PG&E Clears Another Bankruptcy Hurdle With Debt Refinancing

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A federal judge on Tuesday approved a settlement that moves Pacific Gas & Electric closer to getting out of bankruptcy, but the troubled utility still must navigate nettlesome obstacles being put up by the state of California.

U.S. Bankruptcy Judge Dennis Montali signed off on the deal to refinance billions of dollars in debt to pay off PG&E bondholders.

The bondholders had threatened to cause problems for the nation’s largest utility. But as part of the truce, they agreed to abandon an alternative plan for getting PG&E out of bankruptcy and support the company’s blueprint instead.

In the past few months, PG&E has also negotiated settlements totaling $25.5 billion to appease homeowners, businesses, insurers and government agencies who had claimed more than $50 billion in losses from a series of catastrophic wildfires blamed on the utility’s dilapidated electrical grid and managerial negligence.

One fire victim, Will Abrams, appeared at Tuesday’s hearing to unsuccessfully try to convince Montali to reject PG&E settlement with the noteholders because he believes it will help the company push through an unfair plan.

“This is heading in the wrong direction,” Abrams told Montali.

PG&E now appears to be well positioned to emerge from bankruptcy by June 30, but still faces one formidable stumbling block: staunch opposition from California Gov. Newsom and other elected officials. They have threatened a government-backed takeover of the company unless far more dramatic changes are made.

PG&E, which provides power to about 16 million people, last week expressed confidence that it will be able to satisfy Newsom by the June 30 deadline to emerge from bankruptcy.

In a sign of its confidence, PG&E used part of the hearing Tuesday to work out a timetable that would enable the company to put the messy bankruptcy process behind it just 17 months after the process began. That would be much faster than the three years it took PG&E to reorganize the last time it filed for bankruptcy in 2001.

The proceedings are moving more quickly this time, largely because both Newsom and PG&E are under pressure to pay the more than 70,000 people who have filed claims after losing family members and property in deadly fires that erupted during 2017 and 2018.

PG&E is setting up a $13.5 billion fund to pay the wildfire victims as part of its bankruptcy plan, but that deal is still a big point of contention in the case. Since the settlement was reached in December, Montali has been swamped with letters from victims worried that too much of the money will be paid to their attorneys and to government agencies seeking to be reimbursement for the billions of dollars doled out during and after the wildfires.

Montali noted the victims’ concerns during Tuesday’s hearing and told their lawyers that they had some “schmoozing” to do with their clients during the next few weeks. He set a Feb. 21 deadline for the lawyers to provide a clear explanation on how the victims can be expected to file claims with a timeline explaining how they can expect to be paid. After that preliminary disclosure, a more exhaustive breakdown with more obtuse language must be filed on March 10.

A hearing on PG&E’s disclosure statement, the equivalent of the voter’s pamphlets traditionally distributed in political elections, will also be held on March 10. If Montali approves the statement, voting on PG&E’s reorganization plan will begin in early April and be completed by May 15. About 415,000 different parties are expected to receive the disclosure statement, a massive undertaking that illustrates the scope of PG&E’s turmoil.

Newsom’s opinion will be among the most influential. The Democratic governor is demanding that PG&E replace its entire 14-member board of directors, including CEO Bill Johnson, and revise other elements of its plan to reduce its debt load so it has enough financial flexibility to pay for $40 billion to $50 billion in improvements to its outdated electrical system to reduce the chances of igniting more wildfires.

The San Francisco company pledged to bring in new directors, without specifying how many, but hasn’t said if it will tweak its financial plan. A lawyer representing Newsom told Montali that the governor remains dissatisfied with PG&E’s current financing plan. The company is expected to provide more details about it in documents that Montali ruled must be filed early next week.

Newsom, state lawmakers and PG&E’s chief regulatory agency in California hold unusual leverage over the company because of a wildfire insurance fund that the state created. Obtaining funding from the state program is a key component in PG&E’s reorganization, but the company requires state approval by the June deadline to qualify.

Just days after PG&E announced its attempt to placate Newsom, a California lawmaker announced a formal proposal to authorize borrowing billions of dollars so California taxpayers could buy the utility, currently valued around $9 billion.

Copyright AP - Associated Press
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