PG&E gets new backstop commitments for $7.4 billion in plan funding

By Caroline Salls

Pittsburgh, Nov. 18 – PG&E Corp. entered into Chapter 11 plan backstop commitment letters under which the new backstop parties will fund up to $7.4 billion of proceeds to finance a revised plan through the purchase of PG&E common stock, according to an 8-K filed Monday with the Securities and Exchange Commission.

As previously reported, PG&E initially entered into backstop commitment letters under which investors committed to fund up to $14 billion to finance the existing plan through the purchase of common stock.

The company said the new backstop commitment letters supersede and replace any previous backstop commitments of the new backstop parties or any of their affiliates.

The new commitment letters provide that PG&E will seek a total of $12 billion of new backstop commitments by no later than Dec. 6.

According to the 8-K, the new backstop commitment letters call for the company to file a revised plan of reorganization that includes Abrams Capital Management, LP and Knighthead Capital Management LLC as plan proponents and that provides for substantially the same classification and treatment of all claims, other than pre-bankruptcy wildfire claims that are not insurance subrogation claims or claims held by the public entities party to a previously disclosed plan support agreement, as provided in the existing plan.

The initial commitment premium for the new backstop commitments is 0.955% of the amount of the new commitments. The initial term of the new commitment letters expires on Jan. 20, subject to an extension to April 30 for an additional commitment premium of 1.591%, to June 30, 2020 for an additional commitment premium of 3.182% and to Aug. 29, 2020 for an additional commitment premium of 0.636%.

All commitment fees are payable in shares of PG&E common stock to be issued on the effective date of the plan.

The new backstop parties may terminate the new commitment letters if the PG&E debtors total pre-bankruptcy wildfire-related claims exceed $25.5 billion, up from a cap of $18.9 billion under the previous commitments.

In addition, the new backstop parties may terminate the commitment letters if asserted non-ordinary course administrative expense claims that are not disallowed in the Chapter 11 cases exceed $250 million as of the first date of the confirmation hearing, excluding the portion of an administrative expense claim that is covered by insurance, or if the bankruptcy court determines that the PG&E debtors are insolvent.

The new commitment letters must be approved by the U.S. Bankruptcy Court for the Northern District of California by Dec. 20.

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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