A federal bankruptcy judge in San Francisco on Thursday gave PG&E Co. permission to go ahead with spending an initial $1.5 billion in bank loans to keep operating during its Chapter 11 bankruptcy.
The $1.5 billion is part of a $5.5 billion set of bank loans the utility arranged on the eve of its bankruptcy filing on Tuesday. The banks will get top priority among creditors in repayment.
U.S. Bankruptcy Judge Dennis Montali will decide at another hearing on Feb. 27 whether to allow PG&E Co. to spend the remainder of the loan funds.
Shareholder-owned PG&E, California’s largest utility, provides electricity and natural gas to 16 million customers in Northern and Central California.
The San Francisco-based company and its parent holding company, PG&E Corp., cited an estimated $50 billion in lawsuits and claims from the devastating 2017 and the 2018 Northern California fires as the reason for seeking bankruptcy protection. The Chapter 11 process enables PG&E to freeze its debts but keep operating while developing a financial reorganization plan.
Montali also granted a series of additional interim orders sought by PG&E, including authority for paying its 24,000 employees wages and benefits, paying taxes and paying its energy suppliers.
The interim orders, which could be modified, will be reconsidered at the Feb. 27 hearing. The bankruptcy itself could take months to be resolved.
Montali did not act on a request by PG&E for permission to pay 14,000 workers $130 million in bonuses in a short-term incentive plan, or STIP, for their 2018 work. He will consider it on Feb. 27. PG&E told the judge in a filing that the incentives were “critical to ensuring that employees stay motivated,” but asked him to defer ruling on them until the next hearing. PG&E attorney Stephen Karotkin said the bonus request doesn’t include any top officials.
Several lawyers representing fire victims voiced concerns about when and how much their clients will be compensated and what priority they will be given.
Attorney Frank Pitre told the judge, “This process should move with a sense of urgency” on behalf of fire victims who may “either be homeless or live in trailers and search for food in garbage cans.” Karotkin said at the start of the hearing that PG&E believes wildfire claims can be resolved more quickly in the bankruptcy court than they would be in state trial courts.
He told Montali the bankruptcy was “not a strategic ploy to evade PG&E’s responsibility” for the wildfires, but rather was “the only viable alternative to restore PG&E’s financial stability and to fairly address the wildfire claims.”
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