Item 1.01 Entry into a Material Definitive Agreement.
As previously disclosed, on January 29, 2019, PG&E Corporation (the
"Corporation") and its subsidiary, Pacific Gas and Electric Company (the
"Utility," and together with the Corporation, the "Debtors"), filed voluntary
petitions for relief under chapter 11 of title 11 ("Chapter 11") of the United
States Code in the U.S. Bankruptcy Court for the Northern District of California
(the "Bankruptcy Court"). The Debtors' Chapter 11 cases are being jointly
administered under the caption In re: PG&E Corporation and Pacific Gas and
Electric Company, Case No. 19-30088 (DM) (the "Chapter 11 Cases"). On November
4, 2019, the Debtors filed a Joint Chapter 11 Plan of Reorganization (the
"Existing Plan").
Also as previously disclosed, the Corporation separately entered into Chapter 11
Plan Backstop Commitment Letters with certain investors (the "Prior Backstop
Commitment Letters"), under which such investors severally committed to fund up
to $14 billion of proceeds to finance the Existing Plan through the purchase of
common stock of the Corporation.
On November 16, 2019, the Corporation entered into Chapter 11 Plan Backstop
Commitment Letters (the "New Backstop Commitment Letters") with each of the
entities set forth in Schedule 1 to Exhibit 10.1 of this Current Report on Form
8-K (the "New Backstop Parties") , under which the New Backstop Parties have
severally committed to fund up to $7.4 billion of proceeds to finance a revised
Plan (as defined below) through the purchase of common stock of the Corporation,
subject to the terms and conditions set forth in each New Backstop Commitment
Letter (the "New Backstop Commitments"). The New Backstop Commitment Letters
supersede and replace any prior backstop commitments of the New Backstop Parties
or any of their affiliates. The New Backstop Commitment Letters contemplate
that the Corporation will seek a total of $12 billion of New Backstop
Commitments by no later than December 6, 2019. The New Backstop Commitment
Letters are substantially consistent with the terms of the Prior Backstop
Commitment Letters except as described in this filing.
The New Backstop Commitment Letters provide that the Corporation will file a
revised Chapter 11 plan of reorganization (the "Plan") that includes Abrams
Capital Management, L.P. (or certain funds and accounts it manages) and
Knighthead Capital Management LLC (or certain funds and accounts it manages) as
plan proponents, and that provides for substantially the same classification and
treatment of all claims (other than prepetition wildfire claims that are not
insurance subrogation claims or claims held by the public entities party to a
previously disclosed plan support agreement with the Debtors) as provided in the
Existing Plan.
The initial commitment premium for the New Backstop Commitments is 0.955% of the
amount of the New Backstop Commitments. The initial term of the New Backstop
Commitment Letters expires on January 20, 2020. The Debtors can extend the term
of the New Backstop Commitment Letters to April 30, 2020 for an additional
commitment premium of 1.591% of the amount of the New Backstop Commitments, to
June 30, 2020 for an additional commitment premium of 3.182% of the amount of
the New Backstop Commitments and to August 29, 2020 for an additional commitment
premium of 0.636% of the amount of the New Backstop Commitments. All such
commitment fees are cumulative. All commitment fees are payable in shares of
PG&E Corporation common stock to be issued on the effective date of the Plan
(except in certain circumstances), and the number of such shares to be paid as
commitment fees will be calculated using the backstop price described in the New
Backstop Commitment Letters.
Under the New Backstop Commitment Letters, the Corporation agrees that if the
New Backstop Commitments are drawn, and the Corporation does not expect to
conduct a third-party transaction to monetize any net operating losses or
deductions resulting from payment of prepetition wildfire-related claims (a "Tax
Benefits Monetization Transaction") on the effective date of the Plan, no later
than five business days prior to the effective date of the Plan, the Debtors
shall form a trust which shall provide for periodic distributions of cash to the
New Backstop Parties in amounts equal to (i) the tax benefits arising from the
payment of wildfire-related claims in excess of (ii) the first $1.35 billion of
tax benefits. The Corporation intends to explore a Tax Benefits Monetization
Transaction.
The New Backstop Commitment Letters have conditions and termination rights
substantially consistent with the Prior Backstop Commitment Letters, except as
follows:
? The New Backstop Parties may terminate the New Backstop Commitment Letters if
the Debtors' aggregate liability with respect to prepetition wildfire-related
claims exceeds $25.5 billion (the Prior Backstop Commitment Letters
contemplated a cap of $18.9 billion, subject to certain adjustments).
? The New Backstop Parties may terminate the New Backstop Commitment Letters in
the event that asserted non-ordinary course administrative expense claims that
are not disallowed in the Chapter 11 Cases exceed $250 million as of the first
date of the confirmation hearing, excluding the portion of an administrative
expense claim that is covered by insurance (the Prior Backstop Commitment
Letters did not account for insurance coverage).
? The New Backstop Parties may terminate the New Backstop Commitment Letters if
the New Backstop Commitment Letters are not approved by the Bankruptcy Court by
December 20, 2019 (the deadline under the Prior Backstop Commitment Letters was
November 20, 2019).
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? The New Backstop Parties may terminate the New Backstop Commitment Letters if
at any time the Bankruptcy Court determines that the Debtors are insolvent
(this is a new termination right).
The foregoing description of the New Backstop Commitment Letters does not
purport to be complete and is qualified in its entirety by reference to the New
Backstop Commitment Letters. The form of the New Backstop Commitment Letter is
filed as Exhibit 10.1 hereto and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit Number Description
10.1 (1) Form of Chapter 11 Plan Backstop Commitment Letter
(1) This Form of New Backstop Commitment Letter is substantially similar in all
material respects to each New Backstop Commitment Letter with a New Backstop
Party that is otherwise required to be filed as an exhibit, except as to the New
Backstop Party and the amount of such New Backstop Party's Backstop Commitment
Amount (as defined in the New Backstop Commitment Letter). In accordance with
instruction no. 2 to Item 601 of Regulation S-K, the registrant has filed the
form of such New Backstop Commitment Letter, with a schedule identifying the New
Backstop Commitment Letters omitted and setting forth the material details in
which each New Backstop Commitment Letter differs from the form that was filed.
The registrant acknowledges that the Securities and Exchange Commission may at
any time in its discretion require filing of copies of any agreement so omitted.
Forward-Looking Statements
This Current Report on Form 8-K includes forward-looking statements that are not
historical facts, including statements about the beliefs, expectations,
estimates, future plans and strategies of PG&E Corporation and the Utility,
including but not limited to their Chapter 11 plan of reorganization and related
financings. These statements are based on current expectations and assumptions,
which management believes are reasonable, and on information currently available
to management, but are necessarily subject to various risks and uncertainties,
including the possibility that the conditions to emergence in the plan or to
funding under equity financing commitments will not be satisfied. In addition to
the risk that these assumptions prove to be inaccurate, factors that could cause
actual results to differ materially from those contemplated by the
forward-looking statements include factors disclosed in PG&E Corporation and the
Utility's Annual Report on Form 10-K for the year ended December 31, 2018, their
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019, June 30,
2019 and September 30, 2019, and their subsequent reports filed with the
Securities and Exchange Commission. Additional factors include, but are not
limited to, those associated with PG&E Corporation's and the Utility's Chapter
11 Cases. PG&E Corporation and the Utility undertake no obligation to publicly
update or revise any forward-looking statements, whether due to new information,
future events or otherwise, except to the extent required by law.
No Securities Offering
This is not an offering of securities and securities may not be offered or sold
absent registration or an applicable exemption from the registration statements.
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