PG&E: Hedge funds submit $15 billion reorg plan

Two hedge funds that own PG&E Corp. stock have said they are willing to invest as much as $15 billion to help the company exit bankruptcy protection.

Abrams Capital Management and Knighthead Capital Management, which are competing with bondholders and others for control of the company, sent PG&E board Chairwoman Nora Mead Brownell a letter on Wednesday outlining their plan. Through what is known as a backstop commitment, other investors would be allowed to buy new shares in the company and the funds would contribute the rest.

The hedge funds said in their letter, which was disclosed in a Securities and Exchange Commission filing on Thursday, that PG&E “faces a material need for new funding” because of the wildfire liabilities that prompted it to file for bankruptcy protection in the first place. They also cited the urgency created by California’s new wildfire law that pushes PG&E to

resolve its bankruptcy case by the end of June 2020.

Additionally, the hedge funds said their plan to invest in PG&E is superior to the strategy advanced by bondholders who proposed their own large investment as a way to get the company out of bankruptcy protection.

Abrams and Knighthead combined own 7.3% of PG&E, according to data compiled by Bloomberg.

In the letter, the funds said their plan “would not seek to undervalue the company, subvert the bankruptcy process or disadvantage one group of financial stakeholders to benefit another.”

PG&E did not immediately endorse the contents of the letter. Company spokesman James Noonan said in an email that PG&E’s goal in its bankruptcy restructuring is “to fairly compensate wildfire victims, protect customer rates and continue delivering safe and reliable service.”

PG&E has the sole right to file a bankruptcy reorganization plan until late next month.

The bondholder group had asked U.S. Bankruptcy Judge Dennis Montali to terminate the company’s exclusive period early so they could formally propose their plan, but he was persuaded by state officials, who pushed for more time to develop a different way of evaluating competing proposals, to reject the group’s request. Insurance companies have described their own reorganization plan, too.

Montali is scheduled to hear an update on the new plan evaluation process at a hearing in San Francisco on Friday.