PG&E Corp. and its Pacific Gas & Electric Co. utility filed for Chapter 11 bankruptcy in a defensive maneuver that sets the stage for a major restructuring of California’s largest utility. The shares rose.
A series of wildfires that killed more than 100 people and scorched hundreds of thousands of acres in California over two years brought the utility to its knees. Since the November Camp Fire, the deadliest in state history, about three-quarters of PG&E’s market value has disappeared, its chief executive officer has left, its bonds have plunged and estimates of its liabilities have swelled to more than $30 billion.
Tuesday morning's filing in the United States Bankruptcy Court for the Northern District of California, which listed $51.7 billion in total debts and $71.4 billion in assets. allows the company to keep operating while it works out a plan to turn the business around and pay off creditors. A bankruptcy, and potentially a sale, may represent the best way for lawmakers and regulators to “remake the public face of the company for customers,’’ said Katie Bays, a Washington-based analyst at Height Securities LLC.
The utility’s issues “are long-running and structural," Bays said by telephone. "If PG&E cannot do this, if they cannot reform their safety culture on their own, they maybe need a new leader to come in there and achieve fundamental reforms.’’
The shares rose as much as 8.8 percent in New York, reflecting a view that there’s still value in the company. “Their equity value has not been wiped out,’’ Bays said. “This bankruptcy is a math problem where the equity portion of that math problem is not necessarily a zero.”
While the company’s been cleared of fault for the Tubbs blaze, the wildfire that devastated California’s wine country in 2017, investigators have tied PG&E’s equipment to more than a dozen of the other fires. They’re looking at PG&E’s power lines as a possible ignition source for the Camp Fire, which killed 86.
“We did not make this decision lightly,’’ PG&E’s interim chief executive officer, John R. Simon, said in a letter to customers. “The power and gas will stay on. We will continue to provide you with reliable electric and natural gas service, and that will not change as a result of this process.’’
The Vanguard Group holds about $415 million of municipal bonds issued on behalf of PG&E Corp., about half of the $920 million state and local debt sold for the California utility that’s edging toward bankruptcy because of the fallout from devastating wildfires.
But all but $2 million of the bonds held by Vanguard are backed by banks that act as buyers of last resort for the securities,
