SAN FRANCISCO (CN) – Looking to seize control of California utility giant Pacific Gas & Electric in the aftermath of its bankruptcy case, a group of bondholders hoped a federal judge would end the utility's exclusive right to have a say in its own reorganization.
But things didn’t go their way at a hearing Wednesday, in which U.S. Bankruptcy Judge Dennis Montali decided to put off hearing the bondholders’ motion until next month.
On the eve of the hearing, Governor Gavin Newsom and state’s utility regulator threw a wrench into their plans, notifying Montali that they would be asking for a postponement.
Attorney Alan Kornberg, representing the California Public Utility Commission, said the commission wants competition but wants an orderly process. He said the regulator is wary of a free-for-all of dueling plans for PG&E’s reorganization. PG&E’s exclusivity rights expire at the end of September.
“We do want to have a competitive process which yields the best plan, but we cannot permit competition to turn into chaos,” Kornberg told the judge Wednesday.
A group of insurance companies also filed a motion Tuesday to allow them to introduce their own plan, characterized as "superior” to the bondholders’ since it will provide $15.8 billion to settle claims from the wildfires that have devastated swaths of California and plunged PG&E into bankruptcy.
Montali seemed to agree with Kornberg, asking the bondholders’ attorney Michael Stamer the harm in putting their motion off until August and giving the governor’s office and regulators a chance to work out an orderly process for the court to evaluate the various competing plans.
“What they are proposing is an unprecedented, undocumented road to nowhere,” Stamer said, arguing that time is of the essence.
Newsom’s office authorized $21 billion in funding to settle wildfire-related lawsuits, which PG&E can only access if it gets out of bankruptcy by Jun. 30, 2020. “This company needs to confirm a plan within 11 months,” Stamer said.
“I don’t feel terribly intimated by the challenge of getting a plan confirmed well before that deadline,” Montali said.
Stamer’s clients propose a roughly $30 billion restructuring plan for PG&E in exchange for a sizable controlling stake, saying their proposal is the only viable, confirmable way forward.
In its motion, the bondholders say PG&E “will require tens of billions of dollars in new money to guarantee their successful emergence” from bankruptcy and that it is unclear how they will obtain this financing. It criticized PG&E’s plan to raise the cash from existing shareholders along with securitization bonds that require passage of new legislation as unworkable.
Securitization bonds would be financed by the shareholders, who will presumably take a reduction in their earnings to pay off the bonds.
Montali said he didn’t see how waiting two weeks would be much of a burden. “What if I called in sick today because I had a headache and said the hearing is over for two weeks – what would happen?”
He added that if he were to allow the bondholders to introduce their plan now, it would open the floodgates for a host of other parties would try to get their plans in, too. “The one thing we don’t need is lots of lawyers writing lots of briefs that don’t have to be written and one judge reading lots of briefs that don’t need to be read,” he said.
Stamer said it seems like PG&E and its current shareholders – referred to as equity holders in court papers – were just trying to stall and retain exclusivity for another two weeks.
Montali, who presided over PG&E’s previous bankruptcy case in 2001, reminded Stamer he terminated exclusivity back then. “You’re preaching to the choir. Ask Mr. Kornberg. He was here popping the champagne,” Montali said.
But this is a different situation, he said, noting Stamer still had not given him a good reason not to suspend the hearing.
“Now, tell the doctor where it hurts,” he pushed.
“It hurts all over,” Stamer said, laughing, but also urging Montali to go forward with the hearing for the sake of expediency.
That reason wasn’t good enough for Montali, who decided grant the commission’s request to put it off until Aug. 9.
By then, Montali said, he expects the commission and the governor’s office to come to a consensus that would streamline the proposal process and sort out all the players. “I’m assuming the governor and the CPUC are going to invite you to the table,” he told Stamer.
Cecily Dumas, an attorney who represents a committee of tort claimants that includes wildfire victims, said she opposed the bondholders’ motion to lift exclusivity as the committee supports competition among restructuring plans.
“There’s been a lot of discussion about timing. From our perspective the most significant use of time is to get to the most fair and efficient way to resolve tort claims. That can’t be rushed,” she said. “We don’t want that to get lost in the race of who gets to own this company and make a profit.”
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