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Wall Street investors are looking to California Gov. Gavin Newsom to come through with a proposal to fix PG&E, the state’s largest utility, a lawyer for bondholders said yesterday at a bankruptcy court hearing in San Francisco, WSJ Pro Bankruptcy reported. “The good news is the word out of Sacramento and Governor Newsom is that he is going to do something quickly,” bondholder lawyer Michael Stamer told Judge Dennis Montali, who is presiding over the bankruptcy case PG&E filed at the end of January. Facing an estimated $30 billion worth of liabilities for death, injury and property damage stemming from years of wildfires, PG&E sought bankruptcy court protection aiming for a resolution that will appease thousands of injured people and save the utility. Read more. 

In related news, PG&E Corp. for five years repeatedly delayed a safety overhaul of a century-old high-voltage transmission line that is a prime suspect behind the deadliest wildfire in California history, the Wall Street Journal reported. The company told federal regulators in 2013 it planned to replace many of the towers, wires and hardware pieces on the line, called the Caribou-Palermo, regulatory filings show. It again proposed the project in 2014, 2015 and 2016 — pushing it back each year. The company planned to start work June 2018 and finish late last year. It hasn’t begun. On Nov. 8, 2018, winds picked up before sunrise near Paradise, Calif., when a wire snapped free from the Caribou-Palermo line, creating an electric arc that scorched the metal tower supporting it. A few minutes later, a PG&E worker spotted a quarter-acre fire under the line, the company has disclosed. Within hours, what became known as the Camp Fire destroyed Paradise and killed 85 people. California fire investigators haven’t yet determined the fire’s cause. Read more. (Subscription required.) 

A federal appeals court said the trustee liquidating Bernard Madoff’s firm may pursue dozens of lawsuits to recoup funds from Koch Industries Inc., controlled by billionaire brothers Charles and David Koch, and other defendants, including major banks, Reuters reported. Yesterday’s decision by the U.S. Court of Appeals for the Second Circuit overturned November 2016 dismissals by U.S. Bankruptcy Judge Stuart Bernstein. It gives the trustee Irving Picard a chance to add hundreds of millions of dollars to the $13.36 billion he has recouped for former customers of Bernard L. Madoff Investment Securities LLC. The trustee has estimated that the customers lost $17.5 billion in Madoff’s fraud, which was uncovered in December 2008. Picard had sued Koch, HSBC Holdings Plc, UBS AG and others in 88 lawsuits to recoup funds traceable to the imprisoned swindler, but which had been sent outside the U.S. The lawsuits targeted foreign entities that had received Madoff-linked money from other foreign transferees, including “feeder funds” that sent client money to Madoff. Writing for a three-judge panel on Monday, Circuit Judge Richard Wesley said the later transfers qualified as domestic because the money originally came from Madoff’s firm.

An indication from PG&E Corp. that it might restrict trading in its debt has set alarm bells ringing among distressed investing funds that have swarmed around the California utility’s mega-billion-dollar bankruptcy case, WSJ Pro Bankruptcy reported. Papers filed in U.S. Bankruptcy Court in San Francisco in recent days warn of threats to the market where PG&E’s bonds are being bought and sold if the utility pursues one of many potential paths to getting out of chapter 11. Valuable tax breaks could be at risk if there is too much trading in PG&E’s debt, which could trip triggers in Internal Revenue Service rules, the company said. Some $4 billion in net operating losses are available to offset taxable income but, under the tax code, that could be reduced if too much stock or debt changes hands. PG&E is asking a judge to consider limiting the trading action, and bondholders are fighting back.

Pacific Gas and Electric Co. will not award any of its planned $130 million in 2018 performance bonuses to thousands of employees after deciding the payments were inappropriate in light of the company’s bankruptcy and the wildfires that have killed dozens of people and destroyed tens of thousands of homes, the San Francisco Chronicle reported. John Simon, interim CEO of the utility’s parent company PG&E Corp., announced the decision on Friday in an internal message to employees. The payments were set to be awarded next month and about 14,000 employees were eligible, PG&E previously told the bankruptcy court. PG&E had stressed publicly that it was not seeking to award the bonuses to any of its top executives this year, and union leaders described them as part of the normal pay for the thousands of employees who had participated in the program. While PG&E is scrapping its requested performance pay for last year, the company does plan to seek permission to institute a different kind of program for 2019 which could give employees incentive awards as soon as April, Simon said. Read more.

In related news, California lawmakers would carve out a key role for themselves in the bankruptcy of Pacific Gas and Electric Co. under a proposal introduced on Friday in the Legislature, the Los Angeles Times reported. The legislation marks the latest attempt by state officials to intervene in the reorganization of California’s largest utility, a process playing out in federal court that legislators fear could lead to higher bills for customers and leave wildfire victims uncompensated for losses. The proposal would require the California Public Utilities Commission to seek approval from the Legislature for any increase in PG&E’s electricity rates. Customers took on the burden of billions of dollars in rate hikes after PG&E last filed for bankruptcy in 2001. “In effect, this requirement gives the Legislature a say in how the reorganization impacts PG&E customers — who otherwise would have no representation in any consideration of rate changes,” said Sen. Jerry Hill (D-San Mateo), who introduced the bill. PG&E cited some $30 billion in legal liability when it filed for bankruptcy protection in late January. The filing came after state investigators found the company’s equipment sparked dozens of wildfires in recent years, in some cases because of negligence. Under chapter 11 bankruptcy, the company will continue to operate as it develops a plan to pay off debts. Read more.

California is going to start trying to figure out how to keep another one of its utilities from going bankrupt, Bloomberg News reported. PG&E Corp., the state’s largest power company, has already made a chapter 11 filing to deal with an estimated $30 billion in liabilities from wildfires that its equipment may have ignited. And its peers — Edison International’s Southern California Edison and Sempra Energy’s San Diego Gas & Electric — are just one deadly blaze away from similar ruin if a commission set up by California lawmakers can’t come up with a fix. The panel is scheduled to hold the first in a series of public meetings on Monday. Ratings companies including S&P Global Ratings have already warned that SoCalEd and SDG&E are at risk of having their credit downgraded to junk before the start of the wildfire season in June unless lawmakers take concrete steps to address a legal doctrine known as inverse condemnation. It holds a utility responsible for damages if its equipment ignites a blaze. Citigroup Inc. said in a note this week that legislation may be passed in the next two to three months, citing conversations with officials in Sacramento. Read more. 

In related news, PG&E Corp. yesterday extended the deadline by which investors must file paperwork if they want to install their directors on the board, Reuters reported. Investors will now have until March 1 to nominate director candidates, the utility said in a regulatory filing here early on Thursday only hours before its original deadline was set to expire on Feb. 21. Last month, PG&E shareholder BlueMountain announced plans to try and unseat all board members, criticizing the company for filing for chapter 11 protection, a move it called unnecessary and harmful to investors. The New York-based hedge fund, which owns roughly 8 million shares of PG&E, said last week that it was ready to announce its director candidates by the Feb. 21 deadline. Read more. 

The financial picture at Actual Brewing Co. is coming into focus as investors and backers sort out its future, Columbus (Ohio) Business First reported. The Columbus-based brewery last week filed for chapter 11 protection in U.S. Bankruptcy Court in Columbus after ousting founder and CEO Fred Lee in the wake of sexual assault allegations. Financial documents filed in the bankruptcy case show Actual lost $558,080 in 2018 on $341,432 in sales. A tax return filed with the court showed a $255,225 loss in 2016 on $359,421 in sales. No financials for 2017 have been disclosed. The company reported assets of between $500,000 and $1 million, against debts of between $500,000 and $1 million in the bankruptcy filing. The largest unsecured claim against the company is a $100,000 loan from Dublin resident John Dilley. Four other smaller loans from individuals are listed.

A group of Butte County wildfire victims have filed a class action complaint against PG&E as part of the embattled utility’s bankruptcy case, but a 50-year-old court ruling could place wildfire victims near the bottom of the stack of priorities in PG&E’s insolvency proceeding, according to a market researcher and a Bay Area bankruptcy expert, the East Bay Times reported. A 1968 U.S. Supreme Court ruling in connection with a fire that burned down an industrial building, if applied to the PG&E bankruptcy case, potentially would place the claims of the victims of the infernos of recent years at a lower priority than victims of any PG&E-caused wildfires that began after the company’s bankruptcy filing this year. “Any wildfire victims whose claims arise — meaning, their property catches on fire — from the date of PG&E’s bankruptcy onward will have first priority in the bankruptcy case,” said Jared Ellias, a bankruptcy expert and law professor with the UC Hastings College of the Law. Prof. Ellias assessed whether that 1968 Supreme Court decision could come into play in the PG&E bankruptcy case which is being supervised by U.S. Bankruptcy Court Judge Dennis Montali. That would produce an inferior status for the claims of victims of fires that occurred in 2017, such as the infernos that scorched the North Bay Wine Country and nearby regions; and the 2018 wildfire that roared through Butte County and essentially destroyed the town of Paradise, he said. PG&E listed $51.69 billion in debts and $71.39 billion in assets in its Jan. 29 bankruptcy filing, seeking to reorganize its shattered finances that have been overshadowed by a mountain of potential liabilities arising from the lethal infernos of the last two years. Read more. 

In related news, PG&E Corp., which filed for bankruptcy last month in the wake of potential liabilities from California’s catastrophic wildfires, today extended the deadline by which investors must file paperwork if they want to install their directors on the board, Reuters reported. Investors will now have until March 1 to nominate director candidates, the utility said in a regulatory filing here early on Thursday only hours before its original deadline was set to expire on Feb. 21. Last month, PG&E shareholder BlueMountain announced plans to try and unseat all board members, criticizing the company for filing for chapter 11 protection, a move it called unnecessary and harmful to investors. The New York-based hedge fund, which owns roughly 8 million shares of PG&E, said last week that it was ready to announce its director candidates by the Feb. 21 deadline. Read more. 

The Justice Department and Securities and Exchange Commission are investigating Johnson & Johnson over concerns about possible asbestos contamination of its popular baby powder and other talc-based products, the company said yesterday, the New York Times reported. In a securities filing, Johnson & Johnson said it was “cooperating with these government inquiries and will be producing documents in response” to subpoenas it had received. The New York Times and Reuters reported in December on internal documents that showed decades of communications within the company about the risk of asbestos in its talc products even as Johnson & Johnson fought to keep negative information out of the public eye. Johnson & Johnson, which faces around 13,000 lawsuits in which its body powders are blamed for causing ovarian cancer or mesothelioma, has stood by the safety of its products. It said on Wednesday that “decades of independent tests by regulators and the world’s leading labs prove Johnson & Johnson’s baby powder is safe and asbestos-free, and does not cause cancer.” Last week, Imerys Talc America, a major supplier of talc used by Johnson & Johnson and a defendant in some of the lawsuits, filed for chapter 11 bankruptcy. The company said that although the suits challenging talc’s safety were “entirely without merit,” it did not want to “litigate these claims in perpetuity and incur millions of dollars in projected legal costs to defend these cases.”

USA Gymnastics yesterday named former National Basketball Association vice president Li Li Leung as its new chief executive officer to help the sport’s national governing body navigate the aftermath of a devastating sex abuse scandal, Reuters reported. Leung, who was a college gymnast at the University of Michigan, will take the helm of an organization that filed for bankruptcy protection in December under the weight of lawsuits filed by hundreds of women who were sexually abused by former national team doctor Larry Nassar. Leung, who competed in USA Gymnastics events and represented the United States at the 1988 Junior Pan Am Games, said her ultimate goal is to create an athlete-driven organization where safety is paramount. After attending to outstanding commitments, she will begin as chief executive on March 8, based at USA Gymnastics headquarters in Indianapolis.

The bankruptcy filing by PG&E Corp. is the latest stumble by a company rated highly by environmentally focused investors, further exposing a weakness in a scoring system meant to measure risk for shareholders, the Wall Street Journal reported. The California utility’s moves over the past 10 years to rely more on renewable sources such as wind and solar resulted in high scores on environmental, social and governance metrics, which are considered by many investors to be a positive factor in choosing a stock and used by others as a way of managing risk. What the ratings couldn’t predict is that the stock would lose nearly 70 percent of its market value since early November, as investors worried about potential liabilities for the role PG&E’s equipment may have played in multiple wildfires. PG&E Corp. filed for bankruptcy protection on Jan. 29. Even as the world’s biggest asset managers pile into ESG investing strategies — an estimated $22.89 trillion invested with ESG in mind, according to industry group the Global Sustainable Investment Alliance — the ratings and analysis that underpin sustainable investment scores remain more art than a science. The data is often self-reported, and there can be blind spots, like those revealed when companies such as PG&E, Volkswagen AG and Facebook Inc. ran into trouble. “These data providers almost have an impossible task in front of them” because it isn’t standardized, said George Serafeim, a professor at the Harvard Business School. “The whole field is very messy.”