Governor Newsom disapproves of PG&E’s bankruptcy exit strategy

Pacific Gas & Electric said it’s cleared one if it’s last major bankruptcy hurdles. The California energy giant says it’s finally worked out a deal with creditors over company restructuring, which could soon allow it to move out of protection.

However, Governor Gavin Newsom says he’s not satisfied with the deal. That’s because the governor claims the company’s current plan to assure safe, reliable and affordable power for Californians is “insufficient.”

The company filed for Chapter 11 bankruptcy last year after it got blamed for a series of wildfires that occurred in the northern region of the state.

Reorganizing company finances

Until recently, there were competing plans to sort out company finances and get wildfire victims their desired compensation.

In the plan offered by bondholders, PG&E would come out of bankruptcy in strong financial standing. However, the plan would also knock out current company shareholders. But in the agreement created on Jan. 22, 2020, bondholders could receive a certain amount of interest payments in the period after PG&E filed for protection. Both sides also agreed on the amount of “market whole” payments bondholders would get once the bonds mature and get paid off.

This move complicates matters for Governor Newsom, as he now must decide how much he’ll advocate for his objectives. If the governor uses provisions to deny PG&E access to the wildfire fund, he could cause company shares to drop, putting significant pressure on hedge fund managers.

Victims could get more from bondholders

On the contrary, bondholders have already obtained a large sum of compensation for wildfire victims. According to a recent report, the company initially offered $8.4 billion, but upped their amount to more than $13 billion, the amount that bondholders said they were willing to pay.

While Mr. Newsom’s suggestions may be nerve-wracking for PG&E, he’s said he’s willing to examine all options if the company can’t follow through with its payments.

Businesses can still prosper after bankruptcy

Even if companies find a way to compensate customers and pay back creditors, state and federal government can give business owners a headache with unnecessary and financially burdensome requests. If that’s the case, business owners may want to contact an experienced bankruptcy attorney.

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