Pacific Gas & Electric (PG&E) filed for Chapter 11 bankruptcy last year as a result of the California wildfires. The bankruptcy filing is the company’s attempt to restructure $30 billion in damages payments from the wildfires. State officials have blamed the massive wildfires on faulty PG&E power lines. This Chapter 11 bankruptcy is the biggest bankruptcy of a utility company in U.S. history.
PG&E Filed for Chapter 11 Bankruptcy to Restructure Debt
PG&E has already settled with local authorities and insurers and has filed for Chapter 11 bankruptcy. Chapter 11 bankruptcy is a type of bankruptcy in which a business reorganizes its debts and assets. Corporations typically file for Chapter 11 bankruptcy when they need time to restructure their debts. After a Chapter 11 Bankruptcy has been finalized, the debtor enjoys a fresh start. However, the company must still meet his or her obligations under the reorganization plan.
During a Chapter 11 bankruptcy proceeding, a court assists a business to restructure its debts while the business remains open and operating. PG&E’s restructuring agreement states that PG&E will put itself up for sale if the bankruptcy court does not approve of its restructuring plan by June 30, or if PG&E fails to finalize its Chapter 11 bankruptcy by the end of 2020.
As part of the bankruptcy agreement, PG&E has agreed to freeze all dividends for a period of three years. Doing so will contribute to approximately $4 billion in equity. The company can use this equity to pay down debt. Additionally, PG&E will use shareholder funds to offset customer bill charges. Doing so will raise $7.5 billion and speed up the damage payments to the victims of the California wildfires.
PG&E’s Debts Stem From California’s Devastating Wildfires
Filing for Chapter 11 bankruptcy became necessary after PG&G became linked to several deadly California wildfires that occurred between 2015 to 2018. PG&E’s faulty power lines were at least partially responsible for the 2018 Camp Fire which was the most destructive and deadly fire in California’s history.
After lengthy negotiations, PG&E and California’s Governor Gavin Newsom along with other local authorities came to an agreement regarding the damages amounts. PG&E agreed to over $30 billion in damages payments for the following devastating fires:
- The Camp Fire of 2018 in which 85 people died in and around Paradise, California. Fire investigators blamed faulty PG&E transmission lines.
- The Northern California wildfires of 2017 that resulted in over 30 deaths.
- The Ghost Ship Fire of 2016 that resulted in 36 deaths.
- The Butte Fire that occurred in 2015 and burned down hundreds of structures and caused two deaths.
Does Your Company Need to File for Bankruptcy? We can Help
The Bankruptcy Law Center offers our clients a wide range of effective legal solutions to help them manage their debt, including Chapter 7, Chapter 11, and Chapter 13 bankruptcy. Contact our team of experts today to schedule your initial consultation.