SAN FRANCISCO (CN) – Embattled utility giant Pacific Gas and Electric won approval to take out $5.5 billion in loans at a bankruptcy hearing Wednesday, despite objections that a default would give big banks control over PG&E's assets to the detriment of wildfire victims and other claimants.
"This is the best financing package available in these circumstances," PG&E attorney Paul Zumbro said in court Wednesday before the controversial loan was approved.
A coalition of objectors including the U.S. Trustee, which is responsible for enforcing federal bankruptcy laws, argued against the loan agreement. They noted a default would strip the bankruptcy court of control over PG&E's Chapter 11 reorganization process and hand that authority over to big banks like JPMorgan Chase.
Cecily Dumas, a lawyer representing a committee of tort claimants – those who have sued PG&E for damages – urged U.S. Bankruptcy Judge Dennis Montali to postpone signing off on the loan so that better terms could be negotiated over the next two weeks.
But Montali rejected that request after lawyers for PG&E and JPMorgan Chase, one of the main lenders, insisted further delay would accomplish nothing aside from placing the company and its business partners at risk.
“If that financing is on shaky ground, someone might say I need more collateral for the trade agreement that we have," JPMorgan Chase attorney Kristopher Hansen told the judge.
Earlier this month, Montali raised concerns that PG&E's equipment could start more wildfires this year and prompt fresh litigation that might jeopardize the company's ability to pay off the loan and trigger a default.
But on Wednesday, Montali accepted arguments that this loan package was "the best deal" PG&E could get and that further delay would place the company on unstable footing as an April 15 loan approval deadline approaches.
Montali previously approved $1.5 billion in loans for PG&E in January. His decision Wednesday authorized the remaining $4 billion in requested debtor-in-possession financing.
Also on Wednesday, Montali approved PG&E's motion to pay the remaining $1 million of a $1.5 million settlement with the Butte County District Attorney's Office to avoid prosecution for three 2017 wildfires. The money will help fund a new fire prevention program in Butte County.
In approving that motion, Montali rejected a demand that PG&E also be forced to pay the remaining $9.5 million in signed settlements with Butte County Fire victims. Montali said the fire victims would need to file a separate motion for that request.
The judge also granted PG&E's motion to stay 14 lawsuits against PG&E's co-defendants in various court cases that could impact the company's bottom line. The lawsuits include claims against PG&E employees and contractors.
PG&E will return to court April 2 for a hearing on whether it should be subject to new conditions for violating its probation for crimes relating to the 2010 San Bruno gas line explosion. Last week, the company objected to U.S. District Judge William Alsup's proposal that it be barred from paying out dividends to shareholders until it clears all wildfire risks from around its power lines.
PG&E admitted in February that its equipment was a "probable" cause of the 2018 Camp Fire that killed 85 people and destroyed thousands of homes. It has also been implicated in starting 12 Northern California wildfires in 2017.
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