Some of the biggest players in distressed debt are proposing a $35-billion plan that would allow California utility giant PG&E Corp. to emerge from bankruptcy within a year, according to sources familiar with the matter.
Pacific Investment Management Co., Elliott Management Corp. and Davidson Kempner Capital Management have been meeting with California lawmakers and other stakeholders to discuss the proposal, the sources said, asking not to be identified because the discussions are private. The plan would establish a $14-billion cash trust to pay for claims tied to the deadly 2017 and 2018 wildfires that forced the utility to declare bankruptcy, according to the proposal seen by Bloomberg News.
Since making a Chapter 11 filing in January, PG&E has become the target of investors wrestling for control over the company’s incoming board and chief executive officer. The company is facing liabilities that may exceed $30 billion from wildfires its equipment may have caused. Its bankruptcy case, the biggest for a utility in U.S. history, is expected to be contentious and complex as creditors, shareholders, wildfire victims and state officials weigh in on the remake of the power giant.
Pimco didn’t immediately respond to requests for comment left after business hours. Davidson Kempner also couldn’t immediately be reached for comment. Elliott and PG&E declined to comment.
The plan that Pimco, Elliott and Davidson Kempner are pitching on behalf of an ad hoc committee of PG&E’s senior unsecured noteholders would also establish a statewide wildfire fund of at least $13 billion that would be financed by PG&E, other California utilities, statewide bonds and other state funding, according to the sources.
Under the plan, PG&E would be recapitalized through contributions totaling $8 billion, allowing the company to refinance its debtor-in-possession loan and other maturities. In all, roughly $18.5 billion in funds would be provided by the creditor group — about half in equity and half in debt-linked securities, the sources said. An additional $2 billion would come from insurance proceeds, they said.
In the term sheet, the creditors describe the proposal as “a fresh capital commitment of unprecedented scale by existing PG&E creditors, including leading financial institutions and investors in the U.S. regulated utility industry.” It would have PG&E exiting bankruptcy by March 31, 2020, and would be “mainly neutral for consumers,” according to the document.
The creditors aren’t asking for action by California legislators outside of the establishment of the statewide wildfire fund — a move that could expedite PG&E’s exit from bankruptcy, the sources said.