PG&E confident it is moving toward deal with bondholders over bankruptcy exit plan

Houston — In a court hearing Tuesday, a PG&E Corp. lawyer indicated that the bankrupt utility holding company is negotiating with a group of bondholders who have been competing with PG&E in putting together exit plans the court, and the California governor, will approve.

With the lawyer's comments that negotiations with the bondholders have been "constructive," PG&E's stock price jumped $7.01 Wednesday to close at $12.76/share. The stock was at $9.67/share December 16.

The struggle between the San Francisco-based utility company and the bondholder group led by Pacific Investment Management Co. and Elliott Management Corp., has continued since September. According to state law passed in June, PG&E Corp. and its Pacific Gas and Electric utility subsidiary are required to be out of bankruptcy by June 30, or they will not be eligible for some state wildfire funding.

The bondholders have been offering to inject as much as $20 billion in cash into PG&E Corp. in exchange for virtually all its equity. It has been reported that bondholders' investment in the company would replace some of the exit financing that PG&E is proposing as part of its restructuring.

PG&E's lawyer, Stephen Karotkin of Weil, Gotshel & Manges, was in court trying to resolve a payment dispute that could cost PG&E more than $5 billion. Bondholders put the cost at $5.8 billion.

PG&E has reportedly suggested that bonds paying less than 5% interest would be reinstated as part of an agreement with the bondholders, and bonds paying above 5% would be revised to 4.75% through a mix of 10-year and 30-year bonds.

No agreement between the two parties has yet been reached, and California Governor Gavin Newsom could still play a role in determining whether PG&E's exit plan is ultimately approved. Newsom has already rejected at least one previous PG&E exit plan.

Political observers in Sacramento and in San Francisco have said that Newsom could insist on a provision inserted in an approval of PG&E's plan that if the utility holding company or its subsidiary don't meet future safety standards that the state will be allowed to take over the companies.

In a filing January 14, PG&E said that after three lengthy hearings, in which all parties in interest were given a "full and fair opportunity to submit pleadings and present argument," the court granted its motions to approve restructuring support agreements with subrogation claimants and tort claimants.

Notably, it said in its filing, with the approval of both RSAs, PG&E, with the assistance of the court-appointed mediator, achieved a "comprehensive, global resolution of these Chapter 11 cases, which has been embodied in the Debtors' and Shareholder Proponents' Joint Chapter 11 Plan of Reorganization dated December 12, 2019."