it was aware, hadn’t engaged in any substantive discussions with any of the company’s primary stakeholders, including its members, who own a substantial portion of the company’s $20.5 billion debt.

The committee said it was also concerned that the lengthy process to replace PG&E’s board by the company’s equity holders had slowed its exit from Chapter 11. The group said it reserved the right to seek to shorten or terminate the exclusivity period if a viable alternative emerged before a September deadline to file the plan.

California Governor Gavin Newsom opposed the length of the extension for PG&E’s exclusivity rights, saying the company hadn’t “earned the privilege of a six-month extension.” He urged the court not to give an extension longer than 75 days in a court filing on May 15.

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