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WEIL, GOTSHAL & MANGES LLP 

Stephen Karotkin (pro hac vice) 

(stephen.karotkin@weil.com) 

Ray C. Schrock, P.C. (pro hac vice) 

(ray.schrock@weil.com) 

Jessica Liou (pro hac vice) 

(jessica.liou@weil.com) 

Matthew Goren (pro hac vice) 

(matthew.goren@weil.com) 

767 Fifth Avenue 

New York, NY 10153-0119 

Tel: 212 310 8000 

Fax: 212 310 8007 

KELLER & BENVENUTTI LLP 

Tobias S. Keller (#151445) 

(tkeller@kellerbenvenutti.com) 

Jane Kim (#298192) 

(jkim@kellerbenvenutti.com) 

650 California Street, Suite 1900 

San Francisco, CA 94108 

Tel: 415 496 6723 

Fax: 650 636 9251 

Attorneys for Debtors

and Debtors in Possession

CRAVATH, SWAINE & MOORE LLP 

Paul H. Zumbro (pro hac vice) 

(pzumbro@cravath.com) 

Kevin J. Orsini (pro hac vice) 

(korsini@cravath.com) 

Omid H. Nasab (pro hac vice) 

(onasab@cravath.com) 

825 Eighth Avenue 

New York, NY 10019

Tel: 212 474 1000 

Fax: 212 474 3700 

UNITED STATES BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

In re: 

PG&E CORPORATION 

- and - 

PACIFIC GAS AND ELECTRIC 

COMPANY

Debtors.

Bankruptcy Case No. 19-30088 (DM)

Chapter 11 (Lead Case) (Jointly Administered) 

DECLARATION OF KENNETH S. ZIMAN IN 

SUPPORT OF DEBTORS’ AMENDED 

MOTION FOR ENTRY OF ORDERS (I) 

APPROVING TERMS OF, AND DEBTORS’ 

ENTRY INTO AND PERFORMANCE UNDER, 

EQUITY BACKSTOP COMMITMENT 

LETTERS, (II) APPROVING TERMS OF, AND 

DEBTORS’ ENTRY INTO AND 

PERFORMANCE UNDER, DEBT FINANCING 

COMMITMENT LETTERS AND (III) 

AUTHORIZING INCURRENCE, PAYMENT 

AND ALLOWANCE OF RELATED FEES 

AND/OR PREMIUMS, INDEMNITIES, COSTS 

AND EXPENSES AS ADMINISTRATIVE 

EXPENSE CLAIMS 

Date: January 21, 2020

Time: 10:00 a.m. (Pacific Time) 

Place: United States Bankruptcy Court 

 Courtroom 17, 16th Floor 

 San Francisco, CA 94102 

Objection Deadline: January 14, 2020

 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). 

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I, Kenneth S. Ziman, hereby declare under penalty of perjury as follows: 

1. I am a Managing Director in the Restructuring Group at Lazard Frères & Co. LLC 

(“Lazard”), an investment banking firm that has its principal office at 30 Rockefeller Plaza, New 

York, New York 10112. Lazard is the primary U.S. operating subsidiary of a preeminent 

international investment banking, financial advisory, and asset management firm. Together with 

its predecessors and affiliates, Lazard has been advising clients around the world for over 165 

years. Lazard and its professionals have considerable expertise and experience in providing 

investment banking and financial advisory services to financially distressed companies and to 

creditors, equity holders and other constituencies in reorganization proceedings and complex 

financial restructurings, both in and out of court. In addition, Lazard’s investment banking 

professionals have extensive experience in advising debtors in chapter 11 cases and have served 

as investment bankers to numerous debtors, chapter 11 trustees, creditors’ committees and buyers 

in chapter 11 cases. Since 1990, Lazard professionals have been involved in over 250 

restructurings, representing over $1 trillion in debtor assets. 

2. At Lazard, I specialize in advising public and private companies and creditor groups 

in complex financial restructurings and in raising capital for, selling, or acquiring financially 

distressed businesses. I have nearly 30 years of experience in corporate finance and restructuring. 

I joined Lazard in March 2016 after a more than 25-year career as a bankruptcy and restructuring 

lawyer, previously as a partner at Simpson Thacher & Bartlett LLP and most recently as the Deputy 

Practice Leader of Skadden, Arps, Slate, Meagher & Flom LLP’s Corporate Restructuring 

department. Throughout my career I have represented debtors, individual creditors, official 

creditors’ committees, unofficial bondholder committees, and other parties in interest in numerous 

in-court and out-of-court restructurings and recapitalizations involving companies in multiple 

industries, including those of Takata Corporation, Cobalt International Energy, Inc., ManorCare 

Inc., SunEdison, Inc., CGG Holdings (U.S.) Inc., Millennium Health, LLC, Dendreon 

Corporation, Exide Technologies, Savient Pharmaceuticals, Inc., Energy Future Holdings 

Corporation, Residential Capital, LLC, Select Staffing, iPayment, Inc. and MF Global Holdings 

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Ltd. I have submitted declarations and/or affidavits or have had testimony proffered in CGG, 

SunEdison and GCX Limited, among other cases. 

3. I graduated from Colgate University with a B.A. and I have a law degree from the 

University of Pennsylvania Law School. 

4. I submit this Declaration in support of the Debtors’ Amended Motion for Entry of 

Orders (i) Approving Terms of, and Debtors’ Entry into and Performance Under, Equity Backstop 

Commitment Letters, (ii) Approving Terms of, and Debtors’ Entry into and Performance Under, 

Debt Financing Commitment Letters and (iii) Authorizing Incurrence, Payment and Allowance of 

Related Fees and/or Premiums, Indemnities, Costs and Expenses as Administrative Expense 

Claims (the “Amended Motion”).1

5. Lazard is a long-time advisor to PG&E Corporation (“PG&E Corp.”), and its 

primary operating subsidiary, Pacific Gas and Electric Company (the “Utility”; together with 

PG&E Corp., “PG&E”, the “Company” or the “Debtors”), with the initial engagement for 

advisory services starting in 2011. Since that time, Lazard has provided financial advisory and 

investment banking services to PG&E Corp. with respect to a variety of matters, including, without 

limitation: analysis of the financial condition of the Company, evaluation of potential transactions 

that the Company may pursue, assessment of financing options, and shareholder advisory services. 

Given Lazard’s long history with PG&E Corp., Lazard has significant familiarity with and 

knowledge of the Debtors’ business, operations, and financial challenges. 

6. Lazard currently serves as advisor to the Debtors in their Chapter 11 Cases. In such 

capacity, Lazard assists the Company in its assessment of the Company’s ability to raise capital 

and its evaluation of the sources of financing required in order to successfully emerge from chapter 

11. During the course of these cases, Lazard has engaged in dialogue with the legal counsel and 

advisors to a number of significant shareholders, including in regards to their willingness to invest 

in the Company to finance its emergence from chapter 11. 

1 Capitalized terms used but not defined herein shall have the meanings ascribed to such 

terms in the Amended Motion. 

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7. Along with management, Lazard has also engaged in communications with certain 

money-center banks regarding the Company’s ability to access capital from the traditional equity 

markets. Feedback received from these discussions indicated that regular-way equity markets 

access would require resolution of the Company’s 2020 general rate case and cost of capital 

proceedings, as well as a clear understanding of the aggregate wildfire claims liability, how those 

claims will be treated under a chapter 11 plan and the plan’s compliance with AB 1054. Feedback 

received further indicated that banks would potentially be willing to commit, at the time, to a 

volume underwriting of any equity financing; this would mean that while a bank might guarantee 

an amount of equity proceeds, there would not be a floor price at which that equity would be raised, 

thereby presenting unlimited dilution risk to current shareholders. 

8. In connection with efforts to terminate the Debtors’ exclusivity by the Ad Hoc 

Committee of Senior Unsecured Noteholders (the “Ad Hoc Noteholder Committee”) and the Ad 

Hoc Group of Subrogation Claim Holders in July and August 2019, two large shareholders of 

PG&E Corp., Knighthead Capital Management (“Knighthead”) and Abrams Capital Management 

(“Abrams”; together with Knighthead, the “13D Parties”), submitted a letter to the Chair of 

PG&E Corp. setting forth an unsolicited financing proposal to provide $1.5 billion of equity capital 

commitments in support of the Company’s Plan of Reorganization (as defined below) (the “Initial 

Equity Backstop Commitment Letter”). This proposal was made public by the 13D Parties on 

August 8, 2019, through a Schedule 13D filing with the Securities and Exchange Commission. 

The 13D Parties’ proposal contemplated raising up to $15 billion of equity, with the additional 

capital being provided by other shareholders. Subsequently, without any active solicitation the 

Company received equity capital commitments from more than 35 investors, representing equity 

backstop commitments in excess of $14 billion in the aggregate. 

9. Starting on August 17, and continuing through September, the Company and its 

financial and legal advisors engaged in negotiations with the 13D Parties concerning the terms of 

the Initial Equity Backstop Commitment Letter. Over the course of these discussions, the Debtors 

improved upon several of the terms initially proposed by the 13D Parties, including with respect 

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to structure, conditionality, length and flexibility to pursue a variety of equity financing options. 

At a board meeting on September 8, the PG&E Corp. board (the “Board”) authorized PG&E Corp. 

to enter into backstop commitment letters that had been revised to reflect the outcome of these 

discussions and negotiations (as revised, the “September Equity Backstop Commitment 

Letters”) with affiliates of the 13D Parties. On September 9, PG&E Corp. entered into the 

September Equity Backstop Commitment Letters with certain affiliates of the 13D Parties for 

aggregate commitments of $1.5 billion, and such backstop commitment letters were filed with the 

Court as an exhibit to the Debtors’ “Summary of Key Elements of Debtors’ Joint Chapter 11 Plan 

of Reorganization”. [Docket No. 3844] 

10. Shortly after entering into the September Equity Backstop Commitment Letters, the 

Debtors reached a settlement with the Ad Hoc Group of Subrogation Claim Holders. As the 

September Equity Backstop Commitment Letters did not incorporate this settlement, the Company 

and the 13D Parties negotiated a revised form of the September Equity Backstop Commitment 

Letters that was publicly disclosed on September 13, 2019 via a Current Report on Form 8-K, 

which, among other matters, reflected contemplated amendments to the Company’s Plan of 

Reorganization to incorporate the subrogation settlement. 

11. On September 14, 2019, the Company initiated a process to obtain an additional 

$12.5 billion of equity commitments from current shareholders and others. Of the $14 billion of 

Equity Backstop Commitments sought during this process, 60% was available only to shareholders 

who offered Equity Backstop Commitments to the Company, to be further allocated among such 

shareholders based on shareholdings. The other 40% of the Equity Backstop Commitments was 

made available to shareholders and non-shareholders who offered Equity Backstop Commitments 

to the Company, which was to be further allocated pro rata based on the amount of Equity Backstop 

Commitments offered by such parties. All parties were permitted to include in their shareholdings 

shares purchased between the time they delivered their commitments and the allocation date. 

12. As part of this process, Lazard distributed the form backstop agreement to a diverse 

group of accredited investors (as defined in Rule 501 of Regulation D under the Securities Act of 

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1933, as amended). The Debtors actively engaged with non-shareholders during this process and, 

overall, provided non-shareholders with a meaningful opportunity to participate in the Equity 

Backstop Commitments. In addition, the Company made a presentation available on its website 

that described the backstop commitment structure and other key information about the Debtors 

and the Chapter 11 Cases. The Company also hosted an informational meeting on September 17, 

2019 and the Company and Lazard engaged with potential investors via individual phone calls and 

one-on-one meetings. Any accredited investors that expressed interest to the Company or Lazard 

in participating in the backstop received a copy of the form of September Equity Backstop 

Commitment Letters. The Company addressed comments to the September Equity Backstop 

Commitment Letters from certain of these investors in an amendment distributed on September 

20, 2019 to parties that received the September Equity Backstop Commitment Letters. 

Subsequently, the Company received equity capital commitments from more than 50 investors, 

representing equity backstop commitments in excess of $14 billion in the aggregate. 

13. As a result of negotiations with representatives of the wildfire victims, the Debtors 

amended their Plan of Reorganization to, among other things, accommodate a higher wildfire 

claim settlement amount. This amendment necessitated that negotiations be re-opened around the 

equity backstop commitments to raise the wildfire claim cap therein. On November 16, 2019, the 

September Equity Backstop Commitment Letters were superseded and replaced as the Debtors 

entered into new Equity Backstop Commitment Letters with Knighthead, Abrams and additional 

Equity Backstop Parties that contemplated reduced total commitments of $12 billion (the 

“November Equity Backstop Commitment Letters”). This reduced commitment amount 

reflected that a portion of the claims held by the wildfire victims was expected to be paid in stock. 

However, the November Equity Backstop Commitment Letters also permitted a higher overall 

amount of compensation to be paid to the wildfire victims. On November 17, 2019, the Debtors 

began soliciting more broadly for additional commitments, and on December 6, 2019 the Debtors 

announced they had reached the commitment objective of $12 billion under the November Equity 

Backstop Commitment Letters. 

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14. On December 13, 2019, the Debtors announced they were seeking an extension of 

the Court approval deadline for the November Equity Backstop Commitment Letters. In 

connection with this extension, on December 13, the Board authorized PG&E Corp. to enter into 

new Equity Backstop Commitment Letters with the Equity Backstop Parties, which the Debtors 

then entered into on December 23, that superseded and replaced the prior Equity Backstop 

Commitment Letters (the “Final Equity Backstop Commitment Letters” and, together with the 

Initial Equity Backstop Commitment Letter, September Equity Backstop Commitment Letters and 

the November Equity Backstop Commitment Letters, as applicable, the “Equity Backstop 

Commitment Letters”). 

15. Under the Final Equity Backstop Commitment Letters, the Company accepted 

commitments from a total of 80 Equity Backstop Parties, which aggregated to a combined 

commitment of $12.6 billion, before giving effect to the allocation provisions in the Final Equity 

Backstop Commitment Letters that provided for an automatic reduction of Equity Backstop 

Commitments to an aggregate amount of $12 billion. As before, the Debtors actively engaged 

with non-shareholders during this process and, overall, provided non-shareholders with ample 

opportunity to participate in the Equity Backstop Commitments. 

16. Over the multiple iterations of the Equity Backstop Commitment Letters, the 

Company and its advisors were able to negotiate terms within the Final Equity Backstop 

Commitment Letters to the Company’s advantage relative to the terms of the Initial Equity 

Backstop Commitment Letter. The Debtors simplified the equity offering mechanics from the 

Initial Equity Backstop Commitment Letter, which are structured in the Final Equity Backstop 

Commitment Letters based on the price-to-earnings multiple the Debtors are able to achieve with 

respect to the future equity raises contemplated to occur closer to the Effective Date of the Debtors’ 

Plan of Reorganization. In the event that the price-to-earnings multiple implied by an equity raise 

is equal to or exceeds 13.5x2, the Debtors can pursue a Permitted Equity Offering (i.e., raise equity 

at best terms / structure available in the market). If the price-to-earnings multiple implied by an 

2 Subject to adjustment in accordance with the Final Equity Backstop Commitment Letters.

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equity raise is less than 13.5x2 but equals or exceeds 12.0x2, then the Debtors must raise at least 

80% of equity proceeds through a Rights Offering, but may still consummate certain Permitted 

Equity Offerings for up to 20% of equity proceeds. The features of the Rights Offering, including 

freely tradeable rights and oversubscription privileges, are intended to allow all stakeholders to 

participate in the capital raise. At any multiple lower than the Rights Offering threshold multiple, 

the Debtors will rely on the Backstop Commitments, which are priced at 10.0x2. This structure 

affords the Debtors significant flexibility in financing their emergence from the Chapter 11 Cases, 

while ensuring that the Debtors will be able to raise the anticipated necessary equity capital in time 

for the Debtors to emerge in accordance with the timelines in AB 1054. Absent the Backstop 

Commitments, the Debtors could face a situation where they seek to raise equity financing upon 

emergence from chapter 11 with no guarantee of availability or price. As ultimately negotiated, 

the Backstop Commitments mitigate this downside risk and provide flexibility for the Debtors to 

also raise equity financing at higher prices via a Rights Offering or a Permitted Equity Offering if 

there is sufficient demand in the public markets. Importantly, the equity investment contemplated 

by the Final Equity Backstop Commitment Letters is also structured in a manner that permits the 

Debtors to monetize their significant net operating loss carryforwards and other tax attributes, an 

important component to maximizing the value of the Debtors’ estates. 

17. As described above, the Debtors negotiated in the Final Equity Backstop 

Commitment Letters such that in the event of a Rights Offering, the Company maintains the option 

of raising up to 20% of the total equity proceeds through another form of primary equity offering 

(e.g., a private placement), subject to certain consent rights of the Equity Backstop Parties in the 

case of equity offerings that are not broadly syndicated. This flexibility could be valuable in 

bringing long-term utility investors back into the stock and allowing the Company to diversify its 

shareholder base immediately upon emergence from chapter 11. The Initial Equity Backstop 

Commitment Letter featured no such option. 

18. While the Equity Commitment Premium increased as compared to the Initial Equity 

Backstop Commitment Letter, the Debtors negotiated changes to the structure of the Equity 

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Commitment Premium to provide for a rolling premium clawback reduction schedule that allows 

the Equity Commitment Premium to be significantly reduced with respect to an Equity Backstop 

Party in the event that such party terminates its commitments. Generally, the terminating Equity 

Backstop Party’s Equity Commitment Premium will be reduced by: 

i) 85% if the commitments are terminated on or prior to January 20, 2020; 

ii) 60% if the commitments are terminated after January 20, 2020 and on or prior to April 

30, 2020; and 

iii) 10% if the commitments are terminated after April 30, 2020 and prior to the Effective 

Date. 

However, if an Equity Backstop Party terminates its commitments because (i) asserted 

administrative expense claims in the Chapter 11 Cases exceed $250 million, excluding all ordinary 

course administrative expense claims, all professional fee claims, all disallowed administrative 

expense claims and the portion of an administrative expense claim that is covered by insurance 

(collectively, the “Excluded Administrative Expense Claims”), or (ii) the Debtors have reserved 

for and/or paid more than $250 million in the aggregate for administrative expense claims, 

excluding the Excluded Administrative Expense Claims, then the relevant Equity Backstop Party’s 

Equity Commitment Premium will be reduced by 75%. Additionally, if an Equity Backstop Party 

terminates its commitments in connection with PG&E Corp.’s receipt of written waivers or 

specified amendments from entities holding 60% or more of the Equity Backstop Commitments, 

then the relevant Equity Backstop Party’s Equity Commitment Premium will be reduced by: 

i) 75% if the commitments are terminated on or prior to April 30, 2020; 

ii) 50% if the commitments are terminated after April 30, 2020 and on or prior to May 31, 

2020; and 

iii) 25% if the commitments are terminated after May 31, 2020. 

I believe that these features of the Final Equity Backstop Commitment Letters benefit the Debtors 

by incentivizing the Equity Backstop Parties to maintain their commitments in the event that 

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termination rights are triggered.3 Moreover, the clawback features enables the Debtors to retain 

any portion of the Equity Commitment Premiums that was subject to clawback, which the Debtors 

could then use as consideration to attract a replacement Equity Backstop Party. Such fees are 

necessary and market-based compensation for the Equity Backstop Parties; absent the Equity 

Commitment Premium, the Equity Backstop Parties would not have been willing to provide the 

Equity Backstop Commitments on present terms. Based upon analysis conducted by Lazard of 

equity backstop commitments provided since 2016, the Equity Commitment Premium (6.364%) 

appears comparable to, or less than, other equity backstop commitment premiums that have been 

agreed and approved by other Bankruptcy Courts in order to finance chapter 11 plans. 

19. Furthermore, the reimbursement of reasonable fees and expenses of Jones Day, 

legal advisor to certain of the Equity Backstop Parties, of up to $17.0 million and a financial 

advisor to certain of the Equity Backstop Parties of up to $19.0 million, as contemplated by the 

Final Equity Backstop Commitment Letters, is a necessary component of the agreement and 

without which the equity capital would not otherwise have been provided on the present terms. 

Based on the totality of the circumstances, I believe that the full Equity Commitment Premium of 

6.364%, in addition to the expense reimbursement structure described above, is fair and 

reasonable. 

20. In addition to the work on the Final Equity Backstop Commitment Letters, the 

Debtors have been working in parallel with money-center banks to ensure needed access to debt 

capital at emergence. The Debtors’ Joint Chapter 11 Plan of Reorganization filed on September 

9, 2019 and amended on September 23, 2019, November 4, 2019 and December 12, 2019 (the 

“Plan of Reorganization”) contemplates up to $34.35 billion of new debt financing, consisting of 

$27.35 billion at the Utility and $7.0 billion at PG&E Corp. to refinance their current capital 

structure and fund their emergence from chapter 11. The Plan of Reorganization contemplates 

debt financing at both the Utility and PG&E Corp. to establish a capital structure upon emergence 

3 The termination rights are exercisable on an individual basis—one Equity Backstop Party’s 

decision to exercise its termination right does not terminate the commitments of the other Equity 

Backstop Parties. 

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consistent with other peer utilities. The Plan of Reorganization seeks to maximize the value of the 

Debtors’ estates by refinancing pre-petition Utility debt with less expensive secured bonds at 

market rates where practical to do so. With respect to pre-petition long-term bonds at the Utility, 

refinancing certain or all bonds with this new debt could save the Debtors (and by extension 

ratepayers) up to $1.5 billion in interest expense over the weighted average life of the bonds. 

21. Since the second quarter of 2019, the Debtors and their advisors have maintained 

ongoing dialogue with money-center banks to discuss debt financing options relative to the 

Debtors’ emergence from chapter 11. These conversations ultimately culminated in five banks 

providing highly confident letters (“HCLs”) relative to raising debt and equity financing at 

emergence; the Debtors provided these HCLs to the Court as part of the September 9, 2019 filing 

of their Plan of Reorganization. Furthermore, throughout the course of the third quarter of 2019, 

several banks developed illustrative debt financing structures and term sheets for presentation to 

the Debtors, to assist the Debtors in considering exit financing options. 

22. In late September 2019, following the filing of the second motion of the Ad Hoc 

Noteholder Committee to terminate the Debtors’ exclusive periods, the Board determined that the 

Company should seek to obtain committed debt financing to bolster the confidence of claimants, 

financial creditors, equityholders, ratepayers and other stakeholders that the Debtors’ Plan of 

Reorganization, the best available alternative, can be consummated in accordance with statutory 

requirements (both under the Bankruptcy Code and AB 1054). Much like the Final Equity 

Backstop Commitment Letters, committed debt financing would act as a backstop for the debt 

capital necessary to effectuate the Debtors’ Plan of Reorganization at an acceptable price. The 

Debtors sought debt commitments in the form of investment grade “bridge” financing, which is 

short-term in nature (usually with a maturity within one year) and commonly used to provide 

certainty of execution on large, complex transactions by offering protection against market 

dislocation that could frustrate access to regular-way capital markets transactions at the specific 

dates or periods required by the transaction terms. As is typical, it is not expected that the Debt 

Commitments (as defined below) will be drawn—rather, they serve as an insurance policy to 

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ensure that adequate funds at an acceptable price will be available when the Debtors need them. 

However, even if funded, the backstop debt facilities would be expected to be refinanced well in 

advance of their 364-day maturity. Given this expectation (coupled with the fact that the Debt 

Commitments are not expected to be drawn), I do not believe that the 364-day maturity raises any 

feasibility issues with respect to the Debtors’ Plan of Reorganization. In light of this, the Debtors 

determined in their business judgment that a 364-day debt commitment struck the right balance 

between certainty and cost, as a longer term commitment if even available would come with much 

higher fees. The Debt Commitments will allow the Debtors to proceed with the prosecution and 

consummation of their Plan of Reorganization in a manner that will allow them to successfully 

emerge from chapter 11. 

23. Following the Company’s decision to obtain backstop debt commitments, the 

Debtors and their advisors commenced negotiations regarding backstop debt commitments, with 

the intention of finalizing the commitments by October 4, 2019, in advance of the October 7, 2019 

hearing on the motion to terminate the Debtors’ exclusivity. As such, the Debtors and their 

advisors contacted money-center banks on September 25 and 26 requesting initial proposals for 

backstop debt commitments. The Company and Lazard contacted nine leading banks and 

requested term sheet proposals for total Utility backstop debt commitments of $27.35 billion and 

PG&E Corp. backstop debt commitments of $7.0 billion. All of the aforementioned banks 

delivered proposals by October 1, 2019. 

24. After analysis of the initial proposals, which the Debtors evaluated based on a 

number of metrics, including the proposed terms and fees, the cost and certainty of the 

commitments, the experience and reputations of the parties and the ability of such banks to work 

collaboratively with the Debtors, the Debtors developed and shared a counterproposal based on 

anticipated market-clearing terms and selected JPMorgan, Citi, Bank of America, Barclays and 

Goldman Sachs as initial commitment parties (the “Initial Backstop Debt Commitment 

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Parties”)4. The Board approved the Debtors’ entry into the backstop debt commitments on 

October 11, 2019; the Debtors executed the backstop debt commitments on the same day (the 

“Debt Commitments”). The Debt Financing Commitment Letters executed on October 11, 2019 

contemplated obtaining Court approval by November 20, 2019. 

25. On October 28, 2019, the Debtors joined BNP Paribas, Credit Suisse AG, Cayman 

Islands Branch, Morgan Stanley Bank, N.A., MUFG Union Bank, N.A. and Wells Fargo Bank, 

National Association, as additional Commitment Parties to the Debt Commitment Letters. On 

November 18, 2019, the Debtors amended the Debt Commitment Letters to extend the deadline 

for obtaining Court approval from November 20, 2019 to December 20, 2019. On December 2, 

2019, the Debtors joined Mizuho Bank, Ltd. as an additional Commitment Party to the Debt 

Commitment Letters. On December 20, 2019, the Debtors further amended the Debt Commitment 

Letters to, among other things, extend the deadline for obtaining Court approval from December 

20, 2019 to January 31, 2020. 

26. Subject to the terms of the Debt Commitment Letters and Backstop Debt Fee 

Letters, the Debtors are obligated to pay certain fees (the “Backstop Debt Fees”) to the Backstop 

Debt Commitment Parties to compensate them for their Debt Commitments. Similar to the Equity 

Commitment Premiums in the Final Equity Backstop Commitment Letters, the Backstop Debt 

Fees are necessary and market-based compensation for the Backstop Debt Commitment Parties, 

and, absent the Backstop Debt Fees, the Backstop Debt Commitment Parties would not be willing 

to provide the Debt Commitments. If the entire $34.35 billion in Debt Commitments remain open 

until June 30, 2020 (i.e., the statutory confirmation deadline), the aggregate Backstop Debt Fees 

payable by the Debtors with respect to such Debt Commitments would be approximately $210 

million. While significant in dollar terms, on a percentage basis this represents 0.61% of the 

committed debt quantum, which Lazard’s analysis shows to be consistent with or below market 

rates for bridge commitments. The Debt Commitments provide certainty of financing within a 

4 The Initial Backstop Debt Commitment Parties are also engaged to act as arrangers and 

underwriters for market-based “take-out financing” through a combination of bank debt and 

bond placement at both PG&E Corp. and the Utility. 

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range of pricing outcomes. Absent the Debt Commitments, the Company could be forced to raise 

exit financing at prevailing terms during a time of market dislocation. The incremental interest 

cost of raising debt financing in the absence of a debt backstop could expose the Company to 

increased interest costs that exceed the fees on the Debt Commitments. By agreeing to a fee of up 

to $210 million, the Company is buying insurance; a 100 basis points increase in interest rate 

spreads across its capital structure results in more than $340 million of incremental annual interest 

expense for the Company. 

27. In addition to the Backstop Debt Fees, the Debtors would be required to pay 

additional amounts (including fees and interest) if the Debt Commitments are actually drawn at 

emergence from chapter 11. The pricing of the Debt Commitments, summarized below, provides 

certainty to the Debtors of the availability and cost of debt capital if the Debt Commitments are 

utilized upon exit from chapter 11. Furthermore, the Debt Commitments have added significance 

here given the importance of timely emergence to obtain the benefits of the AB 1054 wildfire fund 

and limited ability to delay emergence to allow credit markets to settle if there is volatility in the 

markets at the time the Debtors must emerge from chapter 11 to meet the AB 1054 and related 

deadlines. The interest rates associated with the Debt Commitments are as follows: 

i) for the Utility: L5+112.5-175 bps (subject to a credit rating grid); 25 bps increase every 

90 days after funding; maximum 75 bps increase; and 

ii) for PG&E Corp.: L5+175-225 bps (subject to a credit rating grid); 25 bps increase every 

90 days after funding; maximum 75 bps increase. 

28. As a result of negotiations led by the Company and Lazard, the Backstop Debt Fees 

were negotiated down relative to the initial proposals and are structured so that payment is 

staggered over time. Also, the Debt Commitments can be reduced or terminated to the extent there 

are changes to the financing needs or the Debtors’ Plan of Reorganization, including any 

5 The interest rate under the facilities will be, at the option of the Utility or PG&E Corp., as 

applicable, (a) the Adjusted LIBO Rate (as defined in the Debt Commitment Letters) plus the 

specified margin or (b) the ABR (as defined in the Debt Commitment Letters) plus the specified 

margin, and minus 100 bps.

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determination to reinstate pre-petition debt or utilize Additional Capital Sources, as defined in the 

Equity Backstop Commitment Letters. Based on analysis conducted by Lazard of financing fees 

for large bridge financing transactions since 2014, the terms are consistent with (or better than) 

those for similarly large, complex transactions. I believe that the Backstop Debt Fees were the 

subject of arms’-length and good faith negotiations between the Debtors and the Initial Backstop 

Debt Commitment Parties, are integral components of the overall terms of the Debt Commitments, 

were required by the Initial Backstop Debt Commitment Parties as consideration for the extension 

of the Debt Commitments and are reasonable under the circumstances, including the unique timing 

requirements of these Chapter 11 Cases. 

29. I believe the Equity Backstop Commitments and the Debt Commitments align the 

incentives of the Debtors with those of leading financial institutions in favor of the ultimate success 

of the Debtors’ Plan of Reorganization. These financial institutions have committed significant 

capital to ensure the viability of the Debtors’ Plan of Reorganization and I believe therefore have 

an interest in seeing it through to completion. I believe these commitments also enhance the 

confidence of claimants, financial creditors, equityholders, ratepayers and other stakeholders that 

the Debtors will timely emerge from chapter 11 as a financially sound utility. 

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I declare under penalty of perjury that, to the best of my knowledge and after 

reasonable inquiry, the foregoing is true and correct. 

Dated: January 3, 2020 

____________________________

Kenneth S. Ziman 

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