Pacific Gas and Electric (NYSE:PCG)
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3 Months : From Apr 2019 to Jul 2019
By Peg Brickley, Andrew Scurria and Katherine Blunt
California Gov. Gavin Newsom is asking a bankruptcy judge to keep PG&E Corp. on a short leash, requesting a cap on how long the state's largest utility has to steer a course out of bankruptcy without worrying about rival restructuring proposals.
The Democratic governor asked the judge overseeing the utility's debt restructuring to limit the period during which it alone can propose a turnaround plan. That request by Mr. Newsom, who has emerged as a vocal critic of PG&E, came earlier on Wednesday, when California investigators later said they had concluded the company's equipment sparked the largest fire in the state's history.
PG&E wants the exclusive right until Nov. 29 to file a chapter 11 plan that would resolve damage claims from years of wildfires. The governor said he wants an Aug. 15 deadline for PG&E to either file an exit plan or demonstrate sufficient progress to justify its maintaining control of its future.
PG&E shouldn't qualify for more breathing room when it hasn't done enough to address the problems that landed it in chapter 11, the governor said Wednesday in a filing in U.S. Bankruptcy Court in San Francisco.
"Despite repeated assurances from PG&E's management, PG&E has not demonstrated that it understands the gravity and urgency of the situation," he said.
In a statement Wednesday, a PG&E spokesman said the company appreciates the governor's perspective and shares his desire to resolve its bankruptcy quickly. PG&E "is asking for additional time to increase our chances of formulating and negotiating a plan of reorganization that is feasible and agreeable to stakeholders," he said.
Judge Dennis Montali will decide whether to grant PG&E's request or give the company a lesser period of unchallenged control. Meanwhile, California lawmakers are determining how to address PG&E's restructuring while protecting the state's other two investor-owned utilities, which have seen their credit ratings slide because of wildfire concerns.
Mr. Newsom last month kicked off the debate with a set of proposals that include creating a California wildfire fund to spread liability costs and modifying a state constitutional provision that makes utilities responsible for damages arising from fires sparked by their equipment.
Mr. Newsom called on lawmakers to pass legislation before a monthlong summer recess beginning July 12. He said in the court filing that although the state is working diligently to construct a new liability framework, PG&E must act urgently to solve its problems and emerge from bankruptcy.
PG&E faces its first deadline May 29 to either file a plan setting out how it will pay fire victims or explain why it deserves more time. The utility wants a six-month extension, an often-routine request in complex corporate restructurings, where it can take years to restructure billions of dollars worth of financial liabilities. PG&E's predicament is further complicated by up to $30 billion in potential liabilities from wildfires that have been tied to its equipment.
The governor's request represents a rebuke of how PG&E has spent its time and money since filing for court protection on Jan. 29, a move that won it temporary reprieve from lawsuits and an initial four-month window to chart a path out of bankruptcy.
Elected last November, Gov. Newsom wields significant influence over the future of PG&E, which has been taking measures to improve its safety practices and appoint new leadership following a series of deadly wildfires within its service territory. He has criticized the company's new board of directors for its "large representation of Wall Street interests" and repeatedly questioned the company's commitment to safety.
He reiterated those concerns in the court filing, slamming the utility for a corporate-governance shake-up that he said put restructuring and financial experts on the board but left a shortage of expertise in utility operations, regulation and safety.
"PG&E has done little to instill confidence that it appreciates the urgency of resolving wildfire claims or that it is developing with due dispatch a viable business plan," Gov. Newsom's lawyers wrote.
Should the utility lose control of its bankruptcy, any other entity with enough financial backing could propose their own restructuring strategy, with or without PG&E's buy-in. Rival plan proponents that may want to sell PG&E businesses or reshape the utility for public ownership could pitch their ideas to creditors and campaign for votes.
If that happens, it wouldn't be the first time PG&E lost control in bankruptcy. During the company's first pass through bankruptcy, which began in 2001, the California Public Utilities Commission filed a competing chapter 11 plan.
The fire damages PG&E needs to address in this bankruptcy date back years, but most victims won't be paid until a chapter 11 plan is proposed, voted upon and confirmed. Bondholders, in contrast, can trade their debt freely and don't have to wait to cash out, the governor noted.
"Allowing PG&E to continue a business-as-usual approach without any accountability would only encourage PG&E's distressed-investors to leverage the chapter 11 cases to their benefit and to the detriment of existing and future wildfire victims," he wrote.
(END) Dow Jones Newswires
May 15, 2019 19:33 ET (23:33 GMT)
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