Court approves PG&E’s $23B bankruptcy financing package

Legal Compliance

Pacific Gas & Electric on Monday won court approval to raise $23 billion to help pay its bills over destructive California wildfires after Gov. Gavin Newsom dropped his opposition to a financing package designed to help the nation’s largest utility get out of bankruptcy.

The milestone reached during an unusual court hearing held by phone moves PG&E closer to its goal of emerging from one of the most complex bankruptcy cases in U.S. history by June 30.

Newsom has said he fears P&E is taking on too much debt to be able to afford an estimated $40 billion in equipment upgrades needed to reduce the chances of its electricity grid igniting destructive wildfires in the future.

The utility’s outdated system triggered a series of catastrophic wildfires in 2017 and 2018 that killed so many people and burned so many homes and businesses that the company had to file for bankruptcy early last year.

But the recent volatility in the financial markets caused by the coronavirus pandemic apparently softened Newsom’s stance after PG&E lined up commitments from investors promising to buy up to $12 billion in company stock.

Those guarantees are looming larger, given the turmoil that has caused the benchmark Standard & Poor’s 500 index to plunge by roughly 25% during the past three weeks. Because of the company’s already shaky condition, PG&E’s stock has been hit even harder, with shares losing nearly half their value during the same stretch. The stock fell 12% Monday to close at $8.95, its lowest price since early December.

Given the potential for upheaval in the financial markets to persist, PG&E lawyer Paul Zumbro told U.S. Bankruptcy Judge Dennis Montali that the commitments are “critically important.” A representative for Newsom said the governor agreed.

“People often talk tough when there is a level playing field, but in circumstances, almost all people want to make deal,” said Eric Snyder, a bankruptcy lawyer who has been following PG&E’s case.

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