1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

Dennis F. Dunne (admitted pro hac vice) 

Samuel A. Khalil (admitted pro hac vice) 

MILBANK LLP 

55 Hudson Yards 

New York, New York 10001-2163 

Telephone: (212) 530-5000 

Facsimile: (212) 530-5219 

and 

Gregory A. Bray (SBN 115367) 

Thomas R. Kreller (SBN 161922) 

MILBANK LLP 

2029 Century Park East, 33rd Floor 

Los Angeles, CA 90067 

Telephone: (424) 386-4000 

Facsimile: (213) 629-5063 

Counsel for the Official Committee 

of Unsecured Creditors

UNITED STATES BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

In re: 

PG&E CORPORATION 

 - and - 

PACIFIC GAS AND ELECTRIC 

COMPANY,

Debtors.

Case No. 19-30088 (DM) 

Chapter 11 

(Lead Case) 

(Jointly Administered) 

STATEMENT OF THE OFFICIAL 

COMMITTEE OF UNSECURED 

CREDITORS REGARDING THE AD HOC 

GROUP OF SUBROGATION CLAIMS 

HOLDERS’ MOTION TO TERMINATE 

THE DEBTORS’ EXCLUSIVE PERIODS 

PURSUANT TO SECTION 1121(d)(1) OF 

THE BANKRUPTCY CODE 

Date: August 13, 2019 

Time: 9:30 a.m. (Pacific Time) 

Place: United States Bankruptcy Court 

 Courtroom 17, 16th Floor 

 450 Golden Gate Avenue 

 San Francisco, CA 94102 

Re: Docket No. 3147 

 Affects PG&E Corporation 

 Affects Pacific Gas and Electric 

Company 

 Affects both Debtors 

* All papers shall be filed in the Lead Case, 

No. 19-30088 (DM). 

Case: 19-30088 Doc# 3391 Filed: 08/06/19 Entered: 08/06/19 15:41:03 Page 1 of

5
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

2 

44553.00001

The Official Committee of Unsecured Creditors (the “Official Committee”) respectfully 

submits this statement in response to the Motion of the Ad Hoc Group of Subrogation Claim 

Holders to Terminate the Debtors’ Exclusive Periods Pursuant to Section 1121(d)(1) of the 

Bankruptcy Code (the “Subrogation Group’s Exclusivity Motion”) [Docket No. 3147] filed by the 

Ad Hoc Group of Subrogation Claim Holders (the “Subrogation Group”).

1

 

STATEMENT 

1. The Subrogation Group’s Exclusivity Motion requests that the Court terminate the 

Debtors’ exclusivity periods to permit the Subrogation Group to file a plan of reorganization 

described in that motion. 

2. The Court had previously received and considered, on a preliminary basis, a similar 

request from the Ad Hoc Committee of Senior Unsecured Noteholders (the “Noteholders’ 

Group”). At the July 24, 2019 hearing (the “Hearing”) on the Motion of the Ad Hoc Committee of 

Senior Unsecured Noteholders to Terminate the Debtors’ Exclusive Periods Pursuant to Section 

1121(d)(1) of the Bankruptcy Code (the “Noteholders’ Exclusivity Motion”) [Docket No. 2741], 

the Court reiterated that credible, potentially confirmable plan proposals from parties in interest 

would be taken seriously so long as such proposals contained the “big ticket items”2 and were 

made by proponents having the financial wherewithal to achieve plan confirmation.3 

3. The Court ultimately decided to continue the Hearing to provide the various parties 

an opportunity to attempt to negotiate a protocol to govern the submission of chapter 11 plans. 

Thus, the protocol negotiations, the Noteholders’ Exclusivity Motion and the Subrogation Group’s 

Exclusivity Motion are all currently in play. 

 

1

 Capitalized terms used in this summary have the meanings ascribed to them in the Subrogation 

Group’s Exclusivity Motion. 

2

 July 24, 2019 Hr’g Tr. at 75-76. 

3

 Id. at 84.

Case: 19-30088 Doc# 3391 Filed: 08/06/19 Entered: 08/06/19 15:41:03 Page 2 of

5
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

3 

44553.00001

4. At present, however, no such protocol is in place. To the extent that a protocol is 

established, it is of course possible that the term sheet attached to the Subrogation Group’s 

Exclusivity Motion (the “Subrogation Term Sheet”) would be made subject to such protocol. In 

the absence of such a protocol, however, the Official Committee makes this statement regarding 

the Subrogation Group’s Exclusivity Motion and the Subrogation Term Sheet. 

5. As a general matter, the Official Committee welcomes the parties to these cases to 

propose practical and feasible plans of reorganization. Competition is likely to improve the overall 

outcome for creditors and other stakeholders. Any competitive process, however, must be 

managed to protect against the potential distraction of plans that are not credible or potentially 

confirmable by June 30, 2020. A fundamental requirement to meet this standard must be some 

adequate level of committed funding. As currently proposed, the Subrogation Term Sheet does 

not pass this test. 

6. Since the filing of the Subrogation Group’s Exclusivity Motion, the Official 

Committee’s advisors have analyzed and conducted diligence with respect to the Subrogation 

Term Sheet. While this diligence continues, the Official Committee has significant concerns that 

the Subrogation Group’s proposal does not yet amount to a “credible, potentially confirmable 

plan” in its current iteration. The most significant deficiency in the Subrogation Term Sheet is its 

lack of feasibility – specifically, it is predicated on a multi-billion dollar rights offering, but there 

is no indication of who will actually provide or backstop that funding, let alone any level of 

commitment to do so. This multi-billion dollar funding hole in the Subrogation Term Sheet is 

significant, especially when compared to the Noteholders’ term sheet, which features a committed 

investment of $22 billion dollars underwritten by certain specified members of the Noteholders’ 

Group. 

Case: 19-30088 Doc# 3391 Filed: 08/06/19 Entered: 08/06/19 15:41:03 Page 3 of

5
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

4 

44553.00001

7. The Subrogation Group may argue that investors will be eager to fund its rights 

offering. The Official Committee, however, is concerned that such interest may be tepid at best 

as the proposal is presently constructed for several reasons. First, the rights offering is limited 

solely to the existing equity holders. Second, the amount of the recovery (approximately $15.8 

billion) the Subrogation Group is projecting for its members and for the other subrogation 

claimants is exceedingly large. Third, the form of such recovery for subrogation claimants is 

largely (90%) convertible preferred equity (the “Mandatory Convertible Preferred Equity”), which 

would create a risk of material future dilution of the common stock being offered in the rights 

offering. Taken together, these factors might well dampen any interest of any potential investors 

deciding whether to invest the billions of dollars needed to fund the Subrogation Group’s 

proposal. 

8. Accordingly, the Official Committee believes that the Court should deny the relief 

sought in the Subrogation Group’s Exclusivity Motion without prejudice to the Subrogation 

Group’s right to come forward again in the future if it has the major components of a plan of 

reorganization further developed and committed in a timely manner. 

[Remainder of Page Left Intentionally Blank] 

Case: 19-30088 Doc# 3391 Filed: 08/06/19 Entered: 08/06/19 15:41:03 Page 4 of

5
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

5 

44553.00001

CONCLUSION 

For the reasons set forth above, the Official Committee does not believe that a plan based 

on the Subrogation Term Sheet, is its current iteration, would be credible and potentially 

confirmable. The Official Committee therefore respectfully requests, in the absence of a plan 

protocol, that the Court deny the Subrogation Group’s Exclusivity Motion without prejudice and 

grant such other and further relief as may be just and appropriate. To the extent the Subrogation 

Group obtains committed financing for its plan, adjusts downward its estimation of subrogation 

claims and/or makes other material changes, the Official Committee reserves the right to amend 

this statement. 

Dated: August 6, 2019 

MILBANK LLP 

/s/Gregory A. Bray . 

DENNIS F. DUNNE 

SAMUEL A. KHALIL 

GREGORY A. BRAY 

THOMAS R. KRELLER 

Counsel for the Official Committee of 

Unsecured Creditors 

Case: 19-30088 Doc# 3391 Filed: 08/06/19 Entered: 08/06/19 15:41:03 Page 5 of

5