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PG&E Seeks More Than $14 Billion in Equity for Restructuring

Mark Chediak and Scott Deveau

(Bloomberg) -- PG&E Corp. is floating a restructuring plan that calls for more than $14 billion in equity commitments -- while giving no clear picture of what its liabilities may be.

In a draft term sheet, PG&E laid out a reorganization proposal that would have it exiting the largest utility bankruptcy in U.S. history next year by using a mix of debt and equity to cover the costly claims it faces from wildfires that its equipment ignited. The company fell short, however, of giving an actual estimate for those claims, and the plan is due to be filed Monday.

PG&E, California’s largest electric utility, was forced to seek Chapter 11 protection in January to deal with claims tied to deadly blazes that devastated Northern California in 2017 and 2018. It warned at the time that its liabilities may exceed $30 billion. The company is now rushing to come up with a plan to cover the costs as bondholders including Pacific Investment Management Co. and Elliott Management Corp. try to pitch their own proposal that would all but wipe out the stake of current shareholders.

“PG&E has made significant progress in further refining a viable, fair, and comprehensive plan of reorganization” to compensate wildfire victims and protect customer rates, the San Francisco-based company said in an emailed statement. It reiterated that it plans to file the reorganization plan on or by Monday.

Complicating PG&E’s plan is the fact that a judge, separate from the one overseeing its bankruptcy, has taken over the process of estimating how much the utility must pay for the injuries and deaths caused by the wildfires. The company won’t know how much it owes until that process is complete and said in the term sheet that it will provide funding for claims as authorized by the court.

PG&E’s latest proposal leaves open the possibility that the utility could get state legislation that would let it use tax-free state bonds financed by future company profits to pay past wildfire claims, according to the term sheet obtained by Bloomberg. That proposed measure has been met with strong opposition from some lawmakers and consumer advocates.

A group representing wildfire victims and their attorneys said it’s concerned about the lack of detail in the draft plan about how much money would be allocated to those who lost their homes and loved ones in the blazes.

“When it comes to PG&E we shouldn’t be surprised, but not clarifying that the new equity would go to wildfire victims is a horrible message to the judge and policy makers and most importantly to the victims who are still suffering,” said Patrick McCallum, co-chair of the group Up From the Ashes. The group is opposing PG&E’s efforts to get tax-free bonds without a settlement agreement with victims, he said.

PG&E said it has received assurances from financial firms that it could raise between $35 billion to $40 billion in debt and equity to satisfy claims, refinance debt and meet other bankruptcy-related needs, according to the term sheet.

Creditor Push-Back

PG&E had already offered a broad outline of its plan that, it claims, would bring in new money, protect the value of its shares and pay wildfire victims. The term sheet reiterates the company’s commitment to settling fire claims, upholding all power purchase agreements and exiting bankruptcy without raising customer bills by June 30. Emerging by then would allow it to tap into a new wildfire fund that can help pay for future damages.

The utility and its shareholders have been making a last-minute lobbying push to pass the bond measure, which would permit the issuance of as much as $20 billion in debt. PG&E says the bonds would allow it to raise money more quickly to pay victims. Creditors are lobbying against the proposal, calling it a bailout that’s designed only to protect current shareholders.

(Updates with comment from wildfire group starting in seventh paragraph.)

To contact the reporters on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net;Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Pratish Narayanan

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