PG&E: Bankruptcy judge indicates that he will confirm plan

By Caroline Salls

Pittsburgh, June 18 – The plan of reorganization filed by PG&E Corp. and its shareholder proponents will be confirmed, according to a decision filed Wednesday by the U.S. Bankruptcy Court for the Northern District of California in which judge Dennis Montali called the company’s Chapter 11 cases “among the most complex in U.S. bankruptcy history.”

Montali said in the decision that if he does not confirm the plan, it would leave tens of thousands of fire survivors, contract parties, lenders, general creditors, allegedly defrauded investors, equity owners and countless others “with no other options on the horizon.” The judge said that “is not an acceptable alternative.”

The order confirming the plan is expected to be filed on Friday. A hearing will be held on June 19 to resolve any remaining issues related to the proposed order.

As previously reported, the plan includes commitments for the backstop of the issuance of up to $12 billion of post-bankruptcy common stock and debt financing commitment letters that provide up to $10.825 billion in funding.

The equity commitments will be used to pay wildfire claims against the company. The debt financing will be used to repay PG&E’s debtor-in-possession facility and other debt.

The premium to be paid to equity backstop commitment parties will be 119 million shares of new common stock. If the market value of those shares is less than $764 million, the backstop parties would be eligible to receive up to 139 million shares.

PG&E’s original plan was amended after the company announced on Jan. 22 that it reached an agreement with all claim holders who executed commitment letters in support of an alternative Chapter 11 plan filed by the ad hoc committee of senior unsecured noteholders.

The ad hoc noteholder committee agreed to withdraw its alternative plan of reorganization and support the PG&E plan upon entry of a bankruptcy court order approving the restructuring support agreement (RSA).

The agreement resolves all issues related to the treatment of pre-petition funded debt of the utility, including post-petition interest amounts and make-whole premiums, under PG&E’s plan.

PG&E said it and the consenting noteholders have agreed to the treatment of all pre-petition funded debt under the PG&E plan through a combination of:

• New notes to be issued by the utility in satisfaction of existing high-coupon, long-dated senior notes, senior notes with near-term maturities and funded bank debt, including revolving loans, term loans, and the pollution control bonds;

• Reinstatement of all other senior notes; and

• Customary debt placement fees and reimbursements.

The new notes to be issued under the PG&E plan will save the company’s customers approximately $1 billion, PG&E said in a Jan. 22 news release.

The utility said savings will be achieved by replacing high-coupon, long-term notes with newly issued, lower cost debt, reducing the weighted average coupon of PG&E’s debt, consistent with the guidance given to the California Public Utilities Commission in PG&E’s cost of capital proceedings.

The pre-petition debt addressed by the settlement represents PG&E’s normal course borrowings for infrastructure investments, among other things, financed through the capital markets before it filed for Chapter 11.

PG&E is an electric and natural gas utility based in San Francisco. The company filed bankruptcy on Jan. 29, 2019 under Chapter 11 case number 19-30088.

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