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PG&E Corporation (NYSE:PCG) got a big boost on Wednesday after a U.S. bankruptcy judge approved the company’s $13.5 billion settlement with wildfire victims and $11 billion agreement with insurance companies.
Bank of America analyst Julien Dumoulin-Smith said the latest developments for PG&E are a positive for investors, but the timing of the potential payouts remains an important detail.
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The PG&E Settlement
The $13.5 billion settlement will provide cash and PG&E stock to a trust that will be distributed to wildfire victims in California.
On Friday, California Gov. Gavin Newsome rejected PG&E’s proposed bankruptcy reorganization plan and said the company must replace its board of directors and comply with the state’s new AB 1054 wildfire law. However, Newsome’s lawyer reportedly said he sees the $13.5 billion settlement as fair and necessary changes to the bankruptcy plan can be negotiated.
PG&E bondholders had opposed the $13.5 billion settlement and want wildfire victims to have the option of supporting their own competing bankruptcy plan, which would wipe out the company’s stock value.
Next Steps For PG&E
Both Judge Dennis Montali and Newsome must approve a bankruptcy plan for PG&E by June 30, 2020 in order for PG&E to participate in California’s new wildfire fund, which would reduce liability for public utilities.
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Montali said the wildfire victims group will continue to be the most important voice in the bankruptcy proceedings.
Dumoulin-Smith said working with the governor and the California Public Utilities Commission on an agreeable plan, particularly when it comes to leverage considerations, is the next critical step for PG&E and its shareholders.
“A key debate we see emerging is whether an amended plan might include lower parent debt, potentially leaving room for debt securitization and/or monetization of NOLs in lieu of incremental equity needs,” Dumoulin-Smith wrote in a note.
Benzinga’s Take
Wednesday is the latest day of extreme volatility in PG&E stock as it navigates an extremely complicated bankruptcy. Patient investors may ultimately be rewarded for hanging on for the ride, but the timing and magnitude of further potential upside is contingent upon PG&E’s structure and balance sheet as it ultimately emerges from bankruptcy.
Do you agree with this take? Email feedback@benzinga.com with your thoughts.
Related Links:
What's Next For PG&E After $13.5B Settlement?
Analyst Provides PG&E Bankruptcy Update After Meeting With Company Management
Photo credit: Frank Deanrdo, Flickr
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.