PG&E shareholder Bluemountain challenges bankruptcy plans

Bluemountain Capital, a hedge fund that holds a stake in the California utility group Pacific Gas and Electric Co., is challenging the company’s plan to file for bankruptcy protection following losses from the devastating California wildfires.

“There is overwhelming evidence that PG&E is solvent,” the hedge fund said in a letter to the company’s board of directors on Thursday morning. “We simply cannot recall a situation where such a valuable company filed for bankruptcy with such blatant questions about the necessity of doing so.”

PG& E said on Monday it would enter Chapter 11 bankruptcy protection on or around January 29, which it said would allow it to maintain gas and electricity supplies for customers while it works out its liabilities, which it estimates at more than $30bn.

Bluemountain said that the utility is actually solvent, and a bankruptcy would be “damaging, avoidable, and unnecessary” and would destroy value for the company and its shareholders.

“Before improper and damaging leaks of confidential boardroom information, every Wall Street analyst found PG& E to have a large capital cushion, and both major ratings agencies found PG&E’S credit to be investmentgrade,” it said.

The fund added that it believes PG&E’S estimates of its liabilities were “inflated and premature,” and urged the board to conduct a solvency analysis.

Bluemountain, which manages around $19bn, holds around 0.8 per cent of the company, making it one of the 25 largest shareholders.

Shares in PG&E, down 85 per cent since November when the California wildfires first broke out, rose 8 per cent in pre-market trading.