PG&E Keeps Bankruptcy Control for Now After Judge Delays Ruling

(Bloomberg) -- PG&E Corp. remains in exclusive control of its bankruptcy for at least another two weeks after a judge sided with California Governor Gavin Newsom’s call for more time to develop alternatives to a bondholder restructuring proposal.

Judge Dennis Montali delayed ruling on a bondholder request to end PG&E’s control so they could submit their restructuring plan, and gave the parties until Aug. 9 to see if they could come up with a process for evaluating alternative reorganization proposals. A hearing will be held Aug. 13 on the bondholder’s group motion to end PG&E’s exclusivity.

Counsel for the bondholder group, which includes Pacific Investment Management Co. and Elliott Management Corp., strongly objected to delaying a ruling on the grounds that PG&E may not be able to exit bankruptcy by June 30. The San Francisco-based utility needs to have a restructuring plan by that date to be able to dip into a $21 billion wildfire insurance fund that would be set up to help utilities pay for fire claims.

“What they are proposing is an unprecedented, undocumented road to nowhere,” Michael Stamer of Akin Gump Strauss Hauer & Feld LLP said in a San Francisco courtroom. “Everything that the ad hoc group is doing has been under a desire to move the process forward.”

Newsom called for the court to allow time for the development of a new process for submitting restructuring proposals ahead of Wednesday’s hearing. The administration said it will support giving PG&E time to develop its own plan for emerging from the largest U.S. utility bankruptcy. PG&E currently has the exclusive right until Sept. 29 to submit a plan to restructure and exit bankruptcy.

PG&E rose as much as 6.7% on Newsom’s statement before paring gains. The shares closed at $18.89 on Wednesday in New York.

Counsel for the California Public Utilities Commission stressed the need for a competitive, orderly process for evaluating restructuring proposals that would give the regulator time to consider factors including the environmental impact and cost to ratepayers of a successful plan. PG&E also needs approval from the CPUC to exit bankruptcy.

“We cannot permit competition to turn into chaos,” CPUC lawyer Alan Kornberg of Paul Weiss Rifkind Wharton & Garrison said in bankruptcy court.

CPUC’s motion for a two-week delay on the exclusivity motion is supported by the company, another creditor group of financial companies holding insurance claims, a shareholder group represented by Jones Day, and the committee of tort claimants, according to Kornberg.

The group of financial companies -- including Seth Klarman’s Baupost Group -- with $20 billion in claims against PG&E has also floated a broad outline of its own restructuring strategy.

A collection of shareholders represented by Jones Day and PJT Partners Inc. said the decision by the court was a welcome step toward satisfying claims against the company and helping it emerge from bankruptcy.

"The investors look forward to working with the company and all stakeholders constructively throughout this process and stand ready to provide capital, as needed, to ensure that the most efficient and equitable form of financing is achieved," Steve Zelin, a partner at PJT, said in a statement.

Wildfire Liabilities

PG&E filed for bankruptcy in January to deal with an estimated $30 billion in liabilities from wildfires that its equipment may have ignited in 2017 and 2018.

PG&E has accused the ad hoc bondholder group of trying to “hijack the Chapter 11 plan process” and argued last week in a court filing that it should be allowed to finish its plan without interference.

The Newsom administration is concerned that the competing proposals could get mired in litigation if allowed to play out in court, making it more difficult for PG&E to emerge from bankruptcy by June 30 as required under legislation passed this month.

In May, Newsom asked the court to deny PG&E’s request for an extra six months to file its restructuring plan and instead be required to submit it by Aug 15. The judge ruled then that PG&E could have until September.

--With assistance from Steven Church.

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;Allison McNeely in New York at amcneely@bloomberg.net

To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, ;Liana Baker at lbaker75@bloomberg.net, Michael Hytha, Joe Ryan

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