PG&E says Elliott, Pimco don’t deserve $5 billion ‘windfall’

Bloomberg

Bondholders don’t deserve a $5 billion “windfall” when PG&E Corp reorganises next year because the utility is in bankruptcy, voiding any right investors had to an early payoff premium, the company said in a court filing.
PG&E’s bankruptcy-exit plan is built on a proposed funding package that includes refinancing about $17.5 billion of debt that has not yet matured. The company is challenging a demand for the so-called make-whole payment by some of the biggest names in the business, including Elliott Management Corp, Pacific Investment Management Co and Oaktree Capital Management. The firms say their debt contracts guarantee them the money if PG&E chooses to pay the notes early.
The dispute is among the most important issues US Bankruptcy Judge Dennis Montali must decide on before he rules on PG&E’s reorganisation plan next year.
Noteholders also have their own bankruptcy-exit plan they claim would be better for all creditors. Both plans assume the utility is solvent, but PG&E’s would provide a much bigger return to shareholders than the bondholder version. PG&E’s plan got a boost this month when wildfire victims abandoned an alliance with noteholders and struck a $13.5 billion deal with PG&E.
For the troubled utility “to pay more on claims than is legally required would be patently irresponsible,” PG&E said.
Representatives for the ad hoc noteholders, PG&E and wildfire victims did not respond to a request for comment.
For years, bondholders and financially troubled companies have fought over whether make-whole premiums should be honoured in bankruptcy.