(Bloomberg) -- PG&E Corp. won bankruptcy court approval to use up to $23 billion in financing after California Governor Gavin Newsom dropped his opposition, clearing a crucial obstacle to the power company’s push to exit Chapter 11.
U.S. Bankruptcy Judge Dennis Montali said Monday he’ll approve a financing motion for $11 billion in debt commitments and $9 billion in new equity that will support PG&E’s turnaround plan. PG&E can also raise an additional $3 billion through new shares under the plan.
Montali called the approval another “major step” in the bankruptcy and complemented the governor’s office and others for working with PG&E to move the process forward. PG&E attorney Paul Zumbro said it’s especially critical given the fallout on Wall Street from the coronavirus.
The plunge in equity markets “underscores with three bright red lines the importance of having committed financing,” Zumbro said during the hearing.
PG&E shares climbed as much as 17% Tuesday before the start of regular trading on Wall Street.
Newsom had previously objected to PG&E’s financing plan, saying it relied on too much debt and included fees that could be in excess of $1 billion, according to court papers. An attorney for the governor said Monday that the state has yet to reach a final deal with PG&E with its overall bankruptcy plan.
The company also needs to win final support from creditors for its bankruptcy plan, including thousands of victims of wildfires blamed on its equipment. PG&E already has reached $25.5 billion in settlements with residents and businesses, insurers and local governments over damage claims from the blazes.
Plus, PG&E needs to convince state regulators that its reorganization won’t increase rates for customers and will lead to a safer and financially stable company.
The utility faces a June 30 deadline to emerge from bankruptcy in order to qualify for a state wildfire fund to help cover the costs of future blazes.
“It was important for the utility to get court approval of this motion,” said Negisa Balluku, bankruptcy litigation analyst for Bloomberg Intelligence. “It was probably the key motion for Newsom to object to if he had substantive concerns with PG&E’s post-emergence capital structure and debt load.”
The bankruptcy case is PG&E Corp. 19-bk-30088, U.S. Bankruptcy Court, Northern District of California (San Francisco).
(Updates shares in fifth paragraph.)
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