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PG&E Wins Support From Key Bondholders for Restructuring Plan
The hard-fought battle that has helped keep the biggest utility bankruptcy in U.S. history dragging on for almost a year has come to an end.
On Wednesday, California power giant PG&E Corp. reached a settlement with a group of noteholders led by bond giant Pacific Investment Management Co.and activist investor Elliott Management Corp., who’ve repeatedly sought to derail the company’s $46 billion restructuring plan. The creditors have agreed to back PG&E’s proposal, according to a statement issued by PG&E.
The deal turns some of PG&E’s most formidable adversaries into backers of its turnaround plan and brings the company closer to getting a proposal approved by a state-imposed deadline of June 30. The San Francisco-based utility has spent months in court battling the creditors who’ve been offering to inject as much as $20 billion in cash into the company in exchange for virtually all its equity.
That leaves California Governor Gavin Newsom as the last major obstacle for PG&E, which was forced into Chapter 11 last year after its equipment was blamed for a series of catastrophic wildfires that saddled the company with $30 billion in liabilities. Newsom has rejected PG&E’s plan and has been pushing the utility to include a provision that would allow the state to take it over should it fail to meet future safety standards.
PG&E’s shares rose as much as 1.7% to $12.75 in after-market trading on Wednesday. The company will save about $1 billion by refinancing higher-interest debt as part of the settlement, PG&E said in its statement. Bonds paying lower interest rates will be reinstated and paid as normal, the company said. The new mix of debt will “reduce the weighted average coupon of PG&E’s debt, the company said, consistent with the guidance given to the California Public Utilities Commission.”
Just hours before the deal was announced Wednesday, California Governor Gavin Newsom raised objections to PG&E’s restructuring plan in a court filing, saying the bankrupt utility giant hasn’t changed a thing to address concerns he had raised in a letter last month. Newsom said his office has been engaged in talks with the utility but said it has “yet to make a single modification” to the proposal to shore up “its many deficiencies.” The plan, as it stands, doesn’t comply with state law, Newsom said in the court filing. He went on to accuse PG&E of trying to take advantage of the Chapter 11 process and to force state officials into approving a “sub-optimal” plan. Newsom said the company’s plan continues to depend on substantial debt and short-term bridge financing that would leave the utility without the resources it needs to invest billions of dollars in safety upgrades.
PG&E said it was aware of Newsom’s concerns and that additional changes to its plan were forthcoming.
The bankruptcy case is PG&E Corp. 19-bk-30088, U.S. Bankruptcy Court, Northern District of California (San Francisco)
https://www.bloomberg.com//news/articles/2020-01-22/pg-e-wins-support-from-elliott-pimco-for-restructuring-plan