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'Constructive negotiations' bring possible PG&E bankruptcy resolution closer

Days after a University of California law professor and bankruptcy expert predicted a global agreement between opposing factions in the contentious joint Chapter 11 restructuring of PG&E Corp. and its utility subsidiary Pacific Gas and Electric Co., that scenario appears closer to unfolding.

An attorney for California's largest utility appeared before the U.S. Bankruptcy Court for the Northern District of California in San Francisco on Jan. 14 and reported "constructive negotiations" on the contested issue of debt claims, part of a long-running dispute with Pacific Gas and Electric, or PG&E, bondholders over competing plans of reorganization.

"We have welcomed feedback from all stakeholders throughout these Chapter 11 proceedings, are engaged in constructive discussions and hope to make progress over the next week regarding our plan of reorganization," a spokeswoman for PG&E said in an email following the hearing.

In light of those discussions, the presiding judge in the case, Dennis Montali, allowed for a one-week delay on a scheduled hearing on debt claims and on a planned status conference on the restructuring proposals from utility bondholders and from PG&E Corp. shareholders. The latter proposal, which includes $25.5 billion in payments to settle damage claims, has support from wildfire victims, insurance companies and other key creditors.

During a Jan. 8 presentation in San Francisco, Jared Ellias, a law professor at the University of California's Hastings College of the Law, said it was "highly likely" that a global agreement would emerge to bring shareholder and bondholder groups together under one restructuring plan. Under that scenario, bondholders, led by hedge funds Elliot Management Services Co and Pacific Investment Management Co. LLC, would provide financing for the shareholders' plan, Ellias said.

A timely resolution to the cases in bankruptcy court could help stave off gathering momentum around a possible public takeover bid, Ellias added.

PG&E declined to comment on speculation that a deal with bondholders is near.

"Our focus is on getting victims paid and continuing to implement changes across our business to improve our operations for the long term, and emerge from Chapter 11 as the safe and financially stable company our customers expect and deserve," the PG&E spokeswoman said.

Investors, meanwhile, reacted positively to the prospect of a deal. PG&E Corp stock, which has lost almost half its value since June 2019, rose nearly 8% on Jan. 14 to close at $11.92 per share.