Author Topic: PG&E - Potential Bankruptcy  (Read 12565 times)

DRValue

  • Sr. Member
  • ****
  • Posts: 263
PG&E - Potential Bankruptcy
« on: January 09, 2019, 06:33:31 AM »
Not much info yet hence starting up in General Discussion, to hear peoples thoughts.

https://seekingalpha.com/news/3421010-pg-and-e-opens-minus-24-percent-bankruptcy-fears

If they file, the debt in bankruptcy could be interesting. They've also filed before and I'm trying to find out exactly what the outcome was.

Any thoughts? What generally happens to stockholders of utilities that file? I'd imagine bigger utilities continue in one form or another.
Not Investment Advice. Do Your Own Research.


oddballstocks

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 2222
    • Oddball Stocks Blog
Re: PG&E - Potential Bankruptcy
« Reply #1 on: January 09, 2019, 06:54:08 AM »
Just like every BK, equity is wiped out, debt is renegotiated and becomes the new equity.  Sometimes you take a haircut on the debt, sometimes a massive haircut.

This is slightly different because of the liabilities, but just estimate what their exposure is.  Then knock out that much equity from that.  How would they pay it etc..

My two cents is that unless you know what you're doing that playing in the bankruptcy pool is a dangerous place to be.  Maybe worth a little speculation to learn, but it's a tight knit group of professionals who know the ins and outs.

I followed a BK a few years ago and the volume of filings was crazy.  It was common for 200-300 pages worth of docs to be filed every day or two.  Depositions between suppliers, the bankrupt party etc.  It's easier to read vs a 10-q, but it's just a lot of reading.  There was a lot of nuance I missed because I didn't understand the process.
The ultimate edge for bank investors: http://www.completebankdata.com

DRValue

  • Sr. Member
  • ****
  • Posts: 263
Re: PG&E - Potential Bankruptcy
« Reply #2 on: January 09, 2019, 07:11:15 AM »
Agree. 1 in 200 bankruptcies is probably a profitable investment, no data for that but you get the point...

The thinking on this one is that they're a utility so there's still demand there should they be able to work out the liabilities. A bankruptcy to convert some unsecured, an equity raise (assuming they can), raising rates and some more debt are some options. If debt is converted in bankruptcy id expect to get par eventually.
Not Investment Advice. Do Your Own Research.

cherzeca

  • Hero Member
  • *****
  • Posts: 1723
Re: PG&E - Potential Bankruptcy
« Reply #3 on: January 09, 2019, 09:50:16 AM »
total wildcard.  did PG&E caused wildfires?  sort of an important question that should be answered before investing imo

DRValue

  • Sr. Member
  • ****
  • Posts: 263
Re: PG&E - Potential Bankruptcy
« Reply #4 on: January 13, 2019, 04:41:35 AM »
https://www.zerohedge.com/news/2019-01-12/pge-reportedly-planning-bankruptcy-announcement-workers-monday

Somewhat reminiscent of ggp liquidity event causing bankruptcy.

Potential solution to 30b liabilities is 18b unsecured conversion to equity, issuance of 18b new debt, equity raise and rate increase?

Perhaps a pay out over time a'la trans ocean is manageable?

Will be interested to see if any big names end up in unsecured debt.

If only I wasn't waiting for the gse's...
Not Investment Advice. Do Your Own Research.

Broeb22

  • Full Member
  • ***
  • Posts: 130
Re: PG&E - Potential Bankruptcy
« Reply #5 on: January 14, 2019, 05:36:14 AM »
There's a great case study on a utility bankruptcy (and a Wilbur Ross/Donald Trump casino restructuring) in the book The Vulture Investors by Hilary Rosenberg. Highly recommend the book in general.

SharperDingaan

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 3033
Re: PG&E - Potential Bankruptcy
« Reply #6 on: January 14, 2019, 05:54:47 AM »
In any bankruptcy, it's pragmatic to separate the physical from the financial. Electricity still has to be delivered, the infrastructure remains in place, it's a rate regulated business, and customers have few practical alternatives. It's really just who customers will pay their bills to going forward, and when. It is of course a human-interest 'story', and there will be much media reporting of the disruption, but it's highly unlikely that thousands of PG&E employees and contractors are going to be permanently out of a job.

The lawyers/bankers will do their thing, the assets/liabilities will move to 'new' legal entitities, and there will be some closed door state/federal 'backstop agreements'; but it will not remove the initial 'fear' and 'uncertainty' scepticism - only success delivered over time will. But to raise the requisite capital in this environment, the new entities are going to have to either pay up, or sell paper at a deeper discount.

Don't fish in the toilet, look at the subsequent 'new' offerings instead.
Let the media do its thing, and the more negative the sentiment the better ;)

SD
« Last Edit: January 14, 2019, 06:00:49 AM by SharperDingaan »

Spekulatius

  • Hero Member
  • *****
  • Posts: 2378
Re: PG&E - Potential Bankruptcy
« Reply #7 on: January 14, 2019, 06:20:48 AM »
Note that PG&E at a sub level ( not the holding) went bankrupt before in 2001 due to poorly designed deregulation ( leading to Enron price gauging utilities). Back then the preferred were trading at much lower prices than they are trading now. Equity ended up being unimpaired after the release from bankruptcy a few years later. I think the current situation is different though. I just mention thi for historical perspective.
To be a realist, one has to believe in miracles.

DRValue

  • Sr. Member
  • ****
  • Posts: 263
Re: PG&E - Potential Bankruptcy
« Reply #8 on: January 14, 2019, 10:49:56 AM »
https://www.cnbc.com/video/2019/01/14/heres-a-break-down-of-the-pge-plan-to-file-for-bankruptcy.html

Feels like a liability management exercise to put a cap on claims.

Stock is pretty high considering they file on 29th.

I'd be surprised if there doesn't end up being some value here.
Not Investment Advice. Do Your Own Research.

walkie518

  • Sr. Member
  • ****
  • Posts: 372
Re: PG&E - Potential Bankruptcy
« Reply #9 on: January 14, 2019, 10:50:13 AM »
In any bankruptcy, it's pragmatic to separate the physical from the financial. Electricity still has to be delivered, the infrastructure remains in place, it's a rate regulated business, and customers have few practical alternatives. It's really just who customers will pay their bills to going forward, and when. It is of course a human-interest 'story', and there will be much media reporting of the disruption, but it's highly unlikely that thousands of PG&E employees and contractors are going to be permanently out of a job.

The lawyers/bankers will do their thing, the assets/liabilities will move to 'new' legal entitities, and there will be some closed door state/federal 'backstop agreements'; but it will not remove the initial 'fear' and 'uncertainty' scepticism - only success delivered over time will. But to raise the requisite capital in this environment, the new entities are going to have to either pay up, or sell paper at a deeper discount.

Don't fish in the toilet, look at the subsequent 'new' offerings instead.
Let the media do its thing, and the more negative the sentiment the better ;)

SD
entirely agreed as for the fishing, though an investment might also require an amendment to state law?