PG&E lands $5.5 billion in funds to keep operating during wildfire-linked bankruptcy

San Jose Mercury News (CA)

March 28-- Mar. 28--PG&E can tap $5.5 billion in financing to keep operating during its wildfire-linked bankruptcy case, a judge ruled Wednesday, effectively authorizing a funding package whereby big banks and Wall Street behemoths could seize the embattled utility's gas and electricity systems if PG&E defaults on the mega loan.

U.S. Bankruptcy Court Judge Dennis Montali approved the financing, which PG&E claims is essential to continue basic electricity and gas operations, despite objections raised by victims of multiple PG&E-linked infernos of recent years, including lethal wildfires in Northern California in 2015, 2017 and 2018, as well as the 2016 Ghost Ship Fire in Oakland.

"This is basically Wall Street investment banks and Park Avenue lawyers getting their paydays before the wildfire victims, who are at the back of the line to be paid back by PG&E," said Jamie Court, president of Consumer Watchdog, a frequent critic of PG&E.

PG&E, already a convicted felon for crimes related to a fatal gas explosion in San Bruno, has argued that it requires the $5.5 billion in what's called debtor-in-possession, or DIP, financing, while it attempts to reorganize its shattered finances through a Chapter 11 bankruptcy proceeding.

However, the collateral for the funding package includes the company's electricity system, gas operations and real estate.

"We are pleased that the court approved PG&E's access to $5.5 billion in debtor-in-possession financing, which will provide us with the capital necessary to continue to invest in safety and reliability," PG&E spokeswoman Lynsey Paulo said.

PG&E filed bankruptcy on Jan. 29, as it faced a forbidding pile of liabilities and wildfire-related claims that have mounted steadily in the wake of deadly infernos that roared through the North Bay Wine Country and nearby regions in October 2017, as well as a fatal blaze that torched Butte County and essentially destroyed the town of Paradise in November 2018. Eighty five people perished in that November fire.

"The better thing to do is go ahead and grant the motion," Montali said in authorizing the PG&E request to gain access to the $5.5 billion loan.

However, Cecily Dumas, an attorney for an official committee of tort claimants that is a party in the bankruptcy case, told the court her clients, which include wildfire victims, opposed approval of the financing package. She also accused PG&E of being uncooperative in negotiations to craft a funding deal.

"The frustrating part is the unwillingness of PG&E to compromise," Dumas told the court. "We haven't been taken seriously by the debtor. We have been taken seriously by the lenders."

Paul Zumbro, a bankruptcy attorney for PG&E, shot back and disputed suggestions that PG&E wasn't being cooperative in the financing discussions.

"I think we were constructive," Zumbro said.

PG&E filed for bankruptcy on Jan. 29, listing $51.69 billion in debts. JPMorgan Chase Bank, Bank of America, Barclays Bank and Citigroup Global Markets have teamed up to lead the funding package.

Kristopher Hansen, an attorney for JPMorgan Chase, the administrator for the banking consortium, forcefully urged Judge Montali to authorize the $5.5 billion in financing right away, saying the utility could collapse without the financing help.

"The more this process plays out, there is additional risk," Hansen said. "The financing could get smaller, it could get more expensive, it might go away."

PG&E's attorney insisted that it would be better off financially the sooner it receives the funding.

"There is an economic benefit to approving it today?" Judge Montali asked PG&E's legal representative during the hearing. Zumbro replied, "Yes."

Court warned that PG&E customers and the California taxpayers could wind up being on the hook to bail out the disgraced utility if it's unable to repay the loan.

"You have $5.5 billion in financing that's backed up by $70 billion in PG&E assets," Court said. "If those assets are tied up as collateral, then you have the ratepayers and taxpayers left holding the bag."

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