PG&E secures $5.5B to fund 2-year bankruptcy process
After months of plunging, PG&E shares surged Tuesday after news broke the utility giant has lined up $5.5 billion to fund its bankruptcy process, which it expects to take about two years.
According to a filing with the Securities and Exchange Commission on Tuesday, four banks have agreed to provide the embattled company with the funding, including a $3.5 billion revolving credit facility.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| PCG | PG&E CORP. | 16.54 | +0.10 | +0.61% |
The company also reiterated its plan to formally file for a Chapter 11 reorganization on Jan. 29.
However, as FOX Business reported last week, despite its intent to file for bankruptcy as it faces billions in liabilities tied to the state’s deadliest wildfires, the utility remains committed to providing “safe natural gas and electric service” to its 10 million customers.
“The company does not expect any impact to electric or natural gas service for its customers as a result of the Chapter 11 process. PG&E remains committed to assisting the communities affected by wildfires in Northern California, and its restoration and rebuilding efforts will continue,” PG&E said in a statement released to FOX Business.
Additionally, the California-based power giant said it expects that its employees will continue to receive their pay and health care benefits as usual and it will continue to make investments in the safety of its system as it works with regulators and policymakers.
PG&E previously sought protection from creditors in 2001. The process took about three years after its utility unit filed for bankruptcy amid an electricity crisis in California that led to severe price spikes and rolling power outages.
Last week, the company’s CEO, Geisha Williams, resigned and was replaced by John Simon, who will serve on an interim basis.
In a statement, Simon said the board believes a court-supervised process under Chapter 11 will “best enable PG&E to resolve its potential liabilities in an orderly, fair and expeditious fashion.”
“We expect this process also will enable PG&E to access the capital and resources we need to continue providing our customers with safe service and investing in our systems and infrastructure,” Simon added.
News of the decision to file, however, sent PG&E shares tumbling by more than 50 percent last week.
On whether filing for Chapter 11 is the best move for PG&E, Sarah Foss, a legal analyst at Debtwire, tells FOX Business that it was “really the only option the company had considering the massive liabilities it was facing,” with not only last year’s deadly wildfires, but also 2017’s damage.
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“Once the company files for bankruptcy, the litigation that the company is currently facing in connection with the wildfires will be stayed. Customers should continue to receive their natural gas and electric service uninterrupted during PG&E’s bankruptcy. However, it is likely that PG&E will be seeking a rate increase for customers as part of a Chapter 11 plan of reorganization,” Foss said.