PG&E announces details of $12 billion in plan backstop commitments

By Caroline Salls

Pittsburgh, Dec. 27 – PG&E Corp. entered into Chapter 11 plan backstop commitment letters on Dec. 23 under which the backstop parties will fund up to $12 billion of proceeds to finance the company’s proposed plan in exchange for the issuance of new shares of PG&E common stock on the plan effective date, according to an 8-K filed with the Securities and Exchange Commission.

Under the backstop commitment letters, the price at which new shares of common stock would be issued to the backstop parties would be equal to 10 times PG&E’s consolidated normalized estimated net income for the estimated year 2021, divided by the number of fully diluted shares that will be outstanding on the plan effective date.

The letters provide that under specified circumstances, the PG&E debtors may issue new shares of common stock for up to $12 billion of proceeds to finance plan transactions through one or more equity offerings that must include a rights offering under some circumstances.

PG&E said the structure, terms and conditions of any equity offering are expected to be determined at a later time in the Chapter 11 process.

If any equity offerings, together with additional permitted capital sources, do not raise at least $12 billion of proceeds or if the debtors do not otherwise complete the offerings, then the debtors may draw on the backstop commitments for equity funding to finance the plan transactions.

In addition, PG&E said it agreed that if the backstop commitments are drawn, and the company does not expect to conduct a third-party transaction based on or related to the utilization or monetization of any net operating losses or tax deductions resulting from the payment of pre-bankruptcy wildfire-related claims, a trust must be formed to provide for periodic distributions of cash to the backstop parties in amounts equal to all tax benefits arising from the payment of wildfire-related claims in excess of the first $1.35 billion of tax benefits, starting with fiscal year 2020.

PG&E said it intends to explore a tax benefits monetization transaction.

According to the 8-K, the backstop commitment premium is 6.364% of the amount of the commitments and will be earned in full upon bankruptcy court approval of the commitment letters. Subject to limited exceptions, all commitment premiums are payable in shares of common stock to be issued on the plan effective date.

If a plan of reorganization for PG&E is confirmed that is not the currently proposed plan, then the commitment premium will be payable in cash if elected by the applicable backstop party.

As previously disclosed, PG&E entered into debt commitment letters under which the commitment parties agreed to provide $34.35 billion in bridge financing for the proposed plan.

On Dec. 20, the debt commitment letters were amended to extend the deadline for obtaining bankruptcy court approval of the debt commitment letters to Jan. 31 from Dec. 20 and to conform to changes in the backstop commitment letters.

PG&E is an electric and natural gas utility based in San Francisco. The company filed bankruptcy on Jan. 29, 2019 in the U.S. Bankruptcy Court for the Northern District of California under Chapter 11 case number 19-30088.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.