PG & E in bankruptcy with a debt of more than 50 billion dollars

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(More Bank) – A series of devastating fires that have killed more than 100 people and burned hundreds of thousands of hectares in California over the past two years has just knuckled one of America's largest public services .

PG & E Corp. and his public service Pacific Gas & Electric Co. declared bankruptcy under Chapter 11 in San Francisco, while investigators were investigating whether his equipment had unleashed the deadliest fire in the history of the company. # 39; State. The San Francisco-based company has announced total debt of $ 51.7 billion and assets of $ 71.4 billion. A Chapter 11 filing allows a business to continue while developing a plan to address the situation and repay the creditors.

California's wildfires have in the past caused considerable damage to utility companies, but never has the fire cost a company so much, resulting in one of the biggest bankruptcies in the world. the utility company of all time. Since the November camp fire, which destroyed the city of Paradise, PG & E has seen its three-quarters of its market value collapse, its general manager is gone, his obligations have plunged into a state and estimates of its fire liabilities totaled more than $ 30 billion. .

"We did not take this decision lightly because we understand that millions of customers trust us and will have questions," said John R. Simon, CEO of PG & E, in a letter to customers. "The current and the gas will stay on. We will continue to provide you with reliable electricity and natural gas service, and that will not change as a result of this process. To be very clear, we are not "going bankrupt". "

The only time the company faced such financial difficulties was the 2001 energy crisis, in which it was forced to bankrupt its public service. On the other hand, the same judge who supervised the last Chapter 11 filing, Dennis Montali, was assigned to the latest.

Some of the biggest names in the investment world were working in last-minute financing fixtures because of the utility giant's financial crisis, which would have saved the company from bankruptcy. A group including Paul Ellinger Management Corp., Paul Singer, would have sent PG & E a proposal backed by $ 4 billion worth of bonds that can be converted into shares. At least one other group, which included Ken Griffin's Citadel LLC and Leon Black's Apollo Global Management LLC, reportedly launched a competing plan.

Key creditors include Bank of New York, Mellon Corp., Citibank, Mizuho and Bank of America Corp. The New York Mellon Bank holds the largest unsecured claim, totaling $ 3 billion, revealed court documents. The first meeting of creditors was scheduled for 26 February.

The disappearance of PG & E underscores the growing vulnerability of public services to natural disasters such as forest fires and hurricanes, which are becoming increasingly extreme. This is particularly the case in California, where current law provides that utilities are liable for damages, even if they have not been found to be negligent.

Although the company was relieved of responsibility for the deadliest of the fires that devastated the California wine region in 2017, investigators linked PG & E's equipment to more than a dozen other fires. They consider the PG & E power lines as a possible source of ignition for the camp fire, which killed 86 people. The company said Tuesday that she "continues to believe that the Chapter 11 process will facilitate the orderly, just and swift resolution of the responsibilities that have arisen and will continue to arise" fires.

State officials, including Governor Gavin Newsom, said it would be in the state's interest to maintain the public health service and make it financially viable. PG & E is considered a key pillar in achieving California's ambitious climate change goal of getting all of its electricity from carbon dioxide sources by 2045. At the same time, Newsom has chosen not to take sufficiently drastic measures to avoid filing for bankruptcy. to evaluate whether to break or take over the utility.

Bankruptcy will likely result in higher bills for customers as it will be more expensive for PG & E to borrow the necessary funds to make the infrastructure investments needed to keep the light. The company supplies natural gas and electricity to about 16 million people in northern and central California.

The story continues

In bankruptcy, PG & E is seeking court approval to enter into a $ 5.5 billion financing agreement with a debtor owner. This would free up the capital necessary for the smooth operation of Chapter 11. It named JP Morgan Chase & Co., Bank of America, Barclays Plc, Citigroup Inc., BNP Paribas SA, Credit Suisse Group SA, Goldman Sachs, MUFG Union Bank and Wells Fargo & Co. acting jointly.

"With the public services, bankruptcies take several years," said Kit Konolige, a More Bank Intelligence analyst, in an interview before filing the case. "There is no rapid bankruptcy of public services. And this creates a lot of uncertainty for everyone involved. "

Preparing the ground for a potential battle over power contracts, PG & E asked the judge to declare that the court had the exclusive right to reject existing power purchase agreements. NextEra Energy Inc. is fighting to prevent the termination of its contracts with PG & E and discussed the matter with the Federal Energy Regulatory Commission last week. The board then decided that it shared "concurrent jurisdiction" with the bankruptcy courts.

Here are some other highlights of the bankruptcy filing:

PG & E intends to pay its suppliers in full under normal conditions. "Weil, Gotshal & Manges LLP and Cravath, Swaine & Moore LLP are the legal advisors of PG & E.Lazard is his investment banker and AlixPartners LLP is his restructuring advisor.James A. Mesterharm, Managing Director of AlixPartners, will act as head of the restructuring of PG & E. John Boken, also managing director of AlixPartners, will be the deputy head of restructuring. The first bankruptcy hearing has not yet been scheduled, according to a PG & E website created for this purpose.

(Updates with application on energy contracts in the last paragraph.)

– With the help of Virginia Van Natta.

To contact the reporters on this story: Mark Chediak in San Francisco at mchediak@More Bank.net Allison McNeely in New York at amcneely@More Bank.net

To contact the editors in charge of this story: Joe Ryan at jryan173@More Bank.net, Lynn Doan, Reed Landberg

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