U.S. judge grants PG&E access to $5.5B in financing

SAN FRANCISCO — The judge overseeing the Pacific Gas and Electric Corp.’s bankruptcy approved the utility’s request to fully tap into $5.5 billion in financing from major banks Wednesday over objections from an attorney representing thousands of wildfire victims, arguing she could leverage a better deal with more time.

Attorneys for PG&E and a lender argued they renegotiated the deal to better address U.S. Bankruptcy Judge Dennis Montali’s concerns over losing control of the matter if the utility defaults on the loan and delaying a decision jeopardizes its operations and those who do business with it.

“I want the principal parties to cast their own fate as much as they can,” the judge said.

Montali considered PG&E’s request to approve the financing at two previous hearings. He continued the decision because of concerns over losing oversight of the utility’s restructuring.

The banks financing the $5.5 billion loan can argue the utility defaulted if it is found potentially liable for another wildfire, according to Cecily A. Dumas, who was appointed to represent tort claimants on March 18, of Baker & Hostetler LLP.

Montali and U.S. District Judge William Alsup, who is overseeing PG&E’s criminal probation arising out of the 2010 San Bruno pipeline explosion, have not discounted the possibility they oust management and appoint a trustee to run the company, which could similarly trigger a default.

PG&E lenders agreed to extend the timeline before they can take action resulting from a default from seven regular days to 21 business days. Montali approved the deal Wednesday because the extension gives the parties more time to refinance the loan.

Certain events that trigger a default are not subject to the extension. In re: PG&E Corporation, 19-30088 (N.D. Cal. Bankruptcy Ct., filed Jan. 29, 2019).

“The [California Public Utilities Commission] supports it, and no committee has asserted we don’t need the financing,” said PG&E attorney Paul H. Zumbro of Cravath, Swaine & Moore LLP. “This is the best integrated package.”

Hansen adamantly argued for Montali to approve the financing or risk having the lenders change the terms of the deal and destabilize PG&E operations and its vendors.

But Dumas, who said she has been “told [Montali] will grant this, and that I should sit down and shut up,” maintained she is confident she could have a better deal lined up by the next hearing on April 9.

The financing was an “extremely attractive loan for the lenders to make,” she continued.

“We see no reason why in an orderly chapter 11 ... we should be in a place for California to save what is a quasi-public service,” Dumas said in response to a statement by Montali of what would likely happen if PG&E were to default. “What we suggested and was rejected is that the 21 business day offer apply to all events of default.”

Dumas went on to accuse PG&E attorneys of working in bad faith to renegotiate terms of the financing.

“With a little more time, we might have been able to reach agreement,” she said. “Where we ran into a stonewall is the debtors’ unwillingness to have any interference in its program.”

Outside of a “ticking fee,” which increases as the loan is awaiting approval, a decision concerning the financing is necessary to stabilize operations for PG&E in addition to its vendors, according to Kristopher M. Hansen, who is representing JPMorgan Chase & Co.

“The issue is ensuring everyone who deals with PG&E, that they have committed financing and are on stable grounds,” the Strookck & Strook & Lavan LLP partner said. “The more this process plays itself out ... it injects risk into debtor operations and dealing with counterparties.”