Dividends and PG&E bondholders propose bankruptcy exit plan

Last year there were many fires in California but some were deemed to have started from electricity infrastructure and given the damage, the electrical company Pacific Gas & Electric or PG&E needed to file for bankruptcy to give it time to reorganize. The company has continue to supply electricity to the state of California. In bankruptcy or Chapter 11, the bondholders rights come to the forefront and they are able to dictate terms. In late June, according to an article by Jim Christie of Reuters,  a committee of bondholders proposed a bankruptcy reorganization that would inject $30 billion into the company and allow it to emerge from bankruptcy.

PG&E has until September 29 to file its plan. The committee’s plan would be funded by $18 billion in cash from bondholders in exchange for new common shares in a reorganized company. The committee believes the new company will have substantial capital to make improvements to the PG&E system.

Governor Gavin Newsom has proposed a fund of $21 billion to help future victims of wildfires.

Linking to dividend paying stocks, when a company goes into bankruptcy protection it means the existing common shares will be worth less as the company needs to issue new shares at less money. Unless you love the company it is generally better to look for alternatives and revisit the company in 6 months.

There are more questions than answers, till the next time – to raising questions.



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