California Governor Pushes to Limit PG&E's Bankruptcy Extension
16 Mai 2019 - 01:48AM
Dow Jones News
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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