PG&E is a ‘junk bond company’ coming out of bankruptcy

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Pacific Gas & Electric Co.’s plan to emerge from bankruptcy mid-year under a mountain of debt stemming from wildfires sparked by its electrical equipment would leave the beleaguered huge utility a ‘junk bond company’ the mayors of San Jose and Oakland and other cities said Tuesday in a letter to state regulators.

“We urge you to do more,” the mayors, representing a coalition of local officials across PG&E’s service area in Northern California who had proposed turning the utility into a giant taxpayer-owned co-op, said. in the letter to the California Public Utilities Commission.

“If PG&E cannot become a reliable and financially viable utility, the commission should pursue another course,” the letter concludes. “We are ready to work with you on a real long-term solution.”

PG&E said in response Tuesday afternoon that the mayors’ letter “contains numerous inaccuracies.”

“As we have indicated in numerous filings and supported by outside financial experts, PG&E’s plan will result in the issuance of investment-grade bonds, resulting in approximately $1 billion in savings on interest expense for the benefit of our customers,” the company said. “PG&E’s plan positions the utility and PG&E Corporation to be financially sound upon emergence, with improved credit ratings and access to equity and debt markets.”

The Utilities Commission is expected to review PG&E’s bankruptcy exit plan on May 21. If the commission accepts the plan, then U.S. Bankruptcy Judge Dennis Montali, who led PG&E’s bankruptcy case through the court, will have to approve it.

PG&E must emerge from bankruptcy by June 30 to qualify for a wildfire insurance fund established by state law — its financial plan would crumble without access to that money.

PG&E filed for Chapter 11 bankruptcy reorganization in January 2019, citing $51.69 billion in debts and liabilities stemming from catastrophic wildfires related to its aging power grid that erupted in storms. ‘fall.

The coalition of local officials, led by San Jose Mayor Sam Liccardo, urged last fall to orchestrate a buyout of PG&E that would restructure it into a supersized version of a rural electric cooperative owned and operated by its taxpayers. . They argued that this would allow him to borrow at lower rates and make him more responsible.

Otherwise, they said, “this financially fragile company would be allowed to take on more debt, paying excessive interest rates owed to junk bondholders.”

But there may be little appetite among state officials to roll back the carefully negotiated bankruptcy exit plan, crafted after lengthy negotiations with wildfire victims, regulators and an often-critical Governor Gavin Newsom, which includes new controls aimed at further preventing enterprise serial security. failures.

Earlier this month, the Utilities Commission, after rocking PG&E with a record fine of nearly $2 billion for its role in several deadly Northern California infernos in 2017 and 2018, backed away from adding a fined $200 million over fears that too drastic a punishment could jeopardize the bankruptcy exit deal.

Although the decision drew fire from consumer advocates, a lawyer representing wildfire victims said at the time that it was an appropriate balance that ensured the punishment was not so harsh. that it would prevent PG&E from paying damages to the victims of the forest fires.

Gerald Singleton, an attorney for 7,000 fire victims, said on Tuesday that although the coalition of mayors raised legitimate concerns about PG&E’s finances, they did little to offer a viable alternative and called his letter so late in the process a mere “political stunt”. .”

PG&E said “we continue to work diligently to obtain bankruptcy court approval of our reorganization plan as soon as possible, so that victims are paid fairly and promptly.”

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