PG&E wins court sign-off on fire deals, now faces governor

Bloomberg

PG&E Corp won court approval for two multibillion-dollar wildfire settlements that will serve as the centerpiece of the bankrupt utility giant’s restructuring plan. It’s still working on winning over California’s governor.
The judge overseeing PG&E’s Chapter 11 case signed off on the company’s $13.5 billion plan to compensate victims of catastrophic fires blamed on its equipment and an $11 billion deal to settle claims with insurers and investors. The agreements are key to the San Francisco-based company’s efforts to emerge from the biggest utility bankruptcy in US history by a state-imposed deadline of June 30.
Judge Dennis Montali’s approval came less than a week after California Governor Gavin Newsom rejected PG&E’s restructuring plan, saying it didn’t comply with state law. His rebuke had threatened to derail the utility’s settlement with wildfire victims, but the utility salvaged the deal at the last minute by stripping away a clause requiring the governor’s blessing. The company said it’s still negotiating with the governor’s office to resolve their differences.
“Ultimately, we expect that PG&E’s plan will win out, though modifications to address Newsom’s comments likely mean it will be less beneficial for equity holders than originally envisioned,” Height Securities LLC analyst Clayton Allen said in a research note.
PG&E filed for Chapter 11 in January after its power lines were tied to deadly blazes that erupted across Northern California in 2017 and 2018, leading to an estimated $30 billion in liabilities. Settling claims tied to those fires has emerged as the biggest obstacle in the utility’s exit from bankruptcy.
The judge’s approval lends support to the company’s efforts and deals a blow to a rival restructuring plan put forth by bondholders including Pacific Investment Management Co. and Elliott Management Corp., who had their own $13.5 billion agreement with wildfire victims before PG&E reached a separate deal. A representative for the creditors group wasn’t immediately available for comment.
PG&E bonds fell on Wednesday, with its 6.05% senior unsecured notes maturing in 2034 dropping 1.25 cents on the dollar to 104.75 cents.