A group of hedge funds and debt investors that once dreamed of taking over PG&E Corp. are demanding hundreds of millions of dollars from the troubled utility, complaining they were unfairly shut out of a lucrative deal with big shareholders, WSJ Pro Bankruptcy reported. Led by New York hedge fund Elliott Management Corp., the group of bondholders say that PG&E failed to do what it could to ensure they received a slice of equity-raising action, which carried rewards for investors willing to take a chance and aid the California utility’s exit from bankruptcy. A PG&E spokesperson said Wednesday the utility strongly disagrees with the bondholder argument and will respond in due course to motions which were recently filed in the U.S. Bankruptcy Court in San Francisco. PG&E was driven into bankruptcy in 2019 by an estimated $30 billion in claims over property damage, injuries and deaths from years of wildfires linked to its equipment. The San Francisco-based utility was determined to exit bankruptcy this summer, which experts project will be the start of another bad fire season. To do that, it needed to raise $20 billion in debt and equity. Fire risks, political complications and tumult in the capital markets linked to the COVID-19 pandemic made PG&E’s shares a risky bet. Stock that sold for nearly $18 a share in the pre-pandemic market was selling for less than $10 a share when PG&E left bankruptcy protection at the end of June. PG&E needed to issue new debt and equity to cover the $25.5 billion it pledged to pay to compensate fire victims and insurance companies for their losses. Bondholders say they agreed to support PG&E’s chapter 11 exit in a pact that included a pledge by the company to see they got a slice of the equity. That didn’t happen, the bondholders say, as PG&E dashed into the open market and raised cash by way of an underwritten offering and a private sale of equity, on terms that conferred benefits on big investors able to participate.
