PG&E Readies $11 Billion Jumbo Debt Deal for Bankruptcy Exit

(Bloomberg) -- Utility giant PG&E Corp. is readying an $11 billion debt-financing package that may be sold to investors as soon as next week as the company prepares to exit bankruptcy, according to people with knowledge of the matter.

The financing includes $4 billion of high-yield bonds and a $750 million term loan led by JPMorgan Chase & Co., the people said, asking not to be named because the transaction is private. The remaining package consists of an investment-grade bond portion offered by Bank of America Corp., JPMorgan and other banks, the people said.

The exit financing marks the near-conclusion of a complex Chapter 11 bankruptcy that’s lasted over a year and seen wildfire victims fight for compensation. The utility company filed for relief from its creditors in January 2019 after its equipment was linked to wildfires that ripped through Northern California in 2017 and 2018.

PG&E shares surged as much as 12.4% to $13.34 after Bloomberg reported the potential offering, triggering a volatility pause.

Bankers are targeting a timeline of next week for the debt offering, the people said, adding that PG&E is expected to market a $9 billion equity offering at a later date. The company has said in court papers that it expects to market the debt as soon as it gets confirmation of its plan, which could come as early as next week.

Representatives for PG&E, JPMorgan and Bank of America declined to comment.

An attorney for PG&E told the bankruptcy judge overseeing its case Friday that the utility plans to raise the $9 billion in equity this month, saying it can’t do it in July because of a blackout period during the run up to reporting second-quarter earnings. The attorney, Stephen Karotkin, asked the judge to confirm its plan by next Friday so the company can start raising the money.

“The intention is to raise all the capital as quickly as possible so we can exit as quickly as possible,” he said.

The jumbo debt financing comes as corporate debt markets have rallied following unprecedented support from the Federal Reserve. Investors poured a record $15.6 billion into funds that buy U.S investment-grade and high-yield bonds and leveraged loans in the week that ended June 3.

Some investment-grade companies have received record-low interest rates on new debt amid the frenzy, and U.S. high-yield bonds have gained 21% since bottoming in late March. Leveraged loans have been slower to recover, but the market for new loans has started to thaw as well.

U.S. Bankruptcy Judge Dennis Montali is expected to conclude confirmation hearings on PG&E’s $59 billion bankruptcy plan Friday and rule shortly after. The plan includes $25.5 billion of settlements to pay wildfire damage claims from residents, businesses, local governments and insurers.

PG&E is seeking to gain court approval of its turnaround plan by June 30 so it can participate in a state wildfire insurance fund that will help utilities pay for any future fire damage claims. The firm’s equity offering is intended to go into a wildfire trust for victims.

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