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PG&E Receives $4 Billion Plan From Investors to Head Off Bankruptcy

Allison McNeely and Katherine Doherty
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PG&E Receives $4 Billion Plan From Investors to Head Off Bankruptcy

(Bloomberg) -- PG&E Corp., the California utility giant that’s hours away from a potential bankruptcy filing, is fielding last-minute proposals from some of the biggest names in the investment world to keep it solvent.

A consortium including Paul Singer’s Elliott Management Corp. sent a proposal to PG&E Monday that would be backed by $4 billion in bonds and could give the company enough cash to stay out of bankruptcy while working through an estimated $30 billion in wildfire liabilities, a person with knowledge of the situation said. At least one other group that includes Ken Griffin’s Citadel LLC and Leon Black’s Apollo Global Management LLC is pitching a rival plan, separate people said.

The proposals are arriving just a day before PG&E is scheduled to file one of the biggest U.S. utility bankruptcies of all time. The company, which delivers power and natural gas to 16 million people, has said a Chapter 11 filing is the only way it can handle the crippling costs of 2017 and 2018 wildfires that its equipment has been blamed for igniting. Since the deadliest fire in California history in November, the company has seen its shares plunge by 75 percent and its credit cut to junk.

PG&E spokeswoman Lynsey Paulo declined to provide a statement, saying it doesn’t comment on market rumors. Representatives for Elliott, Citadel and Apollo declined to comment.

$4 Billion

The consortium including Elliott is pitching a plan backed by bonds that could convert into shares of PG&E, one person with knowledge of the matter said. Those bonds would mature in about five years, the person said.

The proposals were spurred by last week’s finding that PG&E wasn’t responsible for the Tubbs Fire -- the deadliest of the Wine Country blazes that tore through Northern California in 2017. The goal is to buy PG&E more time to seek relief from wildfire claims, perhaps through an act by state legislature, according to the person. The people asked not to be identified discussing the confidential offers.

“One viewpoint is such a financing makes a lot of sense in terms of short-term liquidity until a securitization can be put in place, while also avoiding hundreds of millions of dollars of legal fees from a 2-3 year contested bankruptcy process,” CreditSights utilities analyst Andy DeVries said in a note.

Other analysts doubted PG&E would consider the proposals.

“I don’t see a lot that’s on the table that would necessarily result in a change of direction,” Mizuho Securities utilities analyst Paul Fremont said. Only PG&E’s board “knows what they’re going to do.”

California Vote

California regulators have scheduled a vote Monday that would clear the way for $5.5 billion of debtor-in-possession financing before the utility files for court protection on Tuesday. Bankers have been seeking to offer parts of that financing to investors, and after meeting resistance from some potential lenders, were poised to sell the debt, people with knowledge of the discussions said.

The two competing consortiums are separate from the bondholders group that’s said to be organizing for a prolonged bankruptcy proceeding, one person said. That group includes Elliott, Apollo, Pacific Investment Management Co., Western Asset Management Co., Centerbridge Capital Partners LP and Davidson Kempner Capital Management, according to prior reports.

BlueMountain Capital Management LLC, a New York investment firm that bought shares right before the stock collapsed, has challenged the California power giant’s plans to seek bankruptcy protection. In an open letter to PG&E’s board, it said there is “overwhelming evidence” that the utility holding company is solvent -- and that a bankruptcy filing is “damaging, avoidable and unnecessary.”

In a regulatory filing, BlueMountain also cited a PG&E form 8-K earlier this month in which the company said it could shore up liquidity by using its assets to secure issuance of more capital, or access alternative capital. A spokesman for BlueMountain declined to comment on whether the firm is working with either of the financing groups.

PG&E wouldn’t be Elliott’s first foray into utilities. It outmaneuvered Berkshire Hathaway Inc. in 2017 by acquiring a small parcel of unsecured debt in Oncor Electric Delivery Co., opening a window for Sempra Energy to swoop in and strike a deal to acquire the Texas utility.

--With assistance from Mark Chediak, Jeannine Amodeo and David R. Baker.

To contact the reporters on this story: Allison McNeely in New York at amcneely@bloomberg.net;Katherine Doherty in New York at kdoherty23@bloomberg.net

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net, Lynn Doan, Margot Habiby

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