Bondholders and other creditors struggled to persuade a federal judge to force PG&E Corp. to pay them “hundreds of millions of dollars” more in interest than the bankrupt utility has proposed, Bloomberg News reported. Bankruptcy Judge Dennis Montali appeared to side with PG&E in a court hearing yesterday in which the company and the bondholders argued over what interest rate creditors should earn during the bankruptcy. Montali repeatedly asked creditor lawyers why a ruling by a federal appeals court in a similar case that forced investors to accept the so-called federal judgment rate doesn’t apply. “I realize we’re talking about a lot of money,” Montali said in dismissing a bondholder argument that a Texas court should set the legal precedent instead of a decision by the Ninth Circuit Court of Appeals in California. “They don’t like the Ninth Circuit in Texas. We have to periodically straighten them out.” Montali didn’t immediately rule on the request by bondholders and other creditors. California federal courts have long held that creditors can only collect the federal judgment rate of interest while a company is in bankruptcy. The bondholders want to collect the higher rates listed in their debt contracts. Texas federal courts have allowed the higher rates. PG&E filed bankruptcy in January in San Francisco. At the time, the federal judgment rate was 2.59 percent, which is what creditors would get paid while the company remains under court protection should Judge Montali side with PG&E. Read more.
In related news, an analysis by researchers at Georgia Tech found that sustained power outages caused by electric-wire failures in Northern California could double or even quadruple in years to come unless PG&E Corp. steps up its replacement of aging equipment, the Wall Street Journal reported. PG&E’s current rate of electric-line replacement falls far short of what’s needed to prevent a surge of failures due to the effects of aging, according to the researchers. The analysis suggests the current focus on upgrading distribution lines in areas of extreme fire risk fails to solve a more basic problem of age-related deterioration, especially in coastal areas where gear often ages faster. If electric-wire replacement continues at the rate currently proposed by the utility, PG&E customers should expect a doubling of sustained power outages in 15 years and a fourfold increase in 30 years, according to the analysis by the National Electric Testing, Research and Applications Center at Georgia Tech, which did the analysis for PG&E last year. Read more. (Subscription required.)
