PG&E Shares Slide as Judge Permits Rival Bankruptcy Plan -- Update
October 10 2019 - 4:11PM
Dow Jones News
By Karen Langley
Shares of PG&E Corp. plummeted Thursday after a judge
cleared the way for a rival bankruptcy plan that could nearly wipe
out the troubled utility's shareholders.
The stock dropped 29% to $7.79, its biggest decline since Jan.
14 when it fell 52%. The shares are down 89% from their closing
high of $71.56 in September 2017.
The judge overseeing PG&E's bankruptcy case stripped
management of its exclusive right to file a plan to restructure the
company. The decision opens the door for bondholders -- who are
allied with victims of wildfires that drove PG&E to bankruptcy
-- to put forth a plan that would leave shareholders with a smaller
stake in PG&E than envisioned in the plan previously proposed
by management.
"PG&E's goal of a tough negotiation stance with the [fire
victims] backfired," Praful Mehta, lead analyst for utilities and
renewables at Citigroup, wrote in a note Thursday.
He changed his price target on the stock to $5, reflecting what
he estimates is a 75% chance that the bondholder bankruptcy plan is
selected and existing shares become worthless, versus a 25% chance
that the PG&E plan wins out and shares are worth $20.
"The ruling means more voices and more of a governance debate
upcoming," UBS analysts wrote in a note.
In another bad publicity move, the company cut power Wednesday
to about 700,000 households and businesses in northern and central
California. The blackout is meant to avoid the type of deadly fires
that killed dozens last year and forced the utility into bankruptcy
court.
PG&E filed for chapter 11 in January to manage the potential
legal costs of a series of deadly wildfires caused by its equipment
in 2017 and 2018.
The company declined to comment on its stock price but told The
Wall Street Journal Wednesday that it was disappointed by the
judge's decision to open the door to rival restructuring plans.
PG&E's bonds were also active. Its 6.05% bonds due in 2034
got a particularly large boost, rising to roughly 115 cents on the
dollar from around 109 cents before the judge's decision, according
to MarketAxess. With their relatively high coupon and distant
maturity, the 6.05% bonds have the most to gain from a plan that is
more favorable to bondholders, analysts said.
--Sam Goldfarb contributed to this article.
(END) Dow Jones Newswires
October 10, 2019 16:56 ET (20:56 GMT)
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