PG&E gets more plan backstop commitments; $14 billion to be funded

By Caroline Salls

Pittsburgh, Oct. 1 – PG&E Corp. entered into Chapter 11 plan backstop commitment letters on Monday with additional backstop parties who, together with the original backstop parties, will fund a total of $14 billion on the plan effective date to finance plan transactions in exchange for shares of new common stock, according to an 8-K filed Tuesday with the Securities and Exchange Commission.

The price at which new shares would be issued to the backstop parties is equal to 10 times PG&E’s consolidated normalized estimated net income for the year 2021, divided by the number of fully diluted shares that will be outstanding on the plan effective date assuming that all equity is raised by funding the backstop commitments.

The company said the backstop commitment letters provide that under specified circumstances, the PG&E debtors will be permitted to issue new shares of common stock for up to $14 billion of proceeds to finance the plan transactions through one or more equity offerings that must include a rights offering.

If the equity offerings together with additional permitted capital sources do not raise at least $14 billion of proceeds or if PG&E does not complete those offerings, then the company may draw on the backstop commitments for equity funding.

The backstop commitments are subject to confirmation of PG&E’s plan by the U.S. Bankruptcy Court for the Northern District of California and to the debtors’ weighted average earning rate base for 2021 being no less than 95% of $48 billion.

According to the 8-K, the initial premium for the backstop commitments is 0.75% of the amount of the commitments. The initial term of the backstop commitment letters expires on Jan. 20, with an option to extend the term of the commitment letters to April 30 in exchange for an additional commitment premium of 1.25% of the amount of the commitments, to June 30, 2020 for an additional commitment premium of 2.5% and to Aug. 29, 2020 for an additional commitment premium of 0.5%.

If the currently proposed plan is not confirmed, the backstop commitment premium will be payable in cash if elected by the applicable backstop party.

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

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