PCG PG&E Corporation

By Peg Brickley 

PG&E Corp. has failed to persuade victims of wildfires sparked by its equipment to go along with a $5.5 billion loan, terms of which allow Wall Street banks to start dismantling the company if things go seriously wrong in bankruptcy court.

Lenders had offered concessions that would give PG&E more time to refinance the loan in the event of a default. However, papers filed Monday in a San Francisco bankruptcy court say the official committee that represents people who lost loved ones or homes in fires occurring over a span of years isn't satisfied with the concessions.

That means Judge Dennis Montali will have to decide at a court hearing Wednesday whether to approve PG&E's bankruptcy loan, one of the largest in history, over the objections of wildfire victims.

A PG&E spokesman wasn't immediately able to comment on the continued resistance to the chapter 11 financing by the official wildfire victims committee.

The California utility filed for chapter 11 protection at the end of January, planning to stay in bankruptcy for years to tackle an estimated $30 billion in fire-related liabilities.

Terms of the loan say it could balloon to $9.5 billion if PG&E's bankruptcy stay is prolonged.

What is worrying wildfire victims, however, are provisions of the loan that say what happens if PG&E defaults on the financing and the lenders want to seize assets. Events of default could include another big wildfire, or a move by Judge William Alsup, a U.S. District Judge who has been openly critical of PG&E's safety record. Judge Alsup oversees PG&E's compliance with terms of its probation for a felony criminal conviction related to a natural-gas pipeline explosion.

A number of Wall Street firms flocked to get a piece of the PG&E loan, which is backed by about $70 billion in unencumbered assets, owned by a borrower with an assured stream of revenue from millions of Californians that count on it for electricity. Lenders leading the financing include J.P. Morgan Securities LLC; Merrill Lynch, Pierce, Fenner & Smith Inc.; Barclays Bank PLC; Citibank N.A.; BNP Paribas Securities Corp.; Credit Suisse Loan Funding LLC; Goldman Sachs Bank USA; MUFG Union Bank N.A.; and Wells Fargo Securities LLC.

PG&E is too big to be allowed to fail, and lenders know the financing is a sure thing, Cecily Dumas, lawyer for the wildfire victims committee, said at a hearing on the loan earlier this month. "There is not a reasonable circumstance in which one can conceive that this money is at risk," she said.

Lenders insisted on standard loan safeguards, such as a clause that allows them to declare the loan in default if PG&E suffers a material adverse change in its circumstances. The so-called MAC clause would kick in if another wildfire linked to PG&E equipment racks up damages during the bankruptcy proceeding, for example.

Another clause says the loan will default if a trustee is appointed. That could happen if either the bankruptcy judge or Judge Alsup, presiding over the federal criminal case, decide PG&E's management can't be trusted.

At an earlier hearing, PG&E's lawyers said there are safeguards in the loan that would prevent lenders from simply marching in and seizing pieces of the company. The bankruptcy judge and the California Public Utilities Commission each have to weigh in.

Write to Peg Brickley at peg.brickley@wsj.com

(END) Dow Jones Newswires

March 26, 2019 16:02 ET (20:02 GMT)

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