Item 1.01 Entry into a Material Definitive Agreement.
As previously disclosed, on January 29, 2019, PG&E Corporation (the “Corporation”) and its subsidiary, Pacific Gas
and Electric Company (the “Utility,” and together with the Corporation, the “Debtors”), filed voluntary petitions for relief under chapter 11 of title 11 (“Chapter 11”) of the United States Code in the U.S. Bankruptcy Court for the Northern District
of California (the “Bankruptcy Court”). The Debtors’ Chapter 11 cases are being jointly administered under the caption In re: PG&E Corporation and Pacific Gas and Electric Company, Case No. 19-30088 (DM) (the “Chapter 11 Cases”). On September
9, 2019, the Debtors filed with the Bankruptcy Court their joint Chapter 11 Plan of Reorganization, which was thereafter amended on September 23, 2019 and November 4, 2019. On December 12, 2019, the Debtors, certain funds and accounts managed or
advised by Abrams Capital Management, LP (“Abrams”), and certain funds and accounts managed or advised by Knighthead Capital Management, LLC (“Knighthead” and, together with Abrams, the “Shareholder Proponents”) filed the Debtors’ and Shareholder
Proponents’ Joint Chapter 11 Plan of Reorganization dated December 12, 2019 with the Bankruptcy Court (as may be further amended, modified or supplemented from time to time, the “Proposed Plan”).
Equity Backstop Commitment Letters
As previously disclosed, the Corporation entered into Chapter 11 Plan Backstop Commitment Letters (the “September
Backstop Commitment Letters”) with certain investors, under which such investors severally committed to fund up to $14.0 billion of proceeds to finance the Proposed Plan through the purchase of common stock of the Corporation. Also as previously
disclosed, the Corporation entered into Chapter 11 Plan Backstop Commitment Letters (the “November Backstop Commitment Letters”) with certain investors (the “November Backstop Parties”), under which such investors severally committed to fund up to
$12.0 billion of proceeds to finance the Proposed Plan through the purchase of common stock of the Corporation. The November Backstop Commitment Letters superseded and replaced any prior backstop commitments of the November Backstop Parties or any of
their affiliates, including the September Backstop Commitment Letters.
On December 23, 2019, the Corporation separately entered into Chapter 11 Plan Backstop Commitment Letters (the
“Backstop Commitment Letters”) with each of the entities set forth in Schedule 1 to Exhibit 10.1 of this Current Report on Form 8-K (the “Backstop Parties”), under which the Backstop Parties have severally committed to the Debtors to fund up to $12.0
billion of proceeds to finance the Proposed Plan (such commitments, the “Backstop Commitments”) in consideration of the issuance of new shares of common stock of the Corporation to the Backstop Parties on the effective date of the Proposed Plan (the
“Effective Date”), subject to the terms and conditions set forth in each Backstop Commitment Letter. The Backstop Commitment Letters supersede and replace any prior backstop commitments of the Backstop Parties or any of their affiliates, including
the September Backstop Commitment Letters and the November Backstop Commitment Letters.
Under the Backstop Commitment Letters, the price at which new shares of common stock of the Corporation would be
issued to the Backstop Parties would be equal to (a) 10 (subject to adjustment as provided in the Backstop Commitment Letters), times (b) the Corporation’s
consolidated Normalized Estimated Net Income (as defined in the Backstop Commitment Letters) for the estimated year 2021, divided by (c) the number of fully
diluted shares of the Corporation that will be outstanding on the Effective Date (assuming that all equity is raised by funding the Backstop Commitments).
The Backstop Commitment Letters provide that under certain circumstances, the Debtors will be permitted to issue new
shares of common stock of the Corporation for up to $12.0 billion of proceeds to finance the transactions contemplated by the Proposed Plan through one or more equity offerings that, under certain circumstances, must include a rights offering (the
“Rights Offering”). The structure, terms and conditions of any such equity offering (including a Rights Offering) are expected to be determined by the Debtors at a later time in the Chapter 11 process, subject to the terms and conditions of the
Backstop Commitment Letters. There can be no assurance that any such equity offering would be successful. In the event that such equity offerings (together with additional permitted capital sources) do not raise at least $12.0 billion of proceeds in
the aggregate or if the Debtors do not otherwise consummate such offerings, then the Debtors may draw on the Backstop Commitments for equity funding to finance the transactions contemplated by the Proposed Plan, subject to the satisfaction or waiver
by the Backstop Parties of the conditions set forth therein.
Under the Backstop Commitment Letters, the Corporation agrees that if the Backstop Commitments are drawn, and the
Corporation does not expect to conduct a third-party transaction based upon or related to the utilization or monetization of any net operating losses or tax deductions resulting from the payment of pre-petition wildfire-related claims (a “Tax
Benefits Monetization Transaction”) on the Effective Date, no later than five business days prior to the Effective Date, the Debtors must form a trust which would provide for periodic distributions of cash to the Backstop Parties in amounts equal to
(i) all tax benefits arising from the payment of wildfire-related claims in excess of (ii) the first $1.35 billion of tax benefits, starting with fiscal year 2020. The Corporation intends to explore a Tax Benefits Monetization Transaction.