Bondholders do not deserve a $5 billion “windfall” when PG&E Corp. reorganizes next year because the utility is in bankruptcy, voiding any right investors had to an early payoff premium, the company said in a court filing, Bloomberg News reported. PG&E’s bankruptcy exit plan is built on a proposed funding package that includes refinancing about $17.5 billion of debt that has not yet matured. The company is challenging a demand for the make-whole payment by some of the biggest names in the business, including Elliott Management Corp., Pacific Investment Management Co. and Oaktree Capital Management. The firms say that their debt contracts guarantee them the money if PG&E chooses to pay the notes early. The dispute is among the most important issues U.S. Bankruptcy Judge Dennis Montali must decide on before he rules on PG&E’s reorganization plan next year. Noteholders also have their own bankruptcy exit plan, which they claim would be better for all creditors. Both plans assume that the utility is solvent, but PG&E’s would provide a much bigger return to shareholders than the bondholder’s version. PG&E’s plan got a boost this month when wildfire victims abandoned an alliance with noteholders and struck a $13.5 billion deal with PG&E.
