PG&E; Dodges Defaulting on Loan

An eleventh-hour reprieve kept San Francisco-based PG&E; Corp. from defaulting on a $420-million loan, as the company announced late Friday that it had renegotiated the terms and picked up $300 million more in financing.

Lenders had given the corporation until Friday to deal with a requirement of the loan -- that the company’s power generating and trading subsidiary maintain an investment-grade credit rating.

Rather than regaining investment status, the subsidiary’s credit rating was further downgraded Friday by Moody’s Investors Service. However, the requirement was removed as part of the renegotiation. Absent a deal or another extension, the company would have been in default.

After the markets closed, the company announced that the loan agreement would provide the corporation with “ample liquidity resources to fund its operations through at least 2006, when the loan matures.”

Shares of PG&E; rose 30 cents Friday to $9.50 on the New York Stock Exchange. The company’s Pacific Gas & Electric Co. utility is operating under Bankruptcy Court protection. It serves about 14 million customers in Northern and Central California.

The deal provided a bright spot for PG&E;, which on Friday saw the credit rating for the National Energy Group cut from B1 to B3 -- six levels below investment grade.

Moody’s cited NEG’s low cash flow, the impending expiration of a revolving credit facility and its plans to stop paying for a major construction project.

NEG’s line of credit with 16 lenders, which are owed $431 million, is set to expire Monday. The company is “continuing to negotiate with lenders on that to reach some kind of long-term resolution,” said Brian Hertzog, a corporate spokesman.

Without a deal, he said, “the facility would mature and the money would be due.”