PG&E Pushes Newsom For Plan to Fund Bankruptcy With Bonds

(Bloomberg) -- PG&E Corp. is pushing California Governor Gavin Newsom to support a proposal by the utility to issue billions of dollars in bonds backed by customer bills to help pay for its bankruptcy plan, according to people familiar with the matter.

The effort to win the governor’s support comes as PG&E has a Friday deadline to file its $46 billion restructuring plan with state regulators. Newsom’s office hasn’t signed off on the idea of using bonds, the people said.

The proposal is one of the final issues the two sides are debating as PG&E pushes to emerge from the largest utility bankruptcy in U.S. history. The company filed for Chapter 11 last year facing $30 billion in liabilities from wildfires blamed on its equipment, and the governor has threatened a state takeover if the utility doesn’t reach a deal with his office over how to restructure itself.

“Our focus has remained on getting victims paid and continuing to deliver safe and reliable electric and gas service and implementing needed changes across our business to improve our operations for the long term,” PG&E said in a statement.

The company said its overall plan won’t result in bill increases and will save customers $1 billion in interest payments on refinanced debt.

The governor’s office did not immediately respond to a request for comment.

Newsom has objected to PG&E’s current restructuring proposal, saying it depends too heavily on debt and short-term bridge financing that would leave the company without adequate resources to fund safety upgrades.

By issuing customer-backed bonds, PG&E contends it can improve its credit rating while expanding access to capital, the people said. The company would fund the securitization through a charge on customer bills, according to the people.

That charge, however, would be offset by customer credits, and financing costs of the debt would fall to shareholders, the people said. It’s not clear how much PG&E would aim to raise via bonds. The company has already lined up $12 billion in equity commitments for its $46 billion restructuring.

The utility needs to win the approval from both the California Public Utilities Commission and bankruptcy court by June 30 in order to participate in a state wildfire insurance fund.

PG&E has already reached $25.5 billion in settlements with residents, insurers and local governments impacted by the fires. It recently struck a deal with bondholders that requires them to drop their opposition to PG&E’s plan and support the company’s proposal.

To contact the reporter on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net

To contact the editors responsible for this story: Joe Ryan at jryan173@bloomberg.net, Carlos Caminada

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