In an attempt to salvage their bid to take control of PG&E, a group of creditors led by Elliott Management Corporation (Elliott) and Pacific Investment Management Company (Pimco) said late Friday that they would commit to addressing Governor Newsom’s concerns with PG&E, including the formation of a new board and making provisions for the option of a state takeover.
In a letter to Governor Newsom, the creditor group said they are prepared to pay the victims $13.5 billion in cash upfront instead of using stock in the reorganized company to finance half of the settlement. The creditor group said they plan to make their pitch directly to those with claims from PG&E’s caused wildfires.
“We believe,” the letter stated, “[that] this is simply a better deal for the true victims of PG&E’s fires, the individuals who need this money as soon as possible so they can rebuild and move on.”
The Elliott and Pimco group face a big challenge given that the U.S Bankruptcy Court has already approved the utility’s $13.5 billion settlement with fire victims, along with an $11 billion payout to holders of insurance claims. Those claimants are now required to support PG&E’s restructuring proposal as a condition of the agreements. On Thursday, the official committee representing fire victims formally withdrew its support for the creditor plan.
PG&E said in a statement Friday that this week marked an “important milestone,” and that it’s moving forward with its bankruptcy proceedings.
Under PG&E’s plan, as outlined in previous reports, half of the payout to wildfire victims is to be financed through stock in the reorganized company, and the other half would come from a series of cash payments.
While Newsom rejected the restructuring plan offered by PG&E, and has said that the current plan doesn’t comply with state law, his administration has also stated that the Elliott and Pimco plan doesn’t meet his requirements either. The bondholders have offered to inject as much as $20 billion in cash into PG&E in exchange for almost all of the company’s equity, effectively wiping out shareholders.
The creditor group said Friday that they envision a new independent board with the majority of directors being California residents, and with some appointees to be selected by the Governor’s Office, labor unions and the wildfire fund. The creditor group also said they would allow for a PG&E takeover by the state if the company causes any future fires that destroy more than 5,000 structures, according to the new term sheet.
California’s purchase options would be at a price equivalent of 1 1/2 times the total value of the utility’s assets, and allow for a right of first refusal if a competing superior bid comes in for the company. The proposal would also cap rate increases at 3% through 2023. Further, any future reorganization would be approved by the California Public Utilities Commission.