Market Overview

PG&E Officially Files For Bankruptcy

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PG&E Officially Files For Bankruptcy

Despite pleas from shareholders and weeks of speculation by Wall Street analysts, PG&E Corporation (NYSE: PCG) followed through with its pledge to file for Chapter 11 bankruptcy.

Earlier this month, PG&E indicated it was facing roughly $30 billion in wildfire liability and was preparing a bankruptcy filing by Jan. 29. On Tuesday, the company officially filed for bankruptcy, citing $71.39 billion in assets and $51.69 billion in liabilities.

Why It’s Important

PG&E was cleared of liability related to the 2017 California wildfires last week, but the company appears to be on the hook for the 2018 Camp Fire, which is reportedly the most costly natural disaster of any kind in history.

Some analysts and investors have questioned the bankruptcy filing given PG&E’s situation. Guggenheim analyst Shahriar Pourreza said earlier this month PG&E would remain solvent without filing.

Morgan Stanley analyst Stephen Byrd said the company has adequate liquidity and cash flow to avoid bankruptcy.

"We believe there is a meaningful probability that a court would reject a PG&E Chapter 11 filing on the ground that the company is solvent and that PG&E is filing Chapter 11 to achieve tactical litigation advantages," Byrd wrote Tuesday.

PG&E shareholder BlueMountain Capital said it's “deeply disappointed” with the decision to file for bankruptcy and plans to continue with its proxy fight to replace the entire PG&E board. BlueMountain said the board’s bankruptcy plan is “reckless and irresponsible” and said it will announce its proposed replacement board members by Feb. 21.

What’s Next

PG&E stock actually gained more than 8 percent Tuesday morning, as investors must see some path forward for the company given the assets and liabilities listed in the filing. Traders will now be on the lookout for a potential lawsuit challenging the filing or any updates from Wall Street on what shareholders can expect.

Shares traded at $12.98 at time of publication.

Related Links:

Wall Street Reacts To The Latest PG&E Liability Ruling

How PG&E's 2001 Bankruptcy Compares To Its Current Situation

Photo credit: Frank Deanrdo, Flickr

Posted-In: Blue Mountain Capital BlueMountain Capital California wildfiresAnalyst Color News Short Sellers Legal Top Stories Best of Benzinga

 

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