(Reuters) – California utility PG&E Corp PCG.N is preparing an $11 billion debt financing program as it prepares to emerge from bankruptcy, an investor involved in the company’s financing plan said Friday, sending its shares soaring more than 12%.
PG&E’s debt financing program, which will consist of high-yield bonds and term loans, is part of the company’s previously announced plans to raise up to $27 billion in funding from future public offerings, said George Schultze, founder of Schultze Asset Management, which invests in distressed securities.
Schultze’s company is one of the participants in the company’s funding plan, which is crucial to PG&E’s goal of emerging from bankruptcy by June 30 to operate a state-backed fund that would help electric utilities cushion the blow of wildfires.
“Although the company will come out of this slightly overleveraged, it has a solid business and will be able to repay the debt,” Schultze said. “The debt market is so hot right now that I’m sure this offering will be oversubscribed.”
Most of the remaining $16 billion in proposed future public offerings will come from capital raised — possibly at a discount to where PG&E’s peer group is trading at the time of exit from bankruptcy, said Schultze.
Bloomberg first reported on the debt financing plans on Friday.
PG&E said it was working diligently to get its reorganization plan approved by the bankruptcy court as soon as possible.
Last month, PG&E’s Chapter 11 plan was upheld by the California Public Utilities Commission, bringing the struggling utility one step closer to emerging from bankruptcy and participating in a state-backed fire fund.
The regulator had also approved PG&E’s request to issue new debt and securities to fund its exit from bankruptcy.
PG&E filed for bankruptcy in January last year, citing potential liabilities exceeding $30 billion due to major wildfires started by its equipment in 2017 and 2018.
Reporting by Shariq Khan and Shradha Singh in Bengaluru; Editing by Uttaresh.V and An
