PG&E secures $5.5bn in bankruptcy financing

March 2019  |  DEALFRONT  |  BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

March 2019 Issue


As a result of the devastation wrought by wildfires in California in 2017 and 2018, energy company Pacific Gas and Electric (PG&E) Corporation has filed for Chapter 11 bankruptcy, with its liabilities estimated to be $30bn.

The Chapter 11 process is intended to assist PG&E in resolving its liabilities and it to access the capital and resources needed to continue to provide a safe service to its customers. The company has also stated that it does not expect any impact to its customers’ electric or natural gas service and remains committed to assisting the communities affected by the wildfires.

To this end, PG&E has engaged in discussions with potential lenders with respect to debtor-in-possession (DIP) financing and expects to secure approximately $5.5bn. The DIP financing is expected to provide PG&E with sufficient liquidity to fund its ongoing operations, including its ability to provide a safe service to its customers.

The company has also stated its commitment to continuing to make investments in system safety as it works with regulators, policymakers and other key stakeholders to consider a range of alternatives to provide for the safe delivery of natural gas and electric service for the long term in an environment that continues to be challenged by climate change.

As one of the largest combined natural gas and electric utilities in the US, PG&E, along with its wholly owned subsidiary, Pacific Gas and Electric Company, serves 16 million Californians across a 70,000-square-mile service area in Northern and Central California.

“Following a comprehensive review with the assistance of our outside advisers, the PG&E board and management team have determined that initiating a Chapter 11 reorganisation represents the only viable option to address the company’s responsibilities to its stakeholders,” said Richard C. Kelly, chair of the board of directors of PG&E. “Our goal is to work collaboratively to fairly balance the interests of our many constituents – including wildfire victims, customers, employees, creditors, shareholders, the financial community and business partners – while creating a sustainable foundation for the delivery of safe service to our customers in the years ahead.”

The fires, which destroyed large areas of Northern California, claimed the lives of 130 people.

“The people affected by the devastating wildfires are our customers, our neighbours and our friends, and we understand the profound impact the fires have had on our communities and the need for PG&E to continue enhancing our wildfire mitigation efforts,” said John R. Simon, who became interim chief executive of PG&E following the resignation of Geisha Williams in March 2017. “We expect the Chapter 11 process to enable PG&E to access the capital and resources we need to continue providing our customers with safe service and investing in our systems and infrastructure.

“Everyone at PG&E knows that our single most important responsibility is safety, and we recognize that we must work even harder every day to demonstrate that the safety of our customers, our communities, our employees and our contractors comes first,” he continued. “We remain committed to helping them through the recovery and rebuilding process.”

Acting as PG&E’s legal counsel during the Chapter 11 process are Weil, Gotshal & Manges LLP and Cravath, Swaine & Moore LLP. Lazard is serving as the company’s investment banker and AlixPartners LLP is serving as restructuring adviser.

Mr Simon concluded: “We believe a court-supervised process under Chapter 11 will best enable PG&E to resolve its potential liabilities in an orderly, fair and expeditious fashion.”

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BY

Fraser Tennant


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