The PG&E Corp. board is evaluating a $15 billion financing proposal from hedge funds Abrams Capital Management LP and Knighthead Capital Management LLC in support of the bankrupt utility's reorganization plan.
The proposal, which is designed to provide equity capital commitments for the restructuring plan, calls for the issuance of up to $15 billion of shares by reorganized PG&E through a rights offering. It includes backstop commitment letters and related materials.
"We believe that our capital proposal provides the Company with a foundation upon which a more fully developed capital plan and plan of reorganization can be built. Such a capital plan may include other, more efficient sources of capital that will both accelerate the process of paying claimants and return the Company to a more traditional position in the capital markets," Abrams Capital wrote in an Aug. 8 filing.
PG&E said Aug. 9 that it will respond to the proposal in due course.
Abrams Capital is the second-largest institutional owner of PG&E Corp., owning 4.72% of the utility's outstanding common shares as of March 31, while Knighthead Capital Management owns 1.97% of the outstanding shares, according to S&P Global Market Intelligence data.
Abrams Capital and Knighthead Capital, along with Redwood Capital Management LLC, previously planned to initiate a management overhaul at the bankrupt utility.
The California utility recently provided a glimpse of its reorganization plan. The plan assumes "a substantial infusion of cash raised from existing holders" and "equity financed securitized bonds."