Filing Details
- Accession Number:
- 0000904454-19-000596
- Form Type:
- 13D Filing
- Publication Date:
- 2019-08-08 10:14:52
- Filed By:
- Abrams Capital Management
- Company:
- Pg&E Corp (NYSE:PCG)
- Filing Date:
- 2019-08-08
- SEC Url:
- 13D Filing
Filing
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
PG&E
Corporation
(Name of Issuer)
(Name of Issuer)
Common
Stock, no par value
(Title of Class of Securities)
(Title of Class of Securities)
69331C108
(CUSIP Number)
(CUSIP Number)
David C. Abrams
c/o Abrams Capital Management, L.P.
222 Berkeley Street, 21st Floor
Boston, Massachusetts 02116
(617) 646-6100
c/o Abrams Capital Management, L.P.
222 Berkeley Street, 21st Floor
Boston, Massachusetts 02116
(617) 646-6100
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August
7, 2019
(Date of Event Which Requires Filing of This Statement)
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box ☐.
Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See § 240.13d-7 for other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person’s
initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
CUSIP No. 69331C108
Explanatory Note
This Amendment No. 1 amends the statement on Schedule 13D filed with the
Securities and Exchange Commission by (i) Abrams Capital, LLC, (ii) Abrams Capital Management, LLC, (iii) Abrams Capital Management, L.P., (iv) Great Hollow Partners, LLC and (v) David Abrams (together with each of the foregoing, the “Reporting
Persons”) on August 7, 2019 (the “Original Schedule 13D”) with respect to common stock of PG&E Corporation (the “Company”). Capitalized terms used but not defined in this Amendment No. 1 have the meanings set forth in the Original
Schedule 13D.
| Item 4. | Purpose of Transaction. |
Item 4 is hereby amended by adding the following paragraph as the penultimate
paragraph thereof:
On August 7, 2019, certain investment funds managed by Abrams CM LP and the Other
Shareholder each submitted a letter to the Company setting forth the terms by which they committed to provide capital to the Company’s potential plan of reorganization.
Item 7. Materials to be Filed as
Exhibits.
| 99.1* | Letter to the Company, dated August 7, 2019, from Knighthead Capital Management, LLC and Abrams Capital Management,
L.P. | |
| 99.2* | Backstop Commitment Letter, dated August 7, 2019, from Abrams Capital Partners I, L.P. | |
| 99.3* | Backstop Commitment Letter, dated August 7, 2019, from Abrams Capital Partners II, L.P. | |
| 99.4* | Backstop Commitment Letter, dated August 7, 2019, from Whitecrest Partners, LP | |
| 99.5* | Backstop Commitment Letter, dated August 7, 2019, from Great Hollow International, L.P. | |
| 99.6* | Backstop Commitment Letter, dated August 7, 2019, from Riva Capital Partners V, L.P. |
* Filed herewith.
CUSIP No. 69331C108
SIGNATURES
After reasonable inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this statement is true, complete and correct.
Dated: August 7, 2019
| | ABRAMS CAPITAL MANAGEMENT, L.P. | | |
| | By: | ABRAMS CAPITAL MANAGEMENT, LLC, its General Partner | |
| | By: | /s/ David Abrams | |
| | | Name: David Abrams Title: Managing Member | |
| | ABRAMS CAPITAL MANAGEMENT, LLC | | |
| | By: | /s/ David Abrams | |
| | | Name: David Abrams Title: Managing Member | |
| | ABRAMS CAPITAL, LLC | | |
| | By: | /s/ David Abrams | |
| | | Name: David Abrams Title: Managing Member | |
| | GREAT HOLLOW PARTNERS, LLC | | |
| | By: | /s/ David Abrams | |
| | | Name: David Abrams Title: Managing Member | |
| | DAVID ABRAMS | | |
| | By: | /s/ David Abrams | |
| | | Name: David Abrams Title: Individually | |
CUSIP No. 69331C108
Exhibit 99.1
August 7, 2019
Ms. Nora Mead Brownell
Chair of the Board
PG&E Corporation
77 Beale Street
P.O. Box 770000
San Francisco, California 94177
Re: Chapter 11 Plan Backstop Commitment Letter and Related Documents
Ms. Brownell,
As disclosed earlier today in a Schedule 13D filing with the Securities and Exchange Commission, Abrams Capital
Management, L.P. (“Abrams”) and Knighthead Capital Management, LLC (“Knighthead”) on behalf of funds and accounts that they manage and/or advise, agreed to act in concert to develop a proposal to provide equity capital commitments in support of a
plan of reorganization (“POR”) by PG&E Corporation (“PG&E” or the “Company”). Enclosed are the backstop commitment letters (the “Backstop Commitments”) that Abrams and Knighthead have prepared. Abrams’ and Knighthead’s decision to pursue
this course of action is driven by many considerations, which are summarized below. At the most basic level, we are motivated by a desire to provide a clear pathway for the Company to raise needed capital in a fair, efficient and transparent
manner so that it can satisfy all of its obligations quickly and responsibly.
PG&E is currently working its way through a complicated restructuring process. As a result of significant wildfire
liabilities and related capital obligations, the Company faces a material need for new funding. Capital commitments must be made available quickly in order to allow PG&E to exit bankruptcy on the timeline prescribed by the requirements of the
recently passed Assembly Bill 1054. However, unlike the unsolicited proposal proffered by the ad-hoc group of creditors, our proposed construct would not seek to undervalue the company, subvert the bankruptcy process or disadvantage one group of
financial stakeholders to benefit another. In fact, we believe the Company has made it clear that it is open to fair-minded proposals from existing equity holders. A further differentiating factor is that our proposed transaction does not limit
participation to a small group of investors at the expense of others.
The capital raised under the construct we have developed provides a platform for the Company to pursue the objectives it
laid out in its July 18th bankruptcy court filing, which include:
| • | Payment in full or reinstatement of all pre-petition debt obligations; |
| • | Payment in full of all pre-petition trade and employee-related claims; |
| • | Satisfaction of all pre-petition wildfire claims in amounts agreed upon or as otherwise allowed by the court; |
| • | Payment of post-petition interest on all unsecured pre-petition claims; |
| • | Assumption of all PPAs and community choice aggregation servicing agreements; |
| • | Assumption of all collective bargaining agreements, and |
| • | Participation in the go-forward California Wildfire Fund. |
Additionally, we support promoting California’s environmental goals and ensuring that the Company files a plan of
reorganization that achieves ratepayer neutrality.
CUSIP No. 69331C108
We believe that our capital proposal provides the Company with a foundation upon which a more fully developed capital plan and plan of reorganization can be built. Such a capital plan may include other, more efficient sources of capital that will both accelerate the process of paying claimants and return the Company to a more traditional position in the capital markets. Importantly, the goal of the Company should be to pursue a path forward that attracts traditional utility investors and reduces its prospective cost of capital.
By demonstrating independent access to equity capital on reasonable terms, the Company’s access to more economical
financing will be materially enhanced. Indeed, a well-established interest in debt issued by the Company and its subsidiaries already exists, as evidenced by the fact that its defaulted ten year debt is trading above par and at an implied yield
to maturity of just over 4%.
In order to provide transparency on the Backstop Commitments, we have provided a one-page summary as an attachment to
this letter. The Backstop Commitments contemplate funding new equity at a multiple of approximately eleven times fully diluted 2021 earnings. They ensure that the Company will have access to capital it can rely upon so that it can file its plan
of reorganization that pays all claims in full. They also establish a platform for the Company to seek more traditional utility investors and capital solutions. Importantly, the Backstop Commitments are not restrictive. They provide the Company
the freedom to raise debt and equity capital on terms that are more advantageous or issue Mandatory Convertible Preferred Stock on terms outlined in the Backstop Commitments. All such other sources of capital will reduce the funding required by
the Backstop Commitments.
As more fully described in the Backstop Commitments, the Company is required to adhere to certain objectives that will
benefit all stakeholders. The Company must file a plan of reorganization that is acceptable to its shareholders, who ultimately bear the entire burden of funding claims, obligations and the future commitments of the Company. PG&E must also
resolve its bankruptcy proceedings on a timeline consistent with the provisions of Assembly Bill 1054 and do so without the incurrence of any material wildfires in its service area.
CUSIP No. 69331C108
We look forward to working constructively with the Company to develop a plan of reorganization and capital plan that
allows it to achieve the important objectives that it has articulated. We believe that access to capital is the cornerstone to ensure that PG&E is a robust utility, focused on delivering clean, safe and reliable power to its customers. We
support the board and management team in their efforts to achieve these important goals.
Sincerely,
| Abrams Capital Management, L.P., on behalf of itself and its managed or controlled funds | ||
| /s/ David Abrams | ||
| Name: David Abrams | ||
| Title: Managing Member of its General Partner | ||
| Knighthead Capital Management, LLC | ||
| solely on behalf of certain funds and accounts it managed and/or advises | ||
| /s/ Thomas A. Wagner | ||
| Name: Thomas A. Wagner | ||
| Title: Managing Member |
CUSIP No. 69331C108
Preliminary and Subject to Material Revision Key Assumptions (millions, except per share) Backstop
Rights Offering Price Thresholds Commitment At Various Rights Offering Amounts $15 billion $0-5 billion $5-10 billion $10-15 billion Calculation of Fully Diluted Shares Outstanding at the Effective Date Shares Outstanding as of Latest
Filing 529.2 529.2 529.2 529.2 Calculation of Backstop$20 billion of Sources (1) Based on the Company’s current authorized cost of capital; Subject to revision based on the Company’s current cost of capital proceeding. > Price
Threshold calculations shown to the right assume the Additional (+) Outstanding RSUs / PSUs 3.4 3.4 3.4 3.4 Capital Sources (as defined in the (+) Shares of New Common Stock to Backstop 853.1 568.7 284.4 – Backstop Commitment
Letter) are (+) Backstop Commitment Fee 8.5 8.5 8.5 8.5 zero, i.e., no HoldCo debt above $5bn, (+) Backstop Funding Fee 17.1 11.4 5.7 – no mandatory convertible preferred (+) Shares of New Common Stock to Rights
Offering – 232.3 411.3 498.3 stock, and no Wildfire Recovery Bonds Fully Diluted Shares Outstanding 1,411.3 1,353.6 1,242.5 1,039.5 Applicable Utility Index Multiple 19.1x Applicable Utility Index
Multiple A 19.1x 19.1x 19.1x 19.1x Backstop Discount 42.5% PG&E Debt $5,000 PG&E 2021E Net Income B $2,258 $2,258 $2,258 $2,258 Backstop Commitment $15,000 Backstop Commitment
Fee 1.0% Fully Diluted Shares Outstanding C 1,411.3 1,353.6 1,242.5 1,039.5 Backstop Funding Fee 2.0% Baseline Share Price A x B / C $30.58 $31.88 $34.73 $41.52 Calculation of PG&E 2021E Net
Income (x) Relevant Price Adjustment 57.5% 67.5% 70.0% 72.5% 2021E Average Rate Base $47,927 Backstop Price $17.58 $17.58 $17.58 $17.58 (x) Authorized Equity Ratio 52.0% Rights Offering Price
Threshold NA $21.52 $24.31 $30.10 (x) 2021E ROE⁽¹⁾ 10.3% Implied P/E Multiple 11.0x 12.9x 13.4x 13.9x (-) Fund Contribution (Post-Tax) (138) (-) Non-Convertible Pref Dividends (14) Sources of
Capital (-) PG&E Debt Interest (Post-Tax) (144) Backstop Funding $15,000 $10,000 $5,000 $– (-) WRB Deductions (Post-Tax) – Rights Offering – 5,000 10,000 15,000 PG&E 2021E Net
Income $2,258 PG&E Debt 5,000 5,000 5,000 5,000 Total Sources of Capital $20,000 $20,000 $20,000 $20,000
CUSIP No. 69331C108
Exhibit 99.2
EXECUTION VERSION
August 7, 2019
PG&E Corporation
77 Beale Street
P.O. Box 770000
San Francisco, California 94177Re: Chapter 11 Plan Backstop Commitment Letter
Ladies and Gentlemen:
Reference is hereby made to the chapter 11 bankruptcy cases, lead case
no. 19-30088 (the “Chapter 11 Cases”), currently pending before the United States Bankruptcy Court for the District of
Northern California (the “Bankruptcy Court”), in which PG&E Corporation (“PG&E” or the “Company”)
and Pacific Gas and Electric Company (the “Utility” and together with PG&E, the “Debtors”) are debtors in possession. Reference is further made to (i) a Chapter 11 plan of reorganization (the “Plan”) to be filed with the Bankruptcy Court to implement the terms and conditions of the reorganization of the Debtors contemplated by a plan term
sheet that is approved in writing by the undersigned Backstop Party in its sole discretion (the “Backstop Party”) that
contemplates that all subrogation claims and wildfire claims shall not exceed $16 billion in the aggregate (the “Plan Term
Sheet”) and (ii) a disclosure statement that will accompany the Plan (the “Disclosure Statement”).
Capitalized terms used in this backstop commitment letter (this “Backstop Commitment Letter”) but not otherwise defined
shall have the meanings ascribed to them in the Plan Term Sheet.
The Plan, among other things, shall provide that PG&E shall distribute
transferable rights (the “Rights”) to existing holders of PG&E common stock (“Existing Shareholders”) to purchase shares of common stock (“New Common Stock”) issued by Reorganized PG&E on the Effective Date (as defined in the Plan Term Sheet) with cash, for aggregate maximum proceeds to Reorganized PG&E of $15 billion (the
“Rights Offering”).
In order to facilitate the Rights Offering, pursuant to this Backstop
Commitment Letter, and subject to the terms, conditions and limitations set forth herein and in consideration for the Backstop Commitment Payment, the Backstop Party is willing to purchase, on the Effective Date, an amount of New Common Stock
up to its Backstop Commitment Amount (as defined herein) at the Backstop Price (as defined herein).
1. Rights Offering.
a. PG&E shall make the Rights Offering pursuant to the Plan, subject to such terms and conditions as may be included in the documents governing the Rights Offering that
are acceptable to the Backstop Party in its sole discretion. The $15 billion aggregate size of the Rights Offering shall be reduced on a dollar-for-dollar basis by the sum of (i) the amount of proceeds in excess of $5 billion that PG&E
receives from PG&E’s issuance of debt in connection with the Plan; (ii) the aggregate liquidation preference of preferred stock (“Mandatory Convertible Preferred Stock”) that is distributed to holders of wildfire claims or subrogation claims, on the terms and conditions set forth on Exhibit A pursuant to the Plan; and (iii) the principal amount of any other debt that is issued by the Debtors to fund obligations to wildfire claimants, subrogation claimants, and/or the Debtors’ initial contribution
to the insurance fund created pursuant to Cal. Gov’t Code Sec. 3292(b)(3) pursuant to the Plan (the “Additional Capital
Sources”).
b. The Rights Offering shall be structured such that the Rights must be offered at a price above the applicable Rights Offering Price Threshold. “Rights Offering Price Threshold” means (i) 72.5% of the Baseline Share Price (as defined on Exhibit B) if the Debtors receive between $15 billion and $10 billion in proceeds from the exercise of Rights and Additional Capital Sources; (ii) 70.0% of the Baseline Share Price if the
Debtors receive less than $10 billion and more than or equal to $5 billion in proceeds from the exercise of Rights and Additional Capital Sources; and (iii) 67.5% of the Baseline Share Price if the Debtors receive less than $5 billion in
proceeds from the exercise of Rights and Additional Capital Sources.
CUSIP No. 69331C108
c. The consummation of the Rights Offering will occur pursuant to definitive written agreements consistent with the Plan Term Sheet and approved by Backstop Party, in the
sole discretion of the Backstop Party, and will be subject to, among other things, (x) the negotiation, execution and delivery of such definitive agreements for the Rights Offering and the Plan, including, without limitation, all Backstop
Commitment agreements, purchase agreements, investor rights agreements, registration rights agreements, revised certificates of incorporation and bylaws of Reorganized PG&E (which shall contain customary terms and conditions and customary
ownership limitations in order to preserve the tax attributes of the Debtors after the Effective Date) and other similar agreements and documentation required to be entered into on the Effective Date under the terms of the Plan (collectively,
the “Plan Documents”), in form and substance satisfactory to the Backstop Party, in its sole discretion, and
(y) receipt of any necessary or advisable governmental, contractual, regulatory or other requisite consents or approvals in connection with the Rights Offering and the other transactions contemplated by the Plan.
d. The Debtors shall give the Backstop Party, as soon as reasonably practicable, but in no event later than two (2) Business Days, after the entry of the Confirmation Order,
by overnight mail, email or by electronic facsimile transmission, (i) written notification setting forth (A) the total number of shares of New Common Stock to be offered to Existing Shareholders in the Rights Offering pursuant to the exercise
of Rights and the expected aggregate cash proceeds to be received by the Debtors therefor, (B) a calculation of the Backstop Price as of the targeted Effective Date, and (C) the targeted Effective Date and (ii) a subscription form to be completed by the Backstop Party, or other instructions, to facilitate the Backstop Party’s subscription for the New Common Stock.
2. Backstop.
a. Subject to the terms and conditions herein and the Plan Term Sheet (including without limitation the payment of fees to the Backstop Party described therein), the Backstop
Party, solely on behalf of itself hereby, commits to purchase on the Effective Date an amount of New Common Stock at the Backstop Price (the “Backstop Commitment”) up to the dollar amounts set forth on Exhibit B hereto (the “Backstop Commitment Amount”).
b. The Backstop Party will satisfy its Backstop Commitment by funding its Backstop Commitment obligations in accordance with the terms and subject to the conditions to be set
forth in the Plan Documents governing the Rights Offering.
c. The Debtors agree to pay the Backstop Party the Backstop Commitment Fee and any Backstop Funding Fee as set forth on Exhibit B. The provisions for the payment of the
Backstop Commitment Fee, Backstop Funding Fee, and the other provisions provided herein are an integral part of the transactions contemplated by this Backstop Commitment Letter and without these provisions the Backstop Party would not have
entered into this Backstop Commitment Letter, and the Backstop Commitment Fee and Backstop Funding Fee shall, pursuant to an order approving this Backstop Commitment Letter, constitute allowed administrative expenses of the Debtors’ estate
under sections 503(b) and 507 of the Bankruptcy Code.
3. Backstop Party Representations. The Backstop Party hereby represents and
warrants, solely as to itself, that (a) it has all limited partnership, corporate or other power and authority necessary to execute, deliver and perform this Backstop Commitment Letter, (b) the execution, delivery and performance of this
Backstop Commitment Letter by it has been duly and validly authorized and approved by all necessary limited partnership, corporate or other organizational action by it, (c) this Backstop Commitment Letter has been duly and validly executed
and delivered by it and, assuming due execution and delivery by the other parties hereto, constitutes a valid and legally binding obligation of it, enforceable against it in accordance with the terms of this Backstop Commitment Letter,
(d) the execution, delivery and performance by the Backstop Party of this Backstop Commitment Letter does not (i) violate the organizational documents of the Backstop Party or (ii) violate any applicable law or judgment, (e) as of the
Effective Date, its Backstop Commitment will be less than the maximum amount that it or any of its affiliates that may provide the Backstop Commitment is permitted to invest in any one portfolio investment pursuant to the terms of its
constituent documents or otherwise, and (f) it will have, in the aggregate, as of the Effective Date, available funds at least in the sum of its Backstop Commitment hereunder.
CUSIP No. 69331C108
4. Conditions to Backstop Party Commitment. The agreements and obligations of the
Backstop Party pursuant to this Backstop Commitment Letter, including its Backstop Commitment, are further expressly conditioned upon and subject to the satisfaction or written waiver by the Backstop Party, in its sole discretion, at or prior
to the Effective Date of each of the following conditions:
a. the Debtors shall have received valid and enforceable additional Backstop Commitments from Existing Shareholders on the same terms and conditions as set forth in this
Backstop Commitment Letter that in the aggregate result in total backstop commitments equal to the size of the Rights Offering less the total amount of Additional Capital Sources;
b. the Backstop Party shall have completed, and be satisfied with the results of, diligence regarding the Debtors rate base and capital structure;
c. the satisfaction of the other conditions set forth in the Plan Term Sheet and, other than the funding of the Rights Offering, the satisfaction of all of the other
conditions to the Effective Date provided for in the Plan and the Plan Documents;
d. all of the covenants and obligations that the Debtors are required to comply with or to perform pursuant to the Plan Documents at or prior to the Effective Date shall have
been complied with and performed in all material respects, including the payment by the Debtors of all fees contemplated therein;
e. the Plan Documents shall have been executed and delivered by each of the parties thereto in forms approved by the Backstop Party;
f. the Bankruptcy Court shall have entered the Confirmation Order, such Confirmation Order shall be a final order, and such Confirmation Order shall authorize and approve the
transactions contemplated herein and in the Plan Term Sheet and all other consideration and fees contemplated herein and in the Plan Term Sheet;
g. no result, occurrence, fact, change, event, effect, violation, inaccuracy, or circumstance (whether or not constituting a breach of a representation, warranty or covenant
set forth in the Plan or any Plan Document) that, individually or in the aggregate with any such other results, occurrences, facts, changes, events, effects, violations, inaccuracies, or circumstances, (i) would have or would reasonably be
expected to have a material adverse effect on the business, operations, assets, liabilities, capitalization, financial performance, condition (financial or otherwise) or results of operations, in each case, of the Debtors as a whole, or
(ii) would reasonably be expected to prevent or materially impair or delay the ability of the Debtors, the Backstop Party or the applicable parties thereto or referred to therein to consummate the transactions contemplated by this Backstop
Commitment Letter, the Plan Term Sheet, the Plan or the other Plan Documents or perform their obligations hereunder or thereunder (each a “Material Adverse Effect”) shall have occurred; provided, however, that the filing of the Chapter 11 Cases, and the fact that the Debtors are operating in bankruptcy and the effects reasonably expected to result therefrom, shall not constitute
a Material Adverse Effect;
h. the Debtors shall have each operated its business in the ordinary course of business and consistent with its historical practices, other than any deviations from
operations in the ordinary course of business pursuant to an order issued by the Bankruptcy Court; and
i. the Debtors shall have maintained and held in good standing all of their operating licenses, certificates and other regulatory authorizations and approvals necessary to
operate the Utility’s business with no pending revocations of any such license, certificate, approval or authorization or open proceedings contemplating such revocation.
CUSIP No. 69331C108
5. Termination. The Backstop Party may terminate this Backstop Commitment Letter,
solely as to itself, by written notice to the general counsel of the Debtors, on or after the occurrence of any of the following:
a. the Backstop Party has not approved, in its sole discretion, the Plan Term Sheet;
b. if, at any time after the execution of this Backstop Commitment Letter by the Debtors, the Debtors shall not have valid and enforceable Backstop Commitments from Existing
Shareholders on the same terms and conditions as set forth in this Backstop Commitment Letter that in the aggregate result in total backstop commitments equal to the size of the Rights Offering less the total amount of Additional Capital
Sources;
c. the Plan, on terms and conditions consistent with the Plan Term Sheet, and the Disclosure Statement shall not have been filed on or before the later of (i) August 31, 2019
or (ii) if the Debtors have executed this Backstop Commitment Letter prior to August 31, 2019, September 30, 2019;
d. the Plan or any Plan Document filed with the Bankruptcy Court at any time is inconsistent with the Plan Term Sheet or not approved by the Backstop Party;
e. the Confirmation Order, in form and substance reasonably acceptable to the Backstop Party, has not been entered by the Bankruptcy Court on or before June 30, 2020;
f. the Effective Date shall not have occurred on or before 60 days after entry of the Confirmation Order;
g. the failure of any condition set forth in Section 4 that has not been waived by the Backstop Party;
h. the occurrence of any material postpetition fires in the Debtors’ service area;
i. the occurrence of a Material Adverse Effect;
j. the failure of either of the Debtors to operate their business in the ordinary course of business and consistent with their historical practices;
k. there is in effect an order (whether permanent or preliminary) of a governmental authority of competent jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of any of the transactions contemplated by the Plan Term Sheet or the Plan, or any law, statute, rule, regulation or ordinance is adopted that makes consummation of the transactions contemplated by the Plan Term Sheet or the Plan
illegal or otherwise prohibited; or
l. the occurrence or discovery of any state of facts, change, event, development, circumstance or condition that causes any of the conditions precedent set forth in the Plan
Term Sheet, the Plan or the Plan Documents to not be capable of being satisfied.
Upon termination of this Backstop Commitment Letter by the Backstop Party (such terminating
Backstop Party, a “Terminating Backstop Party”) pursuant to any of Section 5(a) through (l), this Backstop Commitment Letter shall be void and of no further force or effect
solely with respect to such Terminating Backstop Party, such Terminating Backstop Party shall be released from its Backstop Commitments, undertakings and agreements under or related to this Backstop Commitment Letter, including its Backstop
Commitment, except as explicitly provided herein and there shall be no liability or obligation on the party of such Terminating Backstop Party hereunder, except as expressly provided herein.
This Backstop Commitment Letter shall automatically terminate in the event that the Debtors
have not returned a counter-signed copy of this Backstop Commitment Letter agreeing to its terms on or before August 31, 2019.
CUSIP No. 69331C108
6. Assignment. This Backstop Commitment Letter (a) is not assignable by the
Backstop Party, and any purported assignment shall be null and void ab initio; provided, however, Backstop Party may assign its Backstop Commitment, in whole or in
part, to (i) another Backstop Party, (ii) an affiliate of the Backstop Party or (iii) an investment fund or separately managed account the primary investment advisor or sub advisor to which is a Backstop Party or an affiliate thereof, to the
extent such assignee Backstop Party agrees in writing to assume all obligations hereunder of such Backstop Party in connection with such Backstop Commitment, and (b) is intended to be solely for the benefit of the parties hereto and is not
intended to confer any benefits upon, or create any rights in favor of, any person or entity other than the parties hereto. Notwithstanding the foregoing, a Backstop Party may assign all or any portion of its obligations hereunder to a
“qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933, as amended), without the consent of any party, provided,
however, that such assignee shall not own, on a pro forma basis, more than the amount of common stock of PG&E that would limit the
Debtors’ ability to utilize their net operating losses.
7. Entire Agreement. This Backstop Commitment Letter, including all exhibits and
schedules hereto, constitutes the entire understanding among the parties hereto with respect to the subject matter hereof and replaces and supersedes all prior agreements and understandings, both written and oral, between the parties hereto
with respect to the subject matter hereof and shall become effective and binding upon the mutual exchange of fully executed counterparts by each of the parties hereto.
8. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Backstop
Commitment Letter shall be governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to the principles of conflict of laws that would require the application of the law of any other
jurisdiction. By its execution and delivery of this Backstop Commitment Letter, each of the parties hereto irrevocably and unconditionally agrees for itself that any legal action, suit or proceeding against it with respect to any matter
under or arising out of or in connection with this Backstop Commitment Letter or for recognition or enforcement of any judgment rendered in any such action, suit or proceeding, may be brought in the Bankruptcy Court. By execution and
delivery of this Backstop Commitment Letter, each of the parties hereto irrevocably accepts and submits itself to the exclusive jurisdiction of the Bankruptcy Court with respect to any such action, suit or proceeding. EACH PARTY HERETO
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO ABOVE.
9. Amendment; Waiver; Counterparts. This Backstop Commitment Letter may not be
amended or waived except in writing signed by the Backstop Party hereto, and confirmed in writing by the Company. This Backstop Commitment Letter may be executed in any number of counterparts, each of which will be an original, and all of
which, when taken together, will constitute one agreement. Delivery of an executed counterpart of this Backstop Commitment Letter by e-mail or portable document format (PDF) will be effective as delivery of a manually executed counterpart of
this Backstop Commitment Letter.
10. Notices. All notices required or permitted to be given under this Backstop
Commitment Letter, unless otherwise stated herein, shall be given at the addresses specified below, or at such other address or addresses as a party may designate for itself in writing:
If to the Backstop Party, to the name and address located on the Backstop
Party’s signature page to this Backstop Commitment Letter.
If to the Debtors:
PG&E Corporation
77 Beale Street
P.O. Box 770000
San Francisco, California 94177
Attention: Mr. John Simon, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen Karotkin
CUSIP No. 69331C108
11. No Liability. Notwithstanding anything that may be expressed or implied in this
Backstop Commitment Letter, each party hereto acknowledges and agrees that no person other than the Backstop Party (and it permitted assigns) shall have any obligation hereunder (subject to the limitations provided herein) or in connection
with the transactions contemplated hereby and that (a) notwithstanding that any Backstop Party may be a partnership, limited partnership or limited liability company, no recourse (whether at law, in equity, in contract, in tort or otherwise)
hereunder or under any document or instrument delivered in connection herewith, or in respect of any oral representations made or alleged to be made in connection herewith or therewith, shall be had against any former, current or future
direct or indirect equity holder, controlling person, general or limited partner, shareholder, member, investment manager or adviser, manager, director, officer, employee, agent, affiliate, assignee, representative or financing source of any
of the foregoing) (any such person or entity, other than such Backstop Party, a “Related Party”) or any Related Party
of any such Related Party, including, without limitation, any liabilities arising under, or in connection with, the Plan Term Sheet, the Plan or this Backstop Commitment Letter and the transactions contemplated thereby and hereby, or in
respect of any oral representations made or alleged to be made in connection therewith or herewith), whether by the enforcement of any judgment or assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or
other applicable law and (b) no personal liability whatsoever will attach to, be imposed on or otherwise be incurred by any Related Party of the Backstop Party or any Related Party of any such Related Party under this Backstop Commitment
Letter or any document or instrument delivered in connection herewith or with the Plan Term Sheet or the Plan (or in respect of any oral representation made or alleged to be made in connection herewith or therewith) or for any action (whether
at law, in equity, in contract, in tort or otherwise) based on, in respect of, or by reason of such obligations hereunder or by their creation.
12. The Backstop Party shall not be required, pursuant to the terms of this Backstop Commitment Letter, to acquire or purchase any securities or indebtedness in connection
with the Rights Offering that, pursuant to the terms of a Backstop Commitment Letter or other agreement, are to be acquired or subscribed for by any other party, nor shall the Backstop Party be required, pursuant to the terms of this Backstop
Commitment Letter, to pay any money or other consideration, or exchange any claims whatsoever, which are owing from, or to be transferred from or by, any other party pursuant to the terms of another Backstop Commitment Letter or other
agreement. Nothing in this Backstop Commitment Letter shall be deemed to constitute a joint venture or partnership between any other person or entity nor constitute any party as the agent of any other person or entity for any purpose. For
the avoidance of doubt, no Backstop Party shall, nor shall any action taken by a Backstop Party hereunder, be deemed to be acting in concert or as any group with any other person or entity with respect to the Backstop Commitment nor shall the
Backstop Commitments hereunder create a presumption that the Backstop Party is in any way acting in concert or as a group with any other person or entity whether as a result of this commitment or otherwise.
13. Each party hereto confirms that it has made its own decision to execute this Backstop Commitment Letter based upon its own independent assessment of documents and
information available to it, as it has deemed appropriate.
14. Except as expressly provided in this Backstop Commitment Letter, (a) nothing herein is intended to, or does, in any manner waive, limit, impair or restrict the ability of
each party hereto to protect and preserve its rights, remedies and interests, including, without limitation, any claims against or interests in any of the Debtors or other parties, or its full participation in any bankruptcy proceeding, and
(b) the parties hereto each fully preserve any and all of their respective rights, remedies, claims and interests as of the date hereof and upon a termination of this Backstop Commitment Letter. Further, nothing in this Backstop Commitment
Letter shall be construed to prohibit any party hereto from appearing as a party-in-interest in any matter to be adjudicated in the Chapter 11 Cases, so long as such appearance and the positions advocated in connection therewith are
consistent with this Backstop Commitment Letter, the Plan Term Sheet and the Plan, and are not for the purpose of, and could not reasonably be expected to have the effect of, hindering, delaying or preventing the consummation of the
transactions contemplated by the Plan Term Sheet and the Plan.
CUSIP No. 69331C108
Sincerely,
Backstop Party:
| | ABRAMS CAPITAL PARTNERS I, L.P. | | |
| | By: | Abrams Capital Management, L.P., | |
| | its investment manager | | |
| | | ||
| | By: | Abrams Capital Management, LLC, | |
| | its general partner | | |
| | | ||
| | By: | /s/ David Abrams | |
| | Name: | David Abrams | |
| | Title: | Managing Member | |
| | | ||
| | Notice Information: Alison Bomberg 222 Berkeley Street, 21st Floor Boston, MA 02116abomberg@abramscapital.com | | |
| | |||
CUSIP No. 69331C108
Accepted and agreed this ____ day of ___________, 2019, by:
PG&E CORPORATION
By:
Name:
Title:
CUSIP No. 69331C108
EXECUTION VERSION
Exhibit A
Mandatory Preferred Stock Term Sheet
CUSIP No. 69331C108
Term Sheet for
5.00% Mandatory Convertible Preferred Stock
5.00% Mandatory Convertible Preferred Stock
| Issuer: | | PG&E Corporation (“PG&E”) |
| Title of Securities: | | 5.00% Mandatory Convertible Preferred Stock of PG&E (the “Mandatory Convertible Preferred Stock”) |
| Shares of Mandatory Convertible Preferred Stock Offered by PG&E: | | Up to [●] shares |
| Offering Price: Issue Date: | $1,000 per share of the Mandatory Convertible Preferred Stock The Effective Date of the Plan | |
| Liquidation Preference: | | $1,000 per share |
| Dividends: | | 5.00% of the Liquidation Preference of $1,000 per share of the Mandatory Convertible Preferred Stock per
year (equivalent to $50 per annum per share), when, as and if declared by PG&E’s board of directors or an authorized committee thereof, payable in cash or, by delivery of additional shares of Mandatory Convertible Preferred
Stock or any combination of cash and shares of Mandatory Convertible Preferred Stock, as determined by PG&E in its sole discretion |
| Floor Price: | | 95% of the Initial Price, subject to standard ant-dilution adjustments |
| Dividend Payment Dates: | | If declared, January 1, April 1, July 1 and October 1 of each year, commencing on (TBD) |
| Dividend Record Dates: | | The March 15, June 15, September 15 and December 15 immediately preceding the next dividend payment date |
| Redemption: | | The Mandatory Convertible Preferred Stock will not be redeemable |
| Initial Price: | | 80% of the Baseline Share Price (as defined in Exhibit B) |
| Threshold Appreciation Price: | | 110% of the Initial Price, subject to standard ant-dilution adjustments |
| Mandatory Conversion Date: | | 1/8th of the Mandatory Convertible Preferred Stock will convert into PG&E Common Stock 90,
180, 270, 360, 450, 540, 630, and 720 days from Issue Date |
| Conversion Rate: | | Upon conversion on the Mandatory Conversion Date, the conversion rate for each share of the Mandatory
Convertible Preferred Stock will be not more than [●] shares of Common Stock (the “Maximum Conversion Rate”)
and not less than [●] shares of Common Stock (the “Minimum Conversion Rate”), depending on the Applicable
Market Value of the Common Stock subject to standard anti-dilution adjustments. The following table illustrates the conversion rate per share of the Mandatory Convertible Preferred Stock: |
CUSIP No. 69331C108
| Applicable Market Value of the Common Stock | | Conversion rate (number of shares of Common Stock to be received upon conversion of each share of the Mandatory Convertible Preferred Stock) | ||||
| Greater than 110% of the Initial Price (which is the Threshold Appreciation Price) | | [●] shares (approximately equal to $1,000 divided by the Threshold Appreciation Price) | ||||
| Equal to or less than the Threshold Appreciation Price but greater than or equal to the Floor Price | | Between [●] and [●] shares, determined by dividing $1,000 by the applicable market value of the Common
Stock | ||||
| Less than 95% of the Initial Price (which is the Floor Price) | | [●] shares (approximately equal to $1,000 divided by the Floor Price) | ||||
| Applicable Market Value: Conversion at the Option of the Holder: | | The “Applicable Market Value” shall be the 10-trading day VWAP immediately preceding the applicable Mandatory Conversion Date At any time prior to final Mandatory Conversion Date, holders of the Mandatory Convertible Preferred Stock
have the option to elect to convert their shares of the Mandatory Convertible Preferred Stock in whole or in part (but in no event less than one share of the Mandatory Convertible Preferred Stock), into shares of Common Stock at the
Minimum Conversion Rate of shares of Common Stock per share of the Mandatory Convertible Preferred. This Minimum Conversion Rate is subject to certain anti-dilution adjustments | ||||
CUSIP No. 69331C108
Exhibit B
Backstop Terms
| Backstop Party | Backstop Commitment Amount |
| Abrams Capital Partners I, L.P. | $19,103,000.00 |
“Applicable
Utility Index Multiple” shall mean the average normalized 2021 estimated price-to-earnings ratio of the U.S. regulated utilities in the S&P 500 Utilities (Sector) Index (after excluding AES, EIX, EXC, NRG, PEG, and PPL) over the
20-day trading period before Effective Date per Capital IQ Consensus Estimates.
“Backstop
Commitment Fee” shall mean a commitment fee equal to 1.0% of the total Backstop Commitment Amount as of the date on which the Debtors execute this Backstop Commitment Letter that shall be paid in New Common Stock, which amount shall
be determined using the Backstop Price.
“Backstop
Funding Fee” shall mean a funding fee of 2.0% of the amount of the Backstop Commitment actually funded by the Backstop Party that shall be paid in New Common Stock, which amount shall be determined using the Backstop Price.
“Backstop
Price” will be calculated on a per share basis as 57.5% of the Baseline Share Price.
“Baseline
Share Price” shall mean the (a) Applicable Utility Index Multiple, multiplied by (b) PG&E 2021E Net Income, divided by (c) the fully diluted shares outstanding at the Effective Date, including the New Common Stock.
“PG&E
2021E Net Income” shall mean PG&E’s forecasted 2021 net income, excluding the impact of restructuring expenses, financing fees, changes in reserves for fire claims, and any other projected amounts that are not normally incurred
by a utility.
CUSIP No. 69331C108
Exhibit 99.3
EXECUTION VERSION
August 7, 2019
PG&E Corporation
77 Beale Street
P.O. Box 770000
San Francisco, California 94177Re: Chapter 11 Plan Backstop Commitment Letter
Ladies and Gentlemen:
Reference is hereby made to the chapter 11 bankruptcy cases, lead case
no. 19-30088 (the “Chapter 11 Cases”), currently pending before the United States Bankruptcy Court for the District of
Northern California (the “Bankruptcy Court”), in which PG&E Corporation (“PG&E” or the “Company”)
and Pacific Gas and Electric Company (the “Utility” and together with PG&E, the “Debtors”) are debtors in possession. Reference is further made to (i) a Chapter 11 plan of reorganization (the “Plan”) to be filed with the Bankruptcy Court to implement the terms and conditions of the reorganization of the Debtors contemplated by a plan term
sheet that is approved in writing by the undersigned Backstop Party in its sole discretion (the “Backstop Party”) that
contemplates that all subrogation claims and wildfire claims shall not exceed $16 billion in the aggregate (the “Plan Term
Sheet”) and (ii) a disclosure statement that will accompany the Plan (the “Disclosure Statement”).
Capitalized terms used in this backstop commitment letter (this “Backstop Commitment Letter”) but not otherwise defined
shall have the meanings ascribed to them in the Plan Term Sheet.
The Plan, among other things, shall provide that PG&E shall distribute
transferable rights (the “Rights”) to existing holders of PG&E common stock (“Existing Shareholders”) to purchase shares of common stock (“New Common Stock”) issued by Reorganized PG&E on the Effective Date (as defined in the Plan Term Sheet) with cash, for aggregate maximum proceeds to Reorganized PG&E of $15 billion (the
“Rights Offering”).
In order to facilitate the Rights Offering, pursuant to this Backstop
Commitment Letter, and subject to the terms, conditions and limitations set forth herein and in consideration for the Backstop Commitment Payment, the Backstop Party is willing to purchase, on the Effective Date, an amount of New Common Stock
up to its Backstop Commitment Amount (as defined herein) at the Backstop Price (as defined herein).
1. Rights Offering.
a. PG&E shall make the Rights Offering pursuant to the Plan, subject to such terms and conditions as may be included in the documents governing the Rights Offering that
are acceptable to the Backstop Party in its sole discretion. The $15 billion aggregate size of the Rights Offering shall be reduced on a dollar-for-dollar basis by the sum of (i) the amount of proceeds in excess of $5 billion that PG&E
receives from PG&E’s issuance of debt in connection with the Plan; (ii) the aggregate liquidation preference of preferred stock (“Mandatory Convertible Preferred Stock”) that is distributed to holders of wildfire claims or subrogation claims, on the terms and conditions set forth on Exhibit A pursuant to the Plan; and (iii) the principal amount of any other debt that is issued by the Debtors to fund obligations to wildfire claimants, subrogation claimants, and/or the Debtors’ initial contribution
to the insurance fund created pursuant to Cal. Gov’t Code Sec. 3292(b)(3) pursuant to the Plan (the “Additional Capital
Sources”).
b. The Rights Offering shall be structured such that the Rights must be offered at a price above the applicable Rights Offering Price Threshold. “Rights Offering Price Threshold” means (i) 72.5% of the Baseline Share Price (as defined on Exhibit B) if the Debtors receive between $15 billion and $10 billion in proceeds from the exercise of Rights and Additional Capital Sources; (ii) 70.0% of the Baseline Share Price if the
Debtors receive less than $10 billion and more than or equal to $5 billion in proceeds from the exercise of Rights and Additional Capital Sources; and (iii) 67.5% of the Baseline Share Price if the Debtors receive less than $5 billion in
proceeds from the exercise of Rights and Additional Capital Sources.
CUSIP No. 69331C108
c. The consummation of the Rights Offering will occur pursuant to definitive written agreements consistent with the Plan Term Sheet and approved by Backstop Party, in the
sole discretion of the Backstop Party, and will be subject to, among other things, (x) the negotiation, execution and delivery of such definitive agreements for the Rights Offering and the Plan, including, without limitation, all Backstop
Commitment agreements, purchase agreements, investor rights agreements, registration rights agreements, revised certificates of incorporation and bylaws of Reorganized PG&E (which shall contain customary terms and conditions and customary
ownership limitations in order to preserve the tax attributes of the Debtors after the Effective Date) and other similar agreements and documentation required to be entered into on the Effective Date under the terms of the Plan (collectively,
the “Plan Documents”), in form and substance satisfactory to the Backstop Party, in its sole discretion, and
(y) receipt of any necessary or advisable governmental, contractual, regulatory or other requisite consents or approvals in connection with the Rights Offering and the other transactions contemplated by the Plan.
d. The Debtors shall give the Backstop Party, as soon as reasonably practicable, but in no event later than two (2) Business Days, after the entry of the Confirmation Order,
by overnight mail, email or by electronic facsimile transmission, (i) written notification setting forth (A) the total number of shares of New Common Stock to be offered to Existing Shareholders in the Rights Offering pursuant to the exercise
of Rights and the expected aggregate cash proceeds to be received by the Debtors therefor, (B) a calculation of the Backstop Price as of the targeted Effective Date, and (C) the targeted Effective Date and (ii) a subscription form to be completed by the Backstop Party, or other instructions, to facilitate the Backstop Party’s subscription for the New Common Stock.
2. Backstop.
a. Subject to the terms and conditions herein and the Plan Term Sheet (including without limitation the payment of fees to the Backstop Party described therein), the Backstop
Party, solely on behalf of itself hereby, commits to purchase on the Effective Date an amount of New Common Stock at the Backstop Price (the “Backstop Commitment”) up to the dollar amounts set forth on Exhibit B hereto (the “Backstop Commitment Amount”).
b. The Backstop Party will satisfy its Backstop Commitment by funding its Backstop Commitment obligations in accordance with the terms and subject to the conditions to be set
forth in the Plan Documents governing the Rights Offering.
c. The Debtors agree to pay the Backstop Party the Backstop Commitment Fee and any Backstop Funding Fee as set forth on Exhibit B. The provisions for the payment of the
Backstop Commitment Fee, Backstop Funding Fee, and the other provisions provided herein are an integral part of the transactions contemplated by this Backstop Commitment Letter and without these provisions the Backstop Party would not have
entered into this Backstop Commitment Letter, and the Backstop Commitment Fee and Backstop Funding Fee shall, pursuant to an order approving this Backstop Commitment Letter, constitute allowed administrative expenses of the Debtors’ estate
under sections 503(b) and 507 of the Bankruptcy Code.
3. Backstop Party Representations. The Backstop Party hereby represents and
warrants, solely as to itself, that (a) it has all limited partnership, corporate or other power and authority necessary to execute, deliver and perform this Backstop Commitment Letter, (b) the execution, delivery and performance of this
Backstop Commitment Letter by it has been duly and validly authorized and approved by all necessary limited partnership, corporate or other organizational action by it, (c) this Backstop Commitment Letter has been duly and validly executed
and delivered by it and, assuming due execution and delivery by the other parties hereto, constitutes a valid and legally binding obligation of it, enforceable against it in accordance with the terms of this Backstop Commitment Letter,
(d) the execution, delivery and performance by the Backstop Party of this Backstop Commitment Letter does not (i) violate the organizational documents of the Backstop Party or (ii) violate any applicable law or judgment, (e) as of the
Effective Date, its Backstop Commitment will be less than the maximum amount that it or any of its affiliates that may provide the Backstop Commitment is permitted to invest in any one portfolio investment pursuant to the terms of its
constituent documents or otherwise, and (f) it will have, in the aggregate, as of the Effective Date, available funds at least in the sum of its Backstop Commitment hereunder.
CUSIP No. 69331C108
4. Conditions to Backstop Party Commitment. The agreements and obligations of the
Backstop Party pursuant to this Backstop Commitment Letter, including its Backstop Commitment, are further expressly conditioned upon and subject to the satisfaction or written waiver by the Backstop Party, in its sole discretion, at or prior
to the Effective Date of each of the following conditions:
a. the Debtors shall have received valid and enforceable additional Backstop Commitments from Existing Shareholders on the same terms and conditions as set forth in this
Backstop Commitment Letter that in the aggregate result in total backstop commitments equal to the size of the Rights Offering less the total amount of Additional Capital Sources;
b. the Backstop Party shall have completed, and be satisfied with the results of, diligence regarding the Debtors rate base and capital structure;
c. the satisfaction of the other conditions set forth in the Plan Term Sheet and, other than the funding of the Rights Offering, the satisfaction of all of the other
conditions to the Effective Date provided for in the Plan and the Plan Documents;
d. all of the covenants and obligations that the Debtors are required to comply with or to perform pursuant to the Plan Documents at or prior to the Effective Date shall have
been complied with and performed in all material respects, including the payment by the Debtors of all fees contemplated therein;
e. the Plan Documents shall have been executed and delivered by each of the parties thereto in forms approved by the Backstop Party;
f. the Bankruptcy Court shall have entered the Confirmation Order, such Confirmation Order shall be a final order, and such Confirmation Order shall authorize and approve the
transactions contemplated herein and in the Plan Term Sheet and all other consideration and fees contemplated herein and in the Plan Term Sheet;
g. no result, occurrence, fact, change, event, effect, violation, inaccuracy, or circumstance (whether or not constituting a breach of a representation, warranty or covenant
set forth in the Plan or any Plan Document) that, individually or in the aggregate with any such other results, occurrences, facts, changes, events, effects, violations, inaccuracies, or circumstances, (i) would have or would reasonably be
expected to have a material adverse effect on the business, operations, assets, liabilities, capitalization, financial performance, condition (financial or otherwise) or results of operations, in each case, of the Debtors as a whole, or
(ii) would reasonably be expected to prevent or materially impair or delay the ability of the Debtors, the Backstop Party or the applicable parties thereto or referred to therein to consummate the transactions contemplated by this Backstop
Commitment Letter, the Plan Term Sheet, the Plan or the other Plan Documents or perform their obligations hereunder or thereunder (each a “Material Adverse Effect”) shall have occurred; provided, however, that the filing of the Chapter 11 Cases, and the fact that the Debtors are operating in bankruptcy and the effects reasonably expected to result therefrom, shall not constitute
a Material Adverse Effect;
h. the Debtors shall have each operated its business in the ordinary course of business and consistent with its historical practices, other than any deviations from
operations in the ordinary course of business pursuant to an order issued by the Bankruptcy Court; and
i. the Debtors shall have maintained and held in good standing all of their operating licenses, certificates and other regulatory authorizations and approvals necessary to
operate the Utility’s business with no pending revocations of any such license, certificate, approval or authorization or open proceedings contemplating such revocation.
CUSIP No. 69331C108
5. Termination. The Backstop Party may terminate this Backstop Commitment Letter,
solely as to itself, by written notice to the general counsel of the Debtors, on or after the occurrence of any of the following:
a. the Backstop Party has not approved, in its sole discretion, the Plan Term Sheet;
b. if, at any time after the execution of this Backstop Commitment Letter by the Debtors, the Debtors shall not have valid and enforceable Backstop Commitments from Existing
Shareholders on the same terms and conditions as set forth in this Backstop Commitment Letter that in the aggregate result in total backstop commitments equal to the size of the Rights Offering less the total amount of Additional Capital
Sources;
c. the Plan, on terms and conditions consistent with the Plan Term Sheet, and the Disclosure Statement shall not have been filed on or before the later of (i) August 31, 2019
or (ii) if the Debtors have executed this Backstop Commitment Letter prior to August 31, 2019, September 30, 2019;
d. the Plan or any Plan Document filed with the Bankruptcy Court at any time is inconsistent with the Plan Term Sheet or not approved by the Backstop Party;
e. the Confirmation Order, in form and substance reasonably acceptable to the Backstop Party, has not been entered by the Bankruptcy Court on or before June 30, 2020;
f. the Effective Date shall not have occurred on or before 60 days after entry of the Confirmation Order;
g. the failure of any condition set forth in Section 4 that has not been waived by the Backstop Party;
h. the occurrence of any material postpetition fires in the Debtors’ service area;
i. the occurrence of a Material Adverse Effect;
j. the failure of either of the Debtors to operate their business in the ordinary course of business and consistent with their historical practices;
k. there is in effect an order (whether permanent or preliminary) of a governmental authority of competent jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of any of the transactions contemplated by the Plan Term Sheet or the Plan, or any law, statute, rule, regulation or ordinance is adopted that makes consummation of the transactions contemplated by the Plan Term Sheet or the Plan
illegal or otherwise prohibited; or
l. the occurrence or discovery of any state of facts, change, event, development, circumstance or condition that causes any of the conditions precedent set forth in the Plan
Term Sheet, the Plan or the Plan Documents to not be capable of being satisfied.
Upon termination of this Backstop Commitment Letter by the Backstop Party (such terminating
Backstop Party, a “Terminating Backstop Party”) pursuant to any of Section 5(a) through (l), this Backstop Commitment Letter shall be void and of no further force or effect
solely with respect to such Terminating Backstop Party, such Terminating Backstop Party shall be released from its Backstop Commitments, undertakings and agreements under or related to this Backstop Commitment Letter, including its Backstop
Commitment, except as explicitly provided herein and there shall be no liability or obligation on the party of such Terminating Backstop Party hereunder, except as expressly provided herein.
This Backstop Commitment Letter shall automatically terminate in the event that the Debtors
have not returned a counter-signed copy of this Backstop Commitment Letter agreeing to its terms on or before August 31, 2019.
CUSIP No. 69331C108
6. Assignment. This Backstop Commitment Letter (a) is not assignable by the
Backstop Party, and any purported assignment shall be null and void ab initio; provided, however, Backstop Party may assign its Backstop Commitment, in whole or in
part, to (i) another Backstop Party, (ii) an affiliate of the Backstop Party or (iii) an investment fund or separately managed account the primary investment advisor or sub advisor to which is a Backstop Party or an affiliate thereof, to the
extent such assignee Backstop Party agrees in writing to assume all obligations hereunder of such Backstop Party in connection with such Backstop Commitment, and (b) is intended to be solely for the benefit of the parties hereto and is not
intended to confer any benefits upon, or create any rights in favor of, any person or entity other than the parties hereto. Notwithstanding the foregoing, a Backstop Party may assign all or any portion of its obligations hereunder to a
“qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933, as amended), without the consent of any party, provided,
however, that such assignee shall not own, on a pro forma basis, more than the amount of common stock of PG&E that would limit the
Debtors’ ability to utilize their net operating losses.
7. Entire Agreement. This Backstop Commitment Letter, including all exhibits and
schedules hereto, constitutes the entire understanding among the parties hereto with respect to the subject matter hereof and replaces and supersedes all prior agreements and understandings, both written and oral, between the parties hereto
with respect to the subject matter hereof and shall become effective and binding upon the mutual exchange of fully executed counterparts by each of the parties hereto.
8. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Backstop
Commitment Letter shall be governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to the principles of conflict of laws that would require the application of the law of any other
jurisdiction. By its execution and delivery of this Backstop Commitment Letter, each of the parties hereto irrevocably and unconditionally agrees for itself that any legal action, suit or proceeding against it with respect to any matter
under or arising out of or in connection with this Backstop Commitment Letter or for recognition or enforcement of any judgment rendered in any such action, suit or proceeding, may be brought in the Bankruptcy Court. By execution and
delivery of this Backstop Commitment Letter, each of the parties hereto irrevocably accepts and submits itself to the exclusive jurisdiction of the Bankruptcy Court with respect to any such action, suit or proceeding. EACH PARTY HERETO
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO ABOVE.
9. Amendment; Waiver; Counterparts. This Backstop Commitment Letter may not be
amended or waived except in writing signed by the Backstop Party hereto, and confirmed in writing by the Company. This Backstop Commitment Letter may be executed in any number of counterparts, each of which will be an original, and all of
which, when taken together, will constitute one agreement. Delivery of an executed counterpart of this Backstop Commitment Letter by e-mail or portable document format (PDF) will be effective as delivery of a manually executed counterpart of
this Backstop Commitment Letter.
10. Notices. All notices required or permitted to be given under this Backstop
Commitment Letter, unless otherwise stated herein, shall be given at the addresses specified below, or at such other address or addresses as a party may designate for itself in writing:
If to the Backstop Party, to the name and address located on the Backstop
Party’s signature page to this Backstop Commitment Letter.
If to the Debtors:
PG&E Corporation
77 Beale Street
P.O. Box 770000
San Francisco, California 94177
Attention: Mr. John Simon, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen Karotkin
11. No Liability. Notwithstanding anything that may be expressed or implied in this
Backstop Commitment Letter, each party hereto acknowledges and agrees that no person other than the Backstop Party (and it permitted assigns) shall have any obligation hereunder (subject to the limitations provided herein) or in connection
with the transactions contemplated hereby and that (a) notwithstanding that any Backstop Party may be a partnership, limited partnership or limited liability company, no recourse (whether at law, in equity, in contract, in tort or otherwise)
hereunder or under any document or instrument delivered in connection herewith, or in respect of any oral representations made or alleged to be made in connection herewith or therewith, shall be had against any former, current or future
direct or indirect equity holder, controlling person, general or limited partner, shareholder, member, investment manager or adviser, manager, director, officer, employee, agent, affiliate, assignee, representative or financing source of any
of the foregoing) (any such person or entity, other than such Backstop Party, a “Related Party”) or any Related Party
of any such Related Party, including, without limitation, any liabilities arising under, or in connection with, the Plan Term Sheet, the Plan or this Backstop Commitment Letter and the transactions contemplated thereby and hereby, or in
respect of any oral representations made or alleged to be made in connection therewith or herewith), whether by the enforcement of any judgment or assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or
other applicable law and (b) no personal liability whatsoever will attach to, be imposed on or otherwise be incurred by any Related Party of the Backstop Party or any Related Party of any such Related Party under this Backstop Commitment
Letter or any document or instrument delivered in connection herewith or with the Plan Term Sheet or the Plan (or in respect of any oral representation made or alleged to be made in connection herewith or therewith) or for any action (whether
at law, in equity, in contract, in tort or otherwise) based on, in respect of, or by reason of such obligations hereunder or by their creation.
12. The Backstop Party shall not be required, pursuant to the terms of this Backstop Commitment Letter, to acquire or purchase any securities or indebtedness in connection
with the Rights Offering that, pursuant to the terms of a Backstop Commitment Letter or other agreement, are to be acquired or subscribed for by any other party, nor shall the Backstop Party be required, pursuant to the terms of this Backstop
Commitment Letter, to pay any money or other consideration, or exchange any claims whatsoever, which are owing from, or to be transferred from or by, any other party pursuant to the terms of another Backstop Commitment Letter or other
agreement. Nothing in this Backstop Commitment Letter shall be deemed to constitute a joint venture or partnership between any other person or entity nor constitute any party as the agent of any other person or entity for any purpose. For
the avoidance of doubt, no Backstop Party shall, nor shall any action taken by a Backstop Party hereunder, be deemed to be acting in concert or as any group with any other person or entity with respect to the Backstop Commitment nor shall the
Backstop Commitments hereunder create a presumption that the Backstop Party is in any way acting in concert or as a group with any other person or entity whether as a result of this commitment or otherwise.
13. Each party hereto confirms that it has made its own decision to execute this Backstop Commitment Letter based upon its own independent assessment of documents and
information available to it, as it has deemed appropriate.
14. Except as expressly provided in this Backstop Commitment Letter, (a) nothing herein is intended to, or does, in any manner waive, limit, impair or restrict the ability of
each party hereto to protect and preserve its rights, remedies and interests, including, without limitation, any claims against or interests in any of the Debtors or other parties, or its full participation in any bankruptcy proceeding, and
(b) the parties hereto each fully preserve any and all of their respective rights, remedies, claims and interests as of the date hereof and upon a termination of this Backstop Commitment Letter. Further, nothing in this Backstop Commitment
Letter shall be construed to prohibit any party hereto from appearing as a party-in-interest in any matter to be adjudicated in the Chapter 11 Cases, so long as such appearance and the positions advocated in connection therewith are
consistent with this Backstop Commitment Letter, the Plan Term Sheet and the Plan, and are not for the purpose of, and could not reasonably be expected to have the effect of, hindering, delaying or preventing the consummation of the
transactions contemplated by the Plan Term Sheet and the Plan.
CUSIP No. 69331C108
Sincerely,
Backstop Party:
| | ABRAMS CAPITAL PARTNERS II, L.P. | | |
| | By: | Abrams Capital Management, L.P., | |
| | its investment manager | | |
| | | ||
| | By: | Abrams Capital Management, LLC, | |
| | its general partner | | |
| | | ||
| | By: | /s/ David Abrams | |
| | Name: | David Abrams | |
| | Title: | Managing Member | |
| | | ||
| | Notice Information: Alison Bomberg 222 Berkeley Street, 21st Floor Boston, MA 02116abomberg@abramscapital.com | | |
| | |||
CUSIP No. 69331C108
Accepted and agreed this ____ day of ___________, 2019, by:
PG&E CORPORATION
By:
Name:
Title:
CUSIP No. 69331C108
EXECUTION VERSION
Exhibit A
Mandatory Preferred Stock Term Sheet
CUSIP No. 69331C108
Term Sheet for
5.00% Mandatory Convertible Preferred Stock
5.00% Mandatory Convertible Preferred Stock
| Issuer: | | PG&E Corporation (“PG&E”) |
| Title of Securities: | | 5.00% Mandatory Convertible Preferred Stock of PG&E (the “Mandatory Convertible Preferred Stock”) |
| Shares of Mandatory Convertible Preferred Stock Offered by PG&E: | | Up to [●] shares |
| Offering Price: Issue Date: | $1,000 per share of the Mandatory Convertible Preferred Stock The Effective Date of the Plan | |
| Liquidation Preference: | | $1,000 per share |
| Dividends: | | 5.00% of the Liquidation Preference of $1,000 per share of the Mandatory Convertible Preferred Stock per
year (equivalent to $50 per annum per share), when, as and if declared by PG&E’s board of directors or an authorized committee thereof, payable in cash or, by delivery of additional shares of Mandatory Convertible Preferred
Stock or any combination of cash and shares of Mandatory Convertible Preferred Stock, as determined by PG&E in its sole discretion |
| Floor Price: | | 95% of the Initial Price, subject to standard ant-dilution adjustments |
| Dividend Payment Dates: | | If declared, January 1, April 1, July 1 and October 1 of each year, commencing on (TBD) |
| Dividend Record Dates: | | The March 15, June 15, September 15 and December 15 immediately preceding the next dividend payment date |
| Redemption: | | The Mandatory Convertible Preferred Stock will not be redeemable |
| Initial Price: | | 80% of the Baseline Share Price (as defined in Exhibit B) |
| Threshold Appreciation Price: | | 110% of the Initial Price, subject to standard ant-dilution adjustments |
| Mandatory Conversion Date: | | 1/8th of the Mandatory Convertible Preferred Stock will convert into PG&E Common Stock 90,
180, 270, 360, 450, 540, 630, and 720 days from Issue Date |
| Conversion Rate: | | Upon conversion on the Mandatory Conversion Date, the conversion rate for each share of the Mandatory
Convertible Preferred Stock will be not more than [●] shares of Common Stock (the “Maximum Conversion Rate”)
and not less than [●] shares of Common Stock (the “Minimum Conversion Rate”), depending on the Applicable
Market Value of the Common Stock subject to standard anti-dilution adjustments. The following table illustrates the conversion rate per share of the Mandatory Convertible Preferred Stock: |
CUSIP No. 69331C108
| Applicable Market Value of the Common Stock | | Conversion rate (number of shares of Common Stock to be received upon conversion of each share of the Mandatory Convertible Preferred Stock) | |||
| Greater than 110% of the Initial Price (which is the Threshold Appreciation Price) | | [●] shares (approximately equal to $1,000 divided by the Threshold Appreciation Price) | |||
| Equal to or less than the Threshold Appreciation Price but greater than or equal to the Floor Price | | Between [●] and [●] shares, determined by dividing $1,000 by the applicable market value of the Common
Stock | |||
| Less than 95% of the Initial Price (which is the Floor Price) | | [●] shares (approximately equal to $1,000 divided by the Floor Price) | |||
| Applicable Market Value: Conversion at the Option of the Holder: | | The “Applicable Market Value” shall be the 10-trading day VWAP immediately preceding the applicable Mandatory Conversion Date At any time prior to final Mandatory Conversion Date, holders of the Mandatory Convertible Preferred Stock
have the option to elect to convert their shares of the Mandatory Convertible Preferred Stock in whole or in part (but in no event less than one share of the Mandatory Convertible Preferred Stock), into shares of Common Stock at the
Minimum Conversion Rate of shares of Common Stock per share of the Mandatory Convertible Preferred. This Minimum Conversion Rate is subject to certain anti-dilution adjustments | |||
CUSIP No. 69331C108
Exhibit B
Backstop Terms
| Backstop Party | Backstop Commitment Amount |
| Abrams Capital Partners II, L.P. | $287,355,000.00 |
“Applicable
Utility Index Multiple” shall mean the average normalized 2021 estimated price-to-earnings ratio of the U.S. regulated utilities in the S&P 500 Utilities (Sector) Index (after excluding AES, EIX, EXC, NRG, PEG, and PPL) over the
20-day trading period before Effective Date per Capital IQ Consensus Estimates.
“Backstop
Commitment Fee” shall mean a commitment fee equal to 1.0% of the total Backstop Commitment Amount as of the date on which the Debtors execute this Backstop Commitment Letter that shall be paid in New Common Stock, which amount shall
be determined using the Backstop Price.
“Backstop
Funding Fee” shall mean a funding fee of 2.0% of the amount of the Backstop Commitment actually funded by the Backstop Party that shall be paid in New Common Stock, which amount shall be determined using the Backstop Price.
“Backstop
Price” will be calculated on a per share basis as 57.5% of the Baseline Share Price.
“Baseline
Share Price” shall mean the (a) Applicable Utility Index Multiple, multiplied by (b) PG&E 2021E Net Income, divided by (c) the fully diluted shares outstanding at the Effective Date, including the New Common Stock.
“PG&E
2021E Net Income” shall mean PG&E’s forecasted 2021 net income, excluding the impact of restructuring expenses, financing fees, changes in reserves for fire claims, and any other projected amounts that are not normally incurred
by a utility.
CUSIP No. 69331C108
Exhibit 99.4
EXECUTION VERSION
August 7, 2019
PG&E Corporation
77 Beale Street
P.O. Box 770000
San Francisco, California 94177
Re: Chapter 11 Plan Backstop Commitment Letter
Ladies and Gentlemen:
Reference is hereby made to the chapter 11 bankruptcy cases, lead case
no. 19-30088 (the “Chapter 11 Cases”), currently pending before the United States Bankruptcy Court for the District of
Northern California (the “Bankruptcy Court”), in which PG&E Corporation (“PG&E” or the “Company”) and Pacific
Gas and Electric Company (the “Utility” and together with PG&E, the “Debtors”) are debtors in possession. Reference is further made to (i) a Chapter 11 plan of reorganization (the “Plan”) to be filed with the Bankruptcy Court to implement the terms and conditions of the reorganization of the Debtors contemplated by a plan term sheet that is
approved in writing by the undersigned Backstop Party in its sole discretion (the “Backstop Party”) that contemplates
that all subrogation claims and wildfire claims shall not exceed $16 billion in the aggregate (the “Plan Term Sheet”) and
(ii) a disclosure statement that will accompany the Plan (the “Disclosure Statement”). Capitalized terms used in this
backstop commitment letter (this “Backstop Commitment Letter”) but not otherwise defined shall have the meanings ascribed
to them in the Plan Term Sheet.
The Plan, among other things, shall provide that PG&E shall distribute
transferable rights (the “Rights”) to existing holders of PG&E common stock (“Existing Shareholders”) to purchase shares of common stock (“New Common Stock”) issued by Reorganized PG&E on the Effective Date (as defined in the Plan Term Sheet) with cash, for aggregate maximum proceeds to Reorganized PG&E of $15 billion (the “Rights Offering”).
In order to facilitate the Rights Offering, pursuant to this Backstop
Commitment Letter, and subject to the terms, conditions and limitations set forth herein and in consideration for the Backstop Commitment Payment, the Backstop Party is willing to purchase, on the Effective Date, an amount of New Common Stock
up to its Backstop Commitment Amount (as defined herein) at the Backstop Price (as defined herein).
1. Rights Offering.
a. PG&E shall make the Rights Offering pursuant to the Plan, subject to such terms and conditions as may be included in the documents governing the Rights Offering that are
acceptable to the Backstop Party in its sole discretion. The $15 billion aggregate size of the Rights Offering shall be reduced on a dollar-for-dollar basis by the sum of (i) the amount of proceeds in excess of $5 billion that PG&E
receives from PG&E’s issuance of debt in connection with the Plan; (ii) the aggregate liquidation preference of preferred stock (“Mandatory Convertible Preferred Stock”) that is distributed to holders of wildfire claims or subrogation claims, on the terms and conditions set forth on Exhibit A pursuant to the Plan; and (iii) the principal amount of any other debt that is issued by the Debtors to fund obligations to wildfire claimants, subrogation claimants, and/or the Debtors’ initial contribution to
the insurance fund created pursuant to Cal. Gov’t Code Sec. 3292(b)(3) pursuant to the Plan (the “Additional Capital Sources”).
b. The Rights Offering shall be structured such that the Rights must be offered at a price above the applicable Rights Offering Price Threshold. “Rights Offering Price Threshold” means (i) 72.5% of the Baseline Share Price (as defined on Exhibit B) if the Debtors receive between $15 billion and $10 billion in proceeds from the exercise of Rights and Additional Capital Sources; (ii) 70.0% of the Baseline Share Price if the Debtors receive
less than $10 billion and more than or equal to $5 billion in proceeds from the exercise of Rights and Additional Capital Sources; and (iii) 67.5% of the Baseline Share Price if the Debtors receive less than $5 billion in proceeds from the
exercise of Rights and Additional Capital Sources.
CUSIP No. 69331C108
c. The consummation of the Rights Offering will occur pursuant to definitive written agreements consistent with the Plan Term Sheet and approved by Backstop Party, in the sole
discretion of the Backstop Party, and will be subject to, among other things, (x) the negotiation, execution and delivery of such definitive agreements for the Rights Offering and the Plan, including, without limitation, all Backstop Commitment
agreements, purchase agreements, investor rights agreements, registration rights agreements, revised certificates of incorporation and bylaws of Reorganized PG&E (which shall contain customary terms and conditions and customary ownership
limitations in order to preserve the tax attributes of the Debtors after the Effective Date) and other similar agreements and documentation required to be entered into on the Effective Date under the terms of the Plan (collectively, the “Plan Documents”), in form and substance satisfactory to the Backstop Party, in its sole discretion, and (y) receipt of any
necessary or advisable governmental, contractual, regulatory or other requisite consents or approvals in connection with the Rights Offering and the other transactions contemplated by the Plan.
d. The Debtors shall give the Backstop Party, as soon as reasonably practicable, but in no event later than two (2) Business Days, after the entry of the Confirmation Order, by
overnight mail, email or by electronic facsimile transmission, (i) written notification setting forth (A) the total number of shares of New Common Stock to be offered to Existing Shareholders in the Rights Offering pursuant to the exercise of
Rights and the expected aggregate cash proceeds to be received by the Debtors therefor, (B) a calculation of the Backstop Price as of the targeted Effective Date, and (C) the targeted Effective Date and (ii) a subscription form to be completed by the Backstop Party, or other instructions, to facilitate the Backstop Party’s subscription for the New Common Stock.
2. Backstop.
a. Subject to the terms and conditions herein and the Plan Term Sheet (including without limitation the payment of fees to the Backstop Party described therein), the Backstop
Party, solely on behalf of itself hereby, commits to purchase on the Effective Date an amount of New Common Stock at the Backstop Price (the “Backstop Commitment”) up to the dollar amounts set forth on Exhibit B hereto (the “Backstop Commitment Amount”).
b. The Backstop Party will satisfy its Backstop Commitment by funding its Backstop Commitment obligations in accordance with the terms and subject to the conditions to be set
forth in the Plan Documents governing the Rights Offering.
c. The Debtors agree to pay the Backstop Party the Backstop Commitment Fee and any Backstop Funding Fee as set forth on Exhibit B. The provisions for the payment of the
Backstop Commitment Fee, Backstop Funding Fee, and the other provisions provided herein are an integral part of the transactions contemplated by this Backstop Commitment Letter and without these provisions the Backstop Party would not have
entered into this Backstop Commitment Letter, and the Backstop Commitment Fee and Backstop Funding Fee shall, pursuant to an order approving this Backstop Commitment Letter, constitute allowed administrative expenses of the Debtors’ estate
under sections 503(b) and 507 of the Bankruptcy Code.
3. Backstop Party Representations. The Backstop Party hereby represents and
warrants, solely as to itself, that (a) it has all limited partnership, corporate or other power and authority necessary to execute, deliver and perform this Backstop Commitment Letter, (b) the execution, delivery and performance of this
Backstop Commitment Letter by it has been duly and validly authorized and approved by all necessary limited partnership, corporate or other organizational action by it, (c) this Backstop Commitment Letter has been duly and validly executed and
delivered by it and, assuming due execution and delivery by the other parties hereto, constitutes a valid and legally binding obligation of it, enforceable against it in accordance with the terms of this Backstop Commitment Letter, (d) the
execution, delivery and performance by the Backstop Party of this Backstop Commitment Letter does not (i) violate the organizational documents of the Backstop Party or (ii) violate any applicable law or judgment, (e) as of the Effective Date,
its Backstop Commitment will be less than the maximum amount that it or any of its affiliates that may provide the Backstop Commitment is permitted to invest in any one portfolio investment pursuant to the terms of its constituent documents or
otherwise, and (f) it will have, in the aggregate, as of the Effective Date, available funds at least in the sum of its Backstop Commitment hereunder.
CUSIP No. 69331C108
4. Conditions to Backstop Party Commitment. The agreements and obligations of the
Backstop Party pursuant to this Backstop Commitment Letter, including its Backstop Commitment, are further expressly conditioned upon and subject to the satisfaction or written waiver by the Backstop Party, in its sole discretion, at or prior
to the Effective Date of each of the following conditions:
a. the Debtors shall have received valid and enforceable additional Backstop Commitments from Existing Shareholders on the same terms and conditions as set forth in this
Backstop Commitment Letter that in the aggregate result in total backstop commitments equal to the size of the Rights Offering less the total amount of Additional Capital Sources;
b. the Backstop Party shall have completed, and be satisfied with the results of, diligence regarding the Debtors rate base and capital structure;
c. the satisfaction of the other conditions set forth in the Plan Term Sheet and, other than the funding of the Rights Offering, the satisfaction of all of the other conditions
to the Effective Date provided for in the Plan and the Plan Documents;
d. all of the covenants and obligations that the Debtors are required to comply with or to perform pursuant to the Plan Documents at or prior to the Effective Date shall have
been complied with and performed in all material respects, including the payment by the Debtors of all fees contemplated therein;
e. the Plan Documents shall have been executed and delivered by each of the parties thereto in forms approved by the Backstop Party;
f. the Bankruptcy Court shall have entered the Confirmation Order, such Confirmation Order shall be a final order, and such Confirmation Order shall authorize and approve the
transactions contemplated herein and in the Plan Term Sheet and all other consideration and fees contemplated herein and in the Plan Term Sheet;
g. no result, occurrence, fact, change, event, effect, violation, inaccuracy, or circumstance (whether or not constituting a breach of a representation, warranty or covenant
set forth in the Plan or any Plan Document) that, individually or in the aggregate with any such other results, occurrences, facts, changes, events, effects, violations, inaccuracies, or circumstances, (i) would have or would reasonably be
expected to have a material adverse effect on the business, operations, assets, liabilities, capitalization, financial performance, condition (financial or otherwise) or results of operations, in each case, of the Debtors as a whole, or
(ii) would reasonably be expected to prevent or materially impair or delay the ability of the Debtors, the Backstop Party or the applicable parties thereto or referred to therein to consummate the transactions contemplated by this Backstop
Commitment Letter, the Plan Term Sheet, the Plan or the other Plan Documents or perform their obligations hereunder or thereunder (each a “Material Adverse Effect”) shall have occurred; provided, however, that the filing of the Chapter 11 Cases, and the fact that the Debtors are operating in bankruptcy and the effects reasonably expected to result therefrom, shall not constitute a
Material Adverse Effect;
h. the Debtors shall have each operated its business in the ordinary course of business and consistent with its historical practices, other than any deviations from operations
in the ordinary course of business pursuant to an order issued by the Bankruptcy Court; and
i. the Debtors shall have maintained and held in good standing all of their operating licenses, certificates and other regulatory authorizations and approvals necessary to
operate the Utility’s business with no pending revocations of any such license, certificate, approval or authorization or open proceedings contemplating such revocation.
CUSIP No. 69331C108
5. Termination. The Backstop Party may terminate this Backstop Commitment Letter,
solely as to itself, by written notice to the general counsel of the Debtors, on or after the occurrence of any of the following:
a. the Backstop Party has not approved, in its sole discretion, the Plan Term Sheet;
b. if, at any time after the execution of this Backstop Commitment Letter by the Debtors, the Debtors shall not have valid and enforceable Backstop Commitments from Existing
Shareholders on the same terms and conditions as set forth in this Backstop Commitment Letter that in the aggregate result in total backstop commitments equal to the size of the Rights Offering less the total amount of Additional Capital
Sources;
c. the Plan, on terms and conditions consistent with the Plan Term Sheet, and the Disclosure Statement shall not have been filed on or before the later of (i) August 31, 2019
or (ii) if the Debtors have executed this Backstop Commitment Letter prior to August 31, 2019, September 30, 2019;
d. the Plan or any Plan Document filed with the Bankruptcy Court at any time is inconsistent with the Plan Term Sheet or not approved by the Backstop Party;
e. the Confirmation Order, in form and substance reasonably acceptable to the Backstop Party, has not been entered by the Bankruptcy Court on or before June 30, 2020;
f. the Effective Date shall not have occurred on or before 60 days after entry of the Confirmation Order;
g. the failure of any condition set forth in Section 4 that has not been waived by the Backstop Party;
h. the occurrence of any material postpetition fires in the Debtors’ service area;
i. the occurrence of a Material Adverse Effect;
j. the failure of either of the Debtors to operate their business in the ordinary course of business and consistent with their historical practices;
k. there is in effect an order (whether permanent or preliminary) of a governmental authority of competent jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of any of the transactions contemplated by the Plan Term Sheet or the Plan, or any law, statute, rule, regulation or ordinance is adopted that makes consummation of the transactions contemplated by the Plan Term Sheet or the Plan
illegal or otherwise prohibited; or
l. the occurrence or discovery of any state of facts, change, event, development, circumstance or condition that causes any of the conditions precedent set forth in the Plan
Term Sheet, the Plan or the Plan Documents to not be capable of being satisfied.
Upon termination of this Backstop Commitment Letter by the Backstop Party (such terminating
Backstop Party, a “Terminating Backstop Party”) pursuant to any of Section 5(a) through (l), this Backstop Commitment Letter shall be void and of no further force or effect solely
with respect to such Terminating Backstop Party, such Terminating Backstop Party shall be released from its Backstop Commitments, undertakings and agreements under or related to this Backstop Commitment Letter, including its Backstop
Commitment, except as explicitly provided herein and there shall be no liability or obligation on the party of such Terminating Backstop Party hereunder, except as expressly provided herein.
This Backstop Commitment Letter shall automatically terminate in the event that the Debtors
have not returned a counter-signed copy of this Backstop Commitment Letter agreeing to its terms on or before August 31, 2019.
CUSIP No. 69331C108
6. Assignment. This Backstop Commitment Letter (a) is not assignable by the Backstop
Party, and any purported assignment shall be null and void ab initio; provided, however, Backstop Party may assign its Backstop Commitment, in whole or in part, to (i)
another Backstop Party, (ii) an affiliate of the Backstop Party or (iii) an investment fund or separately managed account the primary investment advisor or sub advisor to which is a Backstop Party or an affiliate thereof, to the extent such
assignee Backstop Party agrees in writing to assume all obligations hereunder of such Backstop Party in connection with such Backstop Commitment, and (b) is intended to be solely for the benefit of the parties hereto and is not intended to
confer any benefits upon, or create any rights in favor of, any person or entity other than the parties hereto. Notwithstanding the foregoing, a Backstop Party may assign all or any portion of its obligations hereunder to a “qualified
institutional buyer” (as defined in Rule 144A under the Securities Act of 1933, as amended), without the consent of any party, provided, however, that such assignee shall not own, on a pro forma basis, more than the amount of common stock of PG&E that would limit the Debtors’
ability to utilize their net operating losses.
7. Entire Agreement. This Backstop Commitment Letter, including all exhibits and
schedules hereto, constitutes the entire understanding among the parties hereto with respect to the subject matter hereof and replaces and supersedes all prior agreements and understandings, both written and oral, between the parties hereto
with respect to the subject matter hereof and shall become effective and binding upon the mutual exchange of fully executed counterparts by each of the parties hereto.
8. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Backstop
Commitment Letter shall be governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to the principles of conflict of laws that would require the application of the law of any other
jurisdiction. By its execution and delivery of this Backstop Commitment Letter, each of the parties hereto irrevocably and unconditionally agrees for itself that any legal action, suit or proceeding against it with respect to any matter under
or arising out of or in connection with this Backstop Commitment Letter or for recognition or enforcement of any judgment rendered in any such action, suit or proceeding, may be brought in the Bankruptcy Court. By execution and delivery of
this Backstop Commitment Letter, each of the parties hereto irrevocably accepts and submits itself to the exclusive jurisdiction of the Bankruptcy Court with respect to any such action, suit or proceeding. EACH PARTY HERETO UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO ABOVE.
9. Amendment; Waiver; Counterparts. This Backstop Commitment Letter may not be
amended or waived except in writing signed by the Backstop Party hereto, and confirmed in writing by the Company. This Backstop Commitment Letter may be executed in any number of counterparts, each of which will be an original, and all of
which, when taken together, will constitute one agreement. Delivery of an executed counterpart of this Backstop Commitment Letter by e-mail or portable document format (PDF) will be effective as delivery of a manually executed counterpart of
this Backstop Commitment Letter.
10. Notices. All notices required or permitted to be given under this Backstop
Commitment Letter, unless otherwise stated herein, shall be given at the addresses specified below, or at such other address or addresses as a party may designate for itself in writing:
If to the Backstop Party, to the name and address located on the Backstop
Party’s signature page to this Backstop Commitment Letter.
If to the Debtors:
PG&E Corporation
77 Beale Street
P.O. Box 770000
San Francisco, California 94177
Attention: Mr. John Simon, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen Karotkin
CUSIP No. 69331C108
11. No Liability. Notwithstanding anything that may be expressed or implied in this
Backstop Commitment Letter, each party hereto acknowledges and agrees that no person other than the Backstop Party (and it permitted assigns) shall have any obligation hereunder (subject to the limitations provided herein) or in connection with
the transactions contemplated hereby and that (a) notwithstanding that any Backstop Party may be a partnership, limited partnership or limited liability company, no recourse (whether at law, in equity, in contract, in tort or otherwise)
hereunder or under any document or instrument delivered in connection herewith, or in respect of any oral representations made or alleged to be made in connection herewith or therewith, shall be had against any former, current or future direct
or indirect equity holder, controlling person, general or limited partner, shareholder, member, investment manager or adviser, manager, director, officer, employee, agent, affiliate, assignee, representative or financing source of any of the
foregoing) (any such person or entity, other than such Backstop Party, a “Related Party”) or any Related Party of any
such Related Party, including, without limitation, any liabilities arising under, or in connection with, the Plan Term Sheet, the Plan or this Backstop Commitment Letter and the transactions contemplated thereby and hereby, or in respect of any
oral representations made or alleged to be made in connection therewith or herewith), whether by the enforcement of any judgment or assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable
law and (b) no personal liability whatsoever will attach to, be imposed on or otherwise be incurred by any Related Party of the Backstop Party or any Related Party of any such Related Party under this Backstop Commitment Letter or any document
or instrument delivered in connection herewith or with the Plan Term Sheet or the Plan (or in respect of any oral representation made or alleged to be made in connection herewith or therewith) or for any action (whether at law, in equity, in
contract, in tort or otherwise) based on, in respect of, or by reason of such obligations hereunder or by their creation.
12. The Backstop Party shall not be required, pursuant to the terms of this Backstop Commitment Letter, to acquire or purchase any securities or indebtedness in connection with
the Rights Offering that, pursuant to the terms of a Backstop Commitment Letter or other agreement, are to be acquired or subscribed for by any other party, nor shall the Backstop Party be required, pursuant to the terms of this Backstop
Commitment Letter, to pay any money or other consideration, or exchange any claims whatsoever, which are owing from, or to be transferred from or by, any other party pursuant to the terms of another Backstop Commitment Letter or other
agreement. Nothing in this Backstop Commitment Letter shall be deemed to constitute a joint venture or partnership between any other person or entity nor constitute any party as the agent of any other person or entity for any purpose. For the
avoidance of doubt, no Backstop Party shall, nor shall any action taken by a Backstop Party hereunder, be deemed to be acting in concert or as any group with any other person or entity with respect to the Backstop Commitment nor shall the
Backstop Commitments hereunder create a presumption that the Backstop Party is in any way acting in concert or as a group with any other person or entity whether as a result of this commitment or otherwise.
13. Each party hereto confirms that it has made its own decision to execute this Backstop Commitment Letter based upon its own independent assessment of documents and
information available to it, as it has deemed appropriate.
14. Except as expressly provided in this Backstop Commitment Letter, (a) nothing herein is intended to, or does, in any manner waive, limit, impair or restrict the ability of
each party hereto to protect and preserve its rights, remedies and interests, including, without limitation, any claims against or interests in any of the Debtors or other parties, or its full participation in any bankruptcy proceeding, and
(b) the parties hereto each fully preserve any and all of their respective rights, remedies, claims and interests as of the date hereof and upon a termination of this Backstop Commitment Letter. Further, nothing in this Backstop Commitment
Letter shall be construed to prohibit any party hereto from appearing as a party-in-interest in any matter to be adjudicated in the Chapter 11 Cases, so long as such appearance and the positions advocated in connection therewith are consistent
with this Backstop Commitment Letter, the Plan Term Sheet and the Plan, and are not for the purpose of, and could not reasonably be expected to have the effect of, hindering, delaying or preventing the consummation of the transactions
contemplated by the Plan Term Sheet and the Plan.
CUSIP No. 69331C108
Sincerely,
Backstop Party:
| | WHITECREST PARTNERS, LP | | |
| | By: | Abrams Capital Management, L.P., | |
| | its investment manager | | |
| | | ||
| | By: | Abrams Capital Management, LLC, | |
| | its general partner | | |
| | | ||
| | By: | /s/ David Abrams | |
| | Name: | David Abrams | |
| | Title: | Managing Member | |
| | | ||
| | Notice Information: Alison Bomberg 222 Berkeley Street, 21st Floor Boston, MA 02116abomberg@abramscapital.com | | |
| | |||
CUSIP No. 69331C108
Accepted and agreed this ____ day of ___________, 2019, by:
PG&E CORPORATION
By:
Name:
Title:
CUSIP No. 69331C108
EXECUTION VERSION
Exhibit A
Mandatory Preferred Stock Term Sheet
CUSIP No. 69331C108
Term Sheet for
5.00% Mandatory Convertible Preferred Stock
5.00% Mandatory Convertible Preferred Stock
| Issuer: | | PG&E Corporation (“PG&E”) |
| Title of Securities: | | 5.00% Mandatory Convertible Preferred Stock of PG&E (the “Mandatory Convertible Preferred Stock”) |
| Shares of Mandatory Convertible Preferred Stock Offered by PG&E: | | Up to [●] shares |
| Offering Price: Issue Date: | $1,000 per share of the Mandatory Convertible Preferred Stock The Effective Date of the Plan | |
| Liquidation Preference: | | $1,000 per share |
| Dividends: | | 5.00% of the Liquidation Preference of $1,000 per share of the Mandatory Convertible Preferred Stock per year
(equivalent to $50 per annum per share), when, as and if declared by PG&E’s board of directors or an authorized committee thereof, payable in cash or, by delivery of additional shares of Mandatory Convertible Preferred Stock or
any combination of cash and shares of Mandatory Convertible Preferred Stock, as determined by PG&E in its sole discretion |
| Floor Price: | | 95% of the Initial Price, subject to standard ant-dilution adjustments |
| Dividend Payment Dates: | | If declared, January 1, April 1, July 1 and October 1 of each year, commencing on (TBD) |
| Dividend Record Dates: | | The March 15, June 15, September 15 and December 15 immediately preceding the next dividend payment date |
| Redemption: | | The Mandatory Convertible Preferred Stock will not be redeemable |
| Initial Price: | | 80% of the Baseline Share Price (as defined in Exhibit B) |
| Threshold Appreciation Price: | | 110% of the Initial Price, subject to standard ant-dilution adjustments |
| Mandatory Conversion Date: | | 1/8th of the Mandatory Convertible Preferred Stock will convert into PG&E Common Stock 90,
180, 270, 360, 450, 540, 630, and 720 days from Issue Date |
| Conversion Rate: | | Upon conversion on the Mandatory Conversion Date, the conversion rate for each share of the Mandatory
Convertible Preferred Stock will be not more than [●] shares of Common Stock (the “Maximum Conversion Rate”)
and not less than [●] shares of Common Stock (the “Minimum Conversion Rate”), depending on the Applicable
Market Value of the Common Stock subject to standard anti-dilution adjustments. The following table illustrates the conversion rate per share of the Mandatory Convertible Preferred Stock: |
CUSIP No. 69331C108
| Applicable Market Value of the Common Stock | | Conversion rate (number of shares of Common Stock to be received upon conversion of each share of the Mandatory Convertible Preferred Stock) | |||
| Greater than 110% of the Initial Price (which is the Threshold Appreciation Price) | | [●] shares (approximately equal to $1,000 divided by the Threshold Appreciation Price) | |||
| Equal to or less than the Threshold Appreciation Price but greater than or equal to the Floor Price | | Between [●] and [●] shares, determined by dividing $1,000 by the applicable market value of the Common Stock | |||
| Less than 95% of the Initial Price (which is the Floor Price) | | [●] shares (approximately equal to $1,000 divided by the Floor Price) | |||
| Applicable Market Value: Conversion at the Option of the Holder: | | The “Applicable Market Value” shall be the 10-trading day VWAP immediately preceding the applicable Mandatory Conversion Date At any time prior to final Mandatory Conversion Date, holders of the Mandatory Convertible Preferred Stock
have the option to elect to convert their shares of the Mandatory Convertible Preferred Stock in whole or in part (but in no event less than one share of the Mandatory Convertible Preferred Stock), into shares of Common Stock at the
Minimum Conversion Rate of shares of Common Stock per share of the Mandatory Convertible Preferred. This Minimum Conversion Rate is subject to certain anti-dilution adjustments | |||
CUSIP No. 69331C108
Exhibit B
Backstop Terms
| Backstop Party | Backstop Commitment Amount |
| Whitecrest Partners, LP | $33,740,000.00 |
“Applicable
Utility Index Multiple” shall mean the average normalized 2021 estimated price-to-earnings ratio of the U.S. regulated utilities in the S&P 500 Utilities (Sector) Index (after excluding AES, EIX, EXC, NRG, PEG, and PPL) over the
20-day trading period before Effective Date per Capital IQ Consensus Estimates.
“Backstop
Commitment Fee” shall mean a commitment fee equal to 1.0% of the total Backstop Commitment Amount as of the date on which the Debtors execute this Backstop Commitment Letter that shall be paid in New Common Stock, which amount shall be
determined using the Backstop Price.
“Backstop
Funding Fee” shall mean a funding fee of 2.0% of the amount of the Backstop Commitment actually funded by the Backstop Party that shall be paid in New Common Stock, which amount shall be determined using the Backstop Price.
“Backstop
Price” will be calculated on a per share basis as 57.5% of the Baseline Share Price.
“Baseline
Share Price” shall mean the (a) Applicable Utility Index Multiple, multiplied by (b) PG&E 2021E Net Income, divided by (c) the fully diluted shares outstanding at the Effective Date, including the New Common Stock.
“PG&E
2021E Net Income” shall mean PG&E’s forecasted 2021 net income, excluding the impact of restructuring expenses, financing fees, changes in reserves for fire claims, and any other projected amounts that are not normally incurred by
a utility.
CUSIP No. 69331C108
Exhibit 99.5
EXECUTION VERSION
August 7, 2019
PG&E Corporation
77 Beale Street
P.O. Box 770000
San Francisco, California 94177
Re: Chapter 11 Plan Backstop Commitment Letter
Ladies and Gentlemen:
Reference is hereby made to the chapter 11 bankruptcy cases, lead case
no. 19-30088 (the “Chapter 11 Cases”), currently pending before the United States Bankruptcy Court for the District of
Northern California (the “Bankruptcy Court”), in which PG&E Corporation (“PG&E” or the “Company”) and Pacific
Gas and Electric Company (the “Utility” and together with PG&E, the “Debtors”) are debtors in possession. Reference is further made to (i) a Chapter 11 plan of reorganization (the “Plan”) to be filed with the Bankruptcy Court to implement the terms and conditions of the reorganization of the Debtors contemplated by a plan term sheet that is approved in
writing by the undersigned Backstop Party in its sole discretion (the “Backstop Party”) that contemplates that all
subrogation claims and wildfire claims shall not exceed $16 billion in the aggregate (the “Plan Term Sheet”) and (ii) a
disclosure statement that will accompany the Plan (the “Disclosure Statement”). Capitalized terms used in this backstop
commitment letter (this “Backstop Commitment Letter”) but not otherwise defined shall have the meanings ascribed to them in
the Plan Term Sheet.
The Plan, among other things, shall provide that PG&E shall distribute
transferable rights (the “Rights”) to existing holders of PG&E common stock (“Existing Shareholders”) to purchase shares of common stock (“New Common Stock”) issued by Reorganized PG&E on the Effective Date (as defined in the Plan Term Sheet) with cash, for aggregate maximum proceeds to Reorganized PG&E of $15 billion (the “Rights Offering”).
In order to facilitate the Rights Offering, pursuant to this Backstop
Commitment Letter, and subject to the terms, conditions and limitations set forth herein and in consideration for the Backstop Commitment Payment, the Backstop Party is willing to purchase, on the Effective Date, an amount of New Common Stock up
to its Backstop Commitment Amount (as defined herein) at the Backstop Price (as defined herein).
1. Rights Offering.
a. PG&E shall make the Rights Offering pursuant to the Plan, subject to such terms and conditions as may be included in the documents governing the Rights Offering that are
acceptable to the Backstop Party in its sole discretion. The $15 billion aggregate size of the Rights Offering shall be reduced on a dollar-for-dollar basis by the sum of (i) the amount of proceeds in excess of $5 billion that PG&E receives
from PG&E’s issuance of debt in connection with the Plan; (ii) the aggregate liquidation preference of preferred stock (“Mandatory
Convertible Preferred Stock”) that is distributed to holders of wildfire claims or subrogation claims, on the terms and conditions set forth on Exhibit A
pursuant to the Plan; and (iii) the principal amount of any other debt that is issued by the Debtors to fund obligations to wildfire claimants, subrogation claimants, and/or the Debtors’ initial contribution to the insurance fund created pursuant
to Cal. Gov’t Code Sec. 3292(b)(3) pursuant to the Plan (the “Additional Capital Sources”).
b. The Rights Offering shall be structured such that the Rights must be offered at a price above the applicable Rights Offering Price Threshold. “Rights Offering Price Threshold” means (i) 72.5% of the Baseline Share Price (as defined on Exhibit B) if the Debtors receive between $15 billion and $10 billion in proceeds from the exercise of Rights and Additional Capital Sources; (ii) 70.0% of the Baseline Share Price if the Debtors receive
less than $10 billion and more than or equal to $5 billion in proceeds from the exercise of Rights and Additional Capital Sources; and (iii) 67.5% of the Baseline Share Price if the Debtors receive less than $5 billion in proceeds from the
exercise of Rights and Additional Capital Sources.
CUSIP No. 69331C108
c. The consummation of the Rights Offering will occur pursuant to definitive written agreements consistent with the Plan Term Sheet and approved by Backstop Party, in the sole
discretion of the Backstop Party, and will be subject to, among other things, (x) the negotiation, execution and delivery of such definitive agreements for the Rights Offering and the Plan, including, without limitation, all Backstop Commitment
agreements, purchase agreements, investor rights agreements, registration rights agreements, revised certificates of incorporation and bylaws of Reorganized PG&E (which shall contain customary terms and conditions and customary ownership
limitations in order to preserve the tax attributes of the Debtors after the Effective Date) and other similar agreements and documentation required to be entered into on the Effective Date under the terms of the Plan (collectively, the “Plan Documents”), in form and substance satisfactory to the Backstop Party, in its sole discretion, and (y) receipt of any
necessary or advisable governmental, contractual, regulatory or other requisite consents or approvals in connection with the Rights Offering and the other transactions contemplated by the Plan.
d. The Debtors shall give the Backstop Party, as soon as reasonably practicable, but in no event later than two (2) Business Days, after the entry of the Confirmation Order, by
overnight mail, email or by electronic facsimile transmission, (i) written notification setting forth (A) the total number of shares of New Common Stock to be offered to Existing Shareholders in the Rights Offering pursuant to the exercise of
Rights and the expected aggregate cash proceeds to be received by the Debtors therefor, (B) a calculation of the Backstop Price as of the targeted Effective Date, and (C) the targeted Effective Date and (ii) a subscription form to be completed by the Backstop Party, or other instructions, to facilitate the Backstop Party’s subscription for the New Common Stock.
2. Backstop.
a. Subject to the terms and conditions herein and the Plan Term Sheet (including without limitation the payment of fees to the Backstop Party described therein), the Backstop
Party, solely on behalf of itself hereby, commits to purchase on the Effective Date an amount of New Common Stock at the Backstop Price (the “Backstop Commitment”) up to the dollar amounts set forth on Exhibit B hereto (the “Backstop Commitment Amount”).
b. The Backstop Party will satisfy its Backstop Commitment by funding its Backstop Commitment obligations in accordance with the terms and subject to the conditions to be set
forth in the Plan Documents governing the Rights Offering.
c. The Debtors agree to pay the Backstop Party the Backstop Commitment Fee and any Backstop Funding Fee as set forth on Exhibit B. The provisions for the payment of the Backstop
Commitment Fee, Backstop Funding Fee, and the other provisions provided herein are an integral part of the transactions contemplated by this Backstop Commitment Letter and without these provisions the Backstop Party would not have entered into
this Backstop Commitment Letter, and the Backstop Commitment Fee and Backstop Funding Fee shall, pursuant to an order approving this Backstop Commitment Letter, constitute allowed administrative expenses of the Debtors’ estate under sections
503(b) and 507 of the Bankruptcy Code.
3. Backstop Party Representations. The Backstop Party hereby represents and warrants,
solely as to itself, that (a) it has all limited partnership, corporate or other power and authority necessary to execute, deliver and perform this Backstop Commitment Letter, (b) the execution, delivery and performance of this Backstop
Commitment Letter by it has been duly and validly authorized and approved by all necessary limited partnership, corporate or other organizational action by it, (c) this Backstop Commitment Letter has been duly and validly executed and delivered
by it and, assuming due execution and delivery by the other parties hereto, constitutes a valid and legally binding obligation of it, enforceable against it in accordance with the terms of this Backstop Commitment Letter, (d) the execution,
delivery and performance by the Backstop Party of this Backstop Commitment Letter does not (i) violate the organizational documents of the Backstop Party or (ii) violate any applicable law or judgment, (e) as of the Effective Date, its Backstop
Commitment will be less than the maximum amount that it or any of its affiliates that may provide the Backstop Commitment is permitted to invest in any one portfolio investment pursuant to the terms of its constituent documents or otherwise, and
(f) it will have, in the aggregate, as of the Effective Date, available funds at least in the sum of its Backstop Commitment hereunder.
CUSIP No. 69331C108
4. Conditions to Backstop Party Commitment. The agreements and obligations of the
Backstop Party pursuant to this Backstop Commitment Letter, including its Backstop Commitment, are further expressly conditioned upon and subject to the satisfaction or written waiver by the Backstop Party, in its sole discretion, at or prior to
the Effective Date of each of the following conditions:
a. the Debtors shall have received valid and enforceable additional Backstop Commitments from Existing Shareholders on the same terms and conditions as set forth in this Backstop
Commitment Letter that in the aggregate result in total backstop commitments equal to the size of the Rights Offering less the total amount of Additional Capital Sources;
b. the Backstop Party shall have completed, and be satisfied with the results of, diligence regarding the Debtors rate base and capital structure;
c. the satisfaction of the other conditions set forth in the Plan Term Sheet and, other than the funding of the Rights Offering, the satisfaction of all of the other conditions
to the Effective Date provided for in the Plan and the Plan Documents;
d. all of the covenants and obligations that the Debtors are required to comply with or to perform pursuant to the Plan Documents at or prior to the Effective Date shall have
been complied with and performed in all material respects, including the payment by the Debtors of all fees contemplated therein;
e. the Plan Documents shall have been executed and delivered by each of the parties thereto in forms approved by the Backstop Party;
f. the Bankruptcy Court shall have entered the Confirmation Order, such Confirmation Order shall be a final order, and such Confirmation Order shall authorize and approve the
transactions contemplated herein and in the Plan Term Sheet and all other consideration and fees contemplated herein and in the Plan Term Sheet;
g. no result, occurrence, fact, change, event, effect, violation, inaccuracy, or circumstance (whether or not constituting a breach of a representation, warranty or covenant set
forth in the Plan or any Plan Document) that, individually or in the aggregate with any such other results, occurrences, facts, changes, events, effects, violations, inaccuracies, or circumstances, (i) would have or would reasonably be expected
to have a material adverse effect on the business, operations, assets, liabilities, capitalization, financial performance, condition (financial or otherwise) or results of operations, in each case, of the Debtors as a whole, or (ii) would
reasonably be expected to prevent or materially impair or delay the ability of the Debtors, the Backstop Party or the applicable parties thereto or referred to therein to consummate the transactions contemplated by this Backstop Commitment
Letter, the Plan Term Sheet, the Plan or the other Plan Documents or perform their obligations hereunder or thereunder (each a “Material
Adverse Effect”) shall have occurred; provided, however, that the filing of the Chapter 11 Cases, and the fact that the Debtors are operating in bankruptcy and the effects reasonably expected to result therefrom, shall not constitute a Material Adverse Effect;
h. the Debtors shall have each operated its business in the ordinary course of business and consistent with its historical practices, other than any deviations from operations in
the ordinary course of business pursuant to an order issued by the Bankruptcy Court; and
i. the Debtors shall have maintained and held in good standing all of their operating licenses, certificates and other regulatory authorizations and approvals necessary to
operate the Utility’s business with no pending revocations of any such license, certificate, approval or authorization or open proceedings contemplating such revocation.
CUSIP No. 69331C108
5. Termination. The Backstop Party may terminate this Backstop Commitment Letter,
solely as to itself, by written notice to the general counsel of the Debtors, on or after the occurrence of any of the following:
a. the Backstop Party has not approved, in its sole discretion, the Plan Term Sheet;
b. if, at any time after the execution of this Backstop Commitment Letter by the Debtors, the Debtors shall not have valid and enforceable Backstop Commitments from Existing
Shareholders on the same terms and conditions as set forth in this Backstop Commitment Letter that in the aggregate result in total backstop commitments equal to the size of the Rights Offering less the total amount of Additional Capital Sources;
c. the Plan, on terms and conditions consistent with the Plan Term Sheet, and the Disclosure Statement shall not have been filed on or before the later of (i) August 31, 2019 or
(ii) if the Debtors have executed this Backstop Commitment Letter prior to August 31, 2019, September 30, 2019;
d. the Plan or any Plan Document filed with the Bankruptcy Court at any time is inconsistent with the Plan Term Sheet or not approved by the Backstop Party;
e. the Confirmation Order, in form and substance reasonably acceptable to the Backstop Party, has not been entered by the Bankruptcy Court on or before June 30, 2020;
f. the Effective Date shall not have occurred on or before 60 days after entry of the Confirmation Order;
g. the failure of any condition set forth in Section 4 that has not been waived by the Backstop Party;
h. the occurrence of any material postpetition fires in the Debtors’ service area;
i. the occurrence of a Material Adverse Effect;
j. the failure of either of the Debtors to operate their business in the ordinary course of business and consistent with their historical practices;
k. there is in effect an order (whether permanent or preliminary) of a governmental authority of competent jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of any of the transactions contemplated by the Plan Term Sheet or the Plan, or any law, statute, rule, regulation or ordinance is adopted that makes consummation of the transactions contemplated by the Plan Term Sheet or the Plan
illegal or otherwise prohibited; or
l. the occurrence or discovery of any state of facts, change, event, development, circumstance or condition that causes any of the conditions precedent set forth in the Plan Term
Sheet, the Plan or the Plan Documents to not be capable of being satisfied.
Upon termination of this Backstop Commitment Letter by the Backstop Party (such terminating
Backstop Party, a “Terminating Backstop Party”) pursuant to any of Section 5(a) through (l), this Backstop Commitment Letter shall be void and of no further force or effect solely
with respect to such Terminating Backstop Party, such Terminating Backstop Party shall be released from its Backstop Commitments, undertakings and agreements under or related to this Backstop Commitment Letter, including its Backstop Commitment,
except as explicitly provided herein and there shall be no liability or obligation on the party of such Terminating Backstop Party hereunder, except as expressly provided herein.
This Backstop Commitment Letter shall automatically terminate in the event that the Debtors have
not returned a counter-signed copy of this Backstop Commitment Letter agreeing to its terms on or before August 31, 2019.
CUSIP No. 69331C108
6. Assignment. This Backstop Commitment Letter (a) is not assignable by the Backstop
Party, and any purported assignment shall be null and void ab initio; provided, however, Backstop Party may assign its Backstop Commitment, in whole or in part, to (i)
another Backstop Party, (ii) an affiliate of the Backstop Party or (iii) an investment fund or separately managed account the primary investment advisor or sub advisor to which is a Backstop Party or an affiliate thereof, to the extent such
assignee Backstop Party agrees in writing to assume all obligations hereunder of such Backstop Party in connection with such Backstop Commitment, and (b) is intended to be solely for the benefit of the parties hereto and is not intended to confer
any benefits upon, or create any rights in favor of, any person or entity other than the parties hereto. Notwithstanding the foregoing, a Backstop Party may assign all or any portion of its obligations hereunder to a “qualified institutional
buyer” (as defined in Rule 144A under the Securities Act of 1933, as amended), without the consent of any party, provided, however, that such assignee shall not own, on a pro forma basis, more than the amount of common stock of PG&E that would limit the Debtors’
ability to utilize their net operating losses.
7. Entire Agreement. This Backstop Commitment Letter, including all exhibits and
schedules hereto, constitutes the entire understanding among the parties hereto with respect to the subject matter hereof and replaces and supersedes all prior agreements and understandings, both written and oral, between the parties hereto with
respect to the subject matter hereof and shall become effective and binding upon the mutual exchange of fully executed counterparts by each of the parties hereto.
8. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Backstop
Commitment Letter shall be governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to the principles of conflict of laws that would require the application of the law of any other
jurisdiction. By its execution and delivery of this Backstop Commitment Letter, each of the parties hereto irrevocably and unconditionally agrees for itself that any legal action, suit or proceeding against it with respect to any matter under or
arising out of or in connection with this Backstop Commitment Letter or for recognition or enforcement of any judgment rendered in any such action, suit or proceeding, may be brought in the Bankruptcy Court. By execution and delivery of this
Backstop Commitment Letter, each of the parties hereto irrevocably accepts and submits itself to the exclusive jurisdiction of the Bankruptcy Court with respect to any such action, suit or proceeding. EACH PARTY HERETO UNCONDITIONALLY WAIVES
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO ABOVE.
9. Amendment; Waiver; Counterparts. This Backstop Commitment Letter may not be amended
or waived except in writing signed by the Backstop Party hereto, and confirmed in writing by the Company. This Backstop Commitment Letter may be executed in any number of counterparts, each of which will be an original, and all of which, when
taken together, will constitute one agreement. Delivery of an executed counterpart of this Backstop Commitment Letter by e-mail or portable document format (PDF) will be effective as delivery of a manually executed counterpart of this Backstop
Commitment Letter.
10. Notices. All notices required or permitted to be given under this Backstop
Commitment Letter, unless otherwise stated herein, shall be given at the addresses specified below, or at such other address or addresses as a party may designate for itself in writing:
If to the Backstop Party, to the name and address located on the Backstop
Party’s signature page to this Backstop Commitment Letter.
If to the Debtors:
PG&E Corporation
77 Beale Street
P.O. Box 770000
San Francisco, California 94177
Attention: Mr. John Simon, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen Karotkin
CUSIP No. 69331C108
11. No Liability. Notwithstanding anything that may be expressed or implied in this
Backstop Commitment Letter, each party hereto acknowledges and agrees that no person other than the Backstop Party (and it permitted assigns) shall have any obligation hereunder (subject to the limitations provided herein) or in connection with
the transactions contemplated hereby and that (a) notwithstanding that any Backstop Party may be a partnership, limited partnership or limited liability company, no recourse (whether at law, in equity, in contract, in tort or otherwise) hereunder
or under any document or instrument delivered in connection herewith, or in respect of any oral representations made or alleged to be made in connection herewith or therewith, shall be had against any former, current or future direct or indirect
equity holder, controlling person, general or limited partner, shareholder, member, investment manager or adviser, manager, director, officer, employee, agent, affiliate, assignee, representative or financing source of any of the foregoing) (any
such person or entity, other than such Backstop Party, a “Related Party”) or any Related Party of any such Related Party,
including, without limitation, any liabilities arising under, or in connection with, the Plan Term Sheet, the Plan or this Backstop Commitment Letter and the transactions contemplated thereby and hereby, or in respect of any oral representations
made or alleged to be made in connection therewith or herewith), whether by the enforcement of any judgment or assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law and (b) no personal
liability whatsoever will attach to, be imposed on or otherwise be incurred by any Related Party of the Backstop Party or any Related Party of any such Related Party under this Backstop Commitment Letter or any document or instrument delivered in
connection herewith or with the Plan Term Sheet or the Plan (or in respect of any oral representation made or alleged to be made in connection herewith or therewith) or for any action (whether at law, in equity, in contract, in tort or otherwise)
based on, in respect of, or by reason of such obligations hereunder or by their creation.
12. The Backstop Party shall not be required, pursuant to the terms of this Backstop Commitment Letter, to acquire or purchase any securities or indebtedness in connection with
the Rights Offering that, pursuant to the terms of a Backstop Commitment Letter or other agreement, are to be acquired or subscribed for by any other party, nor shall the Backstop Party be required, pursuant to the terms of this Backstop
Commitment Letter, to pay any money or other consideration, or exchange any claims whatsoever, which are owing from, or to be transferred from or by, any other party pursuant to the terms of another Backstop Commitment Letter or other agreement.
Nothing in this Backstop Commitment Letter shall be deemed to constitute a joint venture or partnership between any other person or entity nor constitute any party as the agent of any other person or entity for any purpose. For the avoidance of
doubt, no Backstop Party shall, nor shall any action taken by a Backstop Party hereunder, be deemed to be acting in concert or as any group with any other person or entity with respect to the Backstop Commitment nor shall the Backstop Commitments
hereunder create a presumption that the Backstop Party is in any way acting in concert or as a group with any other person or entity whether as a result of this commitment or otherwise.
13. Each party hereto confirms that it has made its own decision to execute this Backstop Commitment Letter based upon its own independent assessment of documents and information
available to it, as it has deemed appropriate.
14. Except as expressly provided in this Backstop Commitment Letter, (a) nothing herein is intended to, or does, in any manner waive, limit, impair or restrict the ability of each
party hereto to protect and preserve its rights, remedies and interests, including, without limitation, any claims against or interests in any of the Debtors or other parties, or its full participation in any bankruptcy proceeding, and (b) the
parties hereto each fully preserve any and all of their respective rights, remedies, claims and interests as of the date hereof and upon a termination of this Backstop Commitment Letter. Further, nothing in this Backstop Commitment Letter shall
be construed to prohibit any party hereto from appearing as a party-in-interest in any matter to be adjudicated in the Chapter 11 Cases, so long as such appearance and the positions advocated in connection therewith are consistent with this
Backstop Commitment Letter, the Plan Term Sheet and the Plan, and are not for the purpose of, and could not reasonably be expected to have the effect of, hindering, delaying or preventing the consummation of the transactions contemplated by the
Plan Term Sheet and the Plan.
CUSIP No. 69331C108
Sincerely,
Backstop Party:
| | GREAT HOLLOW INTERNATIONAL, L.P. | | |
| | By: | Abrams Capital Management, L.P., | |
| | its investment manager | | |
| | | ||
| | By: | Abrams Capital Management, LLC, | |
| | its general partner | | |
| | | ||
| | By: | /s/ David Abrams | |
| | Name: | David Abrams | |
| | Title: | Managing Member | |
| | | ||
| | Notice Information: Alison Bomberg 222 Berkeley Street, 21st Floor Boston, MA 02116abomberg@abramscapital.com | | |
| | |||
CUSIP No. 69331C108
Accepted and agreed this ____ day of ___________, 2019, by:
PG&E CORPORATION
By:
Name:
Title:
CUSIP No. 69331C108
EXECUTION VERSION
Exhibit A
Mandatory Preferred Stock Term Sheet
CUSIP No. 69331C108
Term Sheet for
5.00% Mandatory Convertible Preferred Stock
5.00% Mandatory Convertible Preferred Stock
| Issuer: | | PG&E Corporation (“PG&E”) | |||
| Title of Securities: | | 5.00% Mandatory Convertible Preferred Stock of PG&E (the “Mandatory Convertible Preferred Stock”) | |||
| Shares of Mandatory Convertible Preferred Stock Offered by PG&E: | | Up to [●] shares | |||
| Offering Price: Issue Date: | $1,000 per share of the Mandatory Convertible Preferred Stock The Effective Date of the Plan | ||||
| Liquidation Preference: | | $1,000 per share | |||
| Dividends: | | 5.00% of the Liquidation Preference of $1,000 per share of the Mandatory Convertible Preferred Stock per year
(equivalent to $50 per annum per share), when, as and if declared by PG&E’s board of directors or an authorized committee thereof, payable in cash or, by delivery of additional shares of Mandatory Convertible Preferred Stock or any
combination of cash and shares of Mandatory Convertible Preferred Stock, as determined by PG&E in its sole discretion | |||
| Floor Price: | | 95% of the Initial Price, subject to standard ant-dilution adjustments | |||
| Dividend Payment Dates: | | If declared, January 1, April 1, July 1 and October 1 of each year, commencing on (TBD) | |||
| Dividend Record Dates: | | The March 15, June 15, September 15 and December 15 immediately preceding the next dividend payment date | |||
| Redemption: | | The Mandatory Convertible Preferred Stock will not be redeemable | |||
| Initial Price: | | 80% of the Baseline Share Price (as defined in Exhibit B) | |||
| Threshold Appreciation Price: | | 110% of the Initial Price, subject to standard ant-dilution adjustments | |||
| Mandatory Conversion Date: | | 1/8th of the Mandatory Convertible Preferred Stock will convert into PG&E Common Stock 90, 180,
270, 360, 450, 540, 630, and 720 days from Issue Date | |||
| Conversion Rate: | | Upon conversion on the Mandatory Conversion Date, the conversion rate for each share of the Mandatory Convertible
Preferred Stock will be not more than [●] shares of Common Stock (the “Maximum Conversion Rate”) and not less than
[●] shares of Common Stock (the “Minimum Conversion Rate”), depending on the Applicable Market Value of the Common
Stock subject to standard anti-dilution adjustments. The following table illustrates the conversion rate per share of the Mandatory Convertible Preferred Stock: | |||
CUSIP No. 69331C108
| Applicable Market Value of the Common Stock | | Conversion rate (number of shares of Common Stock to be received upon conversion of each share of the Mandatory Convertible Preferred Stock) | |||
| Greater than 110% of the Initial Price (which is the Threshold Appreciation Price) | | [●] shares (approximately equal to $1,000 divided by the Threshold Appreciation Price) | |||
| Equal to or less than the Threshold Appreciation Price but greater than or equal to the Floor Price | | Between [●] and [●] shares, determined by dividing $1,000 by the applicable market value of the Common Stock | |||
| Less than 95% of the Initial Price (which is the Floor Price) | | [●] shares (approximately equal to $1,000 divided by the Floor Price) | |||
| Applicable Market Value: Conversion at the Option of the Holder: | | The “Applicable Market Value” shall be the 10-trading day VWAP immediately preceding the applicable Mandatory Conversion Date At any time prior to final Mandatory Conversion Date, holders of the Mandatory Convertible Preferred Stock have
the option to elect to convert their shares of the Mandatory Convertible Preferred Stock in whole or in part (but in no event less than one share of the Mandatory Convertible Preferred Stock), into shares of Common Stock at the Minimum
Conversion Rate of shares of Common Stock per share of the Mandatory Convertible Preferred. This Minimum Conversion Rate is subject to certain anti-dilution adjustments | |||
CUSIP No. 69331C108
Exhibit B
Backstop Terms
| Backstop Party | Backstop Commitment Amount |
| Great Hollow International, L.P. | $9,802,000.00 |
“Applicable
Utility Index Multiple” shall mean the average normalized 2021 estimated price-to-earnings ratio of the U.S. regulated utilities in the S&P 500 Utilities (Sector) Index (after excluding AES, EIX, EXC, NRG, PEG, and PPL) over the
20-day trading period before Effective Date per Capital IQ Consensus Estimates.
“Backstop
Commitment Fee” shall mean a commitment fee equal to 1.0% of the total Backstop Commitment Amount as of the date on which the Debtors execute this Backstop Commitment Letter that shall be paid in New Common Stock, which amount shall be
determined using the Backstop Price.
“Backstop
Funding Fee” shall mean a funding fee of 2.0% of the amount of the Backstop Commitment actually funded by the Backstop Party that shall be paid in New Common Stock, which amount shall be determined using the Backstop Price.
“Backstop
Price” will be calculated on a per share basis as 57.5% of the Baseline Share Price.
“Baseline
Share Price” shall mean the (a) Applicable Utility Index Multiple, multiplied by (b) PG&E 2021E Net Income, divided by (c) the fully diluted shares outstanding at the Effective Date, including the New Common Stock.
“PG&E
2021E Net Income” shall mean PG&E’s forecasted 2021 net income, excluding the impact of restructuring expenses, financing fees, changes in reserves for fire claims, and any other projected amounts that are not normally incurred by a
utility.
CUSIP No. 69331C108
Exhibit 99.6
EXECUTION VERSION
August 7, 2019
PG&E Corporation
77 Beale Street
P.O. Box 770000
San Francisco, California 94177
Re: Chapter 11 Plan Backstop Commitment Letter
Ladies and Gentlemen:
Reference is hereby made to the chapter 11 bankruptcy cases, lead case
no. 19-30088 (the “Chapter 11 Cases”), currently pending before the United States Bankruptcy Court for the District of
Northern California (the “Bankruptcy Court”), in which PG&E Corporation (“PG&E” or the “Company”) and Pacific
Gas and Electric Company (the “Utility” and together with PG&E, the “Debtors”) are debtors in possession. Reference is further made to (i) a Chapter 11 plan of reorganization (the “Plan”) to be filed with the Bankruptcy Court to implement the terms and conditions of the reorganization of the Debtors contemplated by a plan term sheet that is approved in
writing by the undersigned Backstop Party in its sole discretion (the “Backstop Party”) that contemplates that all
subrogation claims and wildfire claims shall not exceed $16 billion in the aggregate (the “Plan Term Sheet”) and (ii) a
disclosure statement that will accompany the Plan (the “Disclosure Statement”). Capitalized terms used in this backstop
commitment letter (this “Backstop Commitment Letter”) but not otherwise defined shall have the meanings ascribed to them in
the Plan Term Sheet.
The Plan, among other things, shall provide that PG&E shall distribute
transferable rights (the “Rights”) to existing holders of PG&E common stock (“Existing Shareholders”) to purchase shares of common stock (“New Common Stock”) issued by Reorganized PG&E on the Effective Date (as defined in the Plan Term Sheet) with cash, for aggregate maximum proceeds to Reorganized PG&E of $15 billion (the “Rights Offering”).
In order to facilitate the Rights Offering, pursuant to this Backstop
Commitment Letter, and subject to the terms, conditions and limitations set forth herein and in consideration for the Backstop Commitment Payment, the Backstop Party is willing to purchase, on the Effective Date, an amount of New Common Stock up
to its Backstop Commitment Amount (as defined herein) at the Backstop Price (as defined herein).
1. Rights Offering.
a. PG&E shall make the Rights Offering pursuant to the Plan, subject to such terms and conditions as may be included in the documents
governing the Rights Offering that are acceptable to the Backstop Party in its sole discretion. The $15 billion aggregate size of the Rights Offering shall be reduced on a dollar-for-dollar basis by the sum of (i) the amount of proceeds in
excess of $5 billion that PG&E receives from PG&E’s issuance of debt in connection with the Plan; (ii) the aggregate liquidation preference of preferred stock (“Mandatory Convertible Preferred Stock”) that is distributed to holders of wildfire claims or subrogation claims, on the terms and conditions set forth on Exhibit A pursuant to the Plan; and (iii) the principal amount of any other debt that is issued by the Debtors to fund obligations to wildfire claimants, subrogation claimants, and/or the Debtors’
initial contribution to the insurance fund created pursuant to Cal. Gov’t Code Sec. 3292(b)(3) pursuant to the Plan (the “Additional
Capital Sources”).
b. The Rights Offering shall be structured such that the Rights must be offered at a price above the applicable Rights Offering Price
Threshold. “Rights Offering Price Threshold” means (i) 72.5% of the Baseline Share Price (as defined on Exhibit B) if the Debtors receive between $15 billion and $10 billion in proceeds from the exercise of Rights and Additional Capital Sources; (ii) 70.0% of the
Baseline Share Price if the Debtors receive less than $10 billion and more than or equal to $5 billion in proceeds from the exercise of Rights and Additional Capital Sources; and (iii) 67.5% of the Baseline Share Price if the Debtors receive less
than $5 billion in proceeds from the exercise of Rights and Additional Capital Sources.
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c. The consummation of the Rights Offering will occur pursuant to definitive written agreements consistent with the Plan Term Sheet and
approved by Backstop Party, in the sole discretion of the Backstop Party, and will be subject to, among other things, (x) the negotiation, execution and delivery of such definitive agreements for the Rights Offering and the Plan, including,
without limitation, all Backstop Commitment agreements, purchase agreements, investor rights agreements, registration rights agreements, revised certificates of incorporation and bylaws of Reorganized PG&E (which shall contain customary
terms and conditions and customary ownership limitations in order to preserve the tax attributes of the Debtors after the Effective Date) and other similar agreements and documentation required to be entered into on the Effective Date under the
terms of the Plan (collectively, the “Plan Documents”), in form and substance satisfactory to the Backstop Party, in its
sole discretion, and (y) receipt of any necessary or advisable governmental, contractual, regulatory or other requisite consents or approvals in connection with the Rights Offering and the other transactions contemplated by the Plan.
d. The Debtors shall give the Backstop Party, as soon as reasonably practicable, but in no event later than two (2) Business Days, after the
entry of the Confirmation Order, by overnight mail, email or by electronic facsimile transmission, (i) written notification setting forth (A) the total number of shares of New Common Stock to be offered to Existing Shareholders in the Rights
Offering pursuant to the exercise of Rights and the expected aggregate cash proceeds to be received by the Debtors therefor, (B) a calculation of the Backstop Price as of the targeted Effective Date, and (C) the targeted Effective Date and (ii) a subscription form to be completed by the Backstop Party, or other instructions, to facilitate the Backstop Party’s subscription for
the New Common Stock.
2. Backstop.
a. Subject to the terms and conditions herein and the Plan Term Sheet (including without limitation the payment of fees to the Backstop Party
described therein), the Backstop Party, solely on behalf of itself hereby, commits to purchase on the Effective Date an amount of New Common Stock at the Backstop Price (the “Backstop Commitment”) up to the dollar amounts set forth on Exhibit B hereto (the “Backstop Commitment Amount”).
b. The Backstop Party will satisfy its Backstop Commitment by funding its Backstop Commitment obligations in accordance with the terms and
subject to the conditions to be set forth in the Plan Documents governing the Rights Offering.
c. The Debtors agree to pay the Backstop Party the Backstop Commitment Fee and any Backstop Funding Fee as set forth on Exhibit B. The
provisions for the payment of the Backstop Commitment Fee, Backstop Funding Fee, and the other provisions provided herein are an integral part of the transactions contemplated by this Backstop Commitment Letter and without these provisions the
Backstop Party would not have entered into this Backstop Commitment Letter, and the Backstop Commitment Fee and Backstop Funding Fee shall, pursuant to an order approving this Backstop Commitment Letter, constitute allowed administrative
expenses of the Debtors’ estate under sections 503(b) and 507 of the Bankruptcy Code.
3. Backstop Party Representations. The Backstop
Party hereby represents and warrants, solely as to itself, that (a) it has all limited partnership, corporate or other power and authority necessary to execute, deliver and perform this Backstop Commitment Letter, (b) the execution, delivery
and performance of this Backstop Commitment Letter by it has been duly and validly authorized and approved by all necessary limited partnership, corporate or other organizational action by it, (c) this Backstop Commitment Letter has been duly
and validly executed and delivered by it and, assuming due execution and delivery by the other parties hereto, constitutes a valid and legally binding obligation of it, enforceable against it in accordance with the terms of this Backstop
Commitment Letter, (d) the execution, delivery and performance by the Backstop Party of this Backstop Commitment Letter does not (i) violate the organizational documents of the Backstop Party or (ii) violate any applicable law or judgment,
(e) as of the Effective Date, its Backstop Commitment will be less than the maximum amount that it or any of its affiliates that may provide the Backstop Commitment is permitted to invest in any one portfolio investment pursuant to the terms of
its constituent documents or otherwise, and (f) it will have, in the aggregate, as of the Effective Date, available funds at least in the sum of its Backstop Commitment hereunder.
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4. Conditions to Backstop Party Commitment. The
agreements and obligations of the Backstop Party pursuant to this Backstop Commitment Letter, including its Backstop Commitment, are further expressly conditioned upon and subject to the satisfaction or written waiver by the Backstop Party, in
its sole discretion, at or prior to the Effective Date of each of the following conditions:
a. the Debtors shall have received valid and enforceable additional Backstop Commitments from Existing Shareholders on the same terms and
conditions as set forth in this Backstop Commitment Letter that in the aggregate result in total backstop commitments equal to the size of the Rights Offering less the total amount of Additional Capital Sources;
b. the Backstop Party shall have completed, and be satisfied with the results of, diligence regarding the Debtors rate base and capital
structure;
c. the satisfaction of the other conditions set forth in the Plan Term Sheet and, other than the funding of the Rights Offering, the
satisfaction of all of the other conditions to the Effective Date provided for in the Plan and the Plan Documents;
d. all of the covenants and obligations that the Debtors are required to comply with or to perform pursuant to the Plan Documents at or prior
to the Effective Date shall have been complied with and performed in all material respects, including the payment by the Debtors of all fees contemplated therein;
e. the Plan Documents shall have been executed and delivered by each of the parties thereto in forms approved by the Backstop Party;
f. the Bankruptcy Court shall have entered the Confirmation Order, such Confirmation Order shall be a final order, and such Confirmation Order
shall authorize and approve the transactions contemplated herein and in the Plan Term Sheet and all other consideration and fees contemplated herein and in the Plan Term Sheet;
g. no result, occurrence, fact, change, event, effect, violation, inaccuracy, or circumstance (whether or not constituting a breach of a
representation, warranty or covenant set forth in the Plan or any Plan Document) that, individually or in the aggregate with any such other results, occurrences, facts, changes, events, effects, violations, inaccuracies, or circumstances,
(i) would have or would reasonably be expected to have a material adverse effect on the business, operations, assets, liabilities, capitalization, financial performance, condition (financial or otherwise) or results of operations, in each case,
of the Debtors as a whole, or (ii) would reasonably be expected to prevent or materially impair or delay the ability of the Debtors, the Backstop Party or the applicable parties thereto or referred to therein to consummate the transactions
contemplated by this Backstop Commitment Letter, the Plan Term Sheet, the Plan or the other Plan Documents or perform their obligations hereunder or thereunder (each a “Material Adverse Effect”) shall have occurred; provided, however, that the filing of the Chapter 11 Cases, and the fact that the Debtors are operating in bankruptcy and the effects reasonably expected to result therefrom,
shall not constitute a Material Adverse Effect;
h. the Debtors shall have each operated its business in the ordinary course of business and consistent with its historical practices, other
than any deviations from operations in the ordinary course of business pursuant to an order issued by the Bankruptcy Court; and
i. the Debtors shall have maintained and held in good standing all of their operating licenses, certificates and other regulatory
authorizations and approvals necessary to operate the Utility’s business with no pending revocations of any such license, certificate, approval or authorization or open proceedings contemplating such revocation.
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5. Termination. The Backstop
Party may terminate this Backstop Commitment Letter, solely as to itself, by written notice to the general counsel of the Debtors, on or after the occurrence of any of the following:
a. the Backstop Party has not approved, in its sole discretion, the Plan Term Sheet;
b. if, at any time after the execution of this Backstop Commitment Letter by the Debtors, the Debtors shall not have valid
and enforceable Backstop Commitments from Existing Shareholders on the same terms and conditions as set forth in this Backstop Commitment Letter that in the aggregate result in total backstop commitments equal to the size of the Rights
Offering less the total amount of Additional Capital Sources;
c. the Plan, on terms and conditions consistent with the Plan Term Sheet, and the Disclosure Statement shall not have been
filed on or before the later of (i) August 31, 2019 or (ii) if the Debtors have executed this Backstop Commitment Letter prior to August 31, 2019, September 30, 2019;
d. the Plan or any Plan Document filed with the Bankruptcy Court at any time is inconsistent with the Plan Term Sheet or not
approved by the Backstop Party;
e. the Confirmation Order, in form and substance reasonably acceptable to the Backstop Party, has not been entered by the
Bankruptcy Court on or before June 30, 2020;
f. the Effective Date shall not have occurred on or before 60 days after entry of the Confirmation Order;
g. the failure of any condition set forth in Section 4 that has not been waived by the Backstop Party;
h. the occurrence of any material postpetition fires in the Debtors’ service area;
i. the occurrence of a Material Adverse Effect;
j. the failure of either of the Debtors to operate their business in the ordinary course of business and consistent with
their historical practices;
k. there is in effect an order (whether permanent or preliminary) of a governmental authority of competent jurisdiction
restraining, enjoining or otherwise prohibiting the consummation of any of the transactions contemplated by the Plan Term Sheet or the Plan, or any law, statute, rule, regulation or ordinance is adopted that makes consummation of the
transactions contemplated by the Plan Term Sheet or the Plan illegal or otherwise prohibited; or
l. the occurrence or discovery of any state of facts, change, event, development, circumstance or condition that causes any
of the conditions precedent set forth in the Plan Term Sheet, the Plan or the Plan Documents to not be capable of being satisfied.
Upon termination of this Backstop Commitment Letter by the Backstop Party (such terminating Backstop
Party, a “Terminating Backstop Party”) pursuant to any of Section 5(a) through (l), this Backstop Commitment Letter shall be void and of no further force or effect
solely with respect to such Terminating Backstop Party, such Terminating Backstop Party shall be released from its Backstop Commitments, undertakings and agreements under or related to this Backstop Commitment Letter, including its Backstop
Commitment, except as explicitly provided herein and there shall be no liability or obligation on the party of such Terminating Backstop Party hereunder, except as expressly provided herein.
This Backstop Commitment Letter shall automatically terminate in the event that the
Debtors have not returned a counter-signed copy of this Backstop Commitment Letter agreeing to its terms on or before August 31, 2019.
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6. Assignment. This Backstop
Commitment Letter (a) is not assignable by the Backstop Party, and any purported assignment shall be null and void ab initio; provided, however, Backstop
Party may assign its Backstop Commitment, in whole or in part, to (i) another Backstop Party, (ii) an affiliate of the Backstop Party or (iii) an investment fund or separately managed account the primary investment advisor or sub
advisor to which is a Backstop Party or an affiliate thereof, to the extent such assignee Backstop Party agrees in writing to assume all obligations hereunder of such Backstop Party in connection with such Backstop Commitment, and
(b) is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person or entity other than the parties hereto. Notwithstanding the foregoing,
a Backstop Party may assign all or any portion of its obligations hereunder to a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933, as amended), without the consent of any party, provided, however, that such
assignee shall not own, on a pro forma basis, more than the amount of common stock of PG&E that would limit the Debtors’ ability to utilize their net operating losses.
7. Entire Agreement. This
Backstop Commitment Letter, including all exhibits and schedules hereto, constitutes the entire understanding among the parties hereto with respect to the subject matter hereof and replaces and supersedes all prior agreements and
understandings, both written and oral, between the parties hereto with respect to the subject matter hereof and shall become effective and binding upon the mutual exchange of fully executed counterparts by each of the parties hereto.
8. Governing Law; Consent to
Jurisdiction; Waiver of Jury Trial. This Backstop Commitment Letter shall be governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to the principles of
conflict of laws that would require the application of the law of any other jurisdiction. By its execution and delivery of this Backstop Commitment Letter, each of the parties hereto irrevocably and unconditionally agrees for itself
that any legal action, suit or proceeding against it with respect to any matter under or arising out of or in connection with this Backstop Commitment Letter or for recognition or enforcement of any judgment rendered in any such
action, suit or proceeding, may be brought in the Bankruptcy Court. By execution and delivery of this Backstop Commitment Letter, each of the parties hereto irrevocably accepts and submits itself to the exclusive jurisdiction of the
Bankruptcy Court with respect to any such action, suit or proceeding. EACH PARTY HERETO UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO ABOVE.
9. Amendment; Waiver; Counterparts.
This Backstop Commitment Letter may not be amended or waived except in writing signed by the Backstop Party hereto, and confirmed in writing by the Company. This Backstop Commitment Letter may be executed in any number of
counterparts, each of which will be an original, and all of which, when taken together, will constitute one agreement. Delivery of an executed counterpart of this Backstop Commitment Letter by e-mail or portable document format (PDF)
will be effective as delivery of a manually executed counterpart of this Backstop Commitment Letter.
10. Notices. All notices
required or permitted to be given under this Backstop Commitment Letter, unless otherwise stated herein, shall be given at the addresses specified below, or at such other address or addresses as a party may designate for itself in
writing:
If to the Backstop Party, to the name and address located on the Backstop
Party’s signature page to this Backstop Commitment Letter.
If to the Debtors:
PG&E Corporation
77 Beale Street
P.O. Box 770000
San Francisco, California 94177
Attention: Mr. John Simon, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen Karotkin
CUSIP No. 69331C108
11. No Liability. Notwithstanding
anything that may be expressed or implied in this Backstop Commitment Letter, each party hereto acknowledges and agrees that no person other than the Backstop Party (and it permitted assigns) shall have any obligation hereunder (subject
to the limitations provided herein) or in connection with the transactions contemplated hereby and that (a) notwithstanding that any Backstop Party may be a partnership, limited partnership or limited liability company, no recourse
(whether at law, in equity, in contract, in tort or otherwise) hereunder or under any document or instrument delivered in connection herewith, or in respect of any oral representations made or alleged to be made in connection herewith or
therewith, shall be had against any former, current or future direct or indirect equity holder, controlling person, general or limited partner, shareholder, member, investment manager or adviser, manager, director, officer, employee,
agent, affiliate, assignee, representative or financing source of any of the foregoing) (any such person or entity, other than such Backstop Party, a “Related Party”) or any Related Party of any such Related Party, including, without limitation, any liabilities arising under, or in connection with, the Plan Term Sheet, the Plan or this
Backstop Commitment Letter and the transactions contemplated thereby and hereby, or in respect of any oral representations made or alleged to be made in connection therewith or herewith), whether by the enforcement of any judgment or
assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law and (b) no personal liability whatsoever will attach to, be imposed on or otherwise be incurred by any Related Party of
the Backstop Party or any Related Party of any such Related Party under this Backstop Commitment Letter or any document or instrument delivered in connection herewith or with the Plan Term Sheet or the Plan (or in respect of any oral
representation made or alleged to be made in connection herewith or therewith) or for any action (whether at law, in equity, in contract, in tort or otherwise) based on, in respect of, or by reason of such obligations hereunder or by
their creation.
12. The Backstop Party shall not be required, pursuant to the terms of this Backstop Commitment Letter, to acquire or purchase
any securities or indebtedness in connection with the Rights Offering that, pursuant to the terms of a Backstop Commitment Letter or other agreement, are to be acquired or subscribed for by any other party, nor shall the Backstop Party be
required, pursuant to the terms of this Backstop Commitment Letter, to pay any money or other consideration, or exchange any claims whatsoever, which are owing from, or to be transferred from or by, any other party pursuant to the terms
of another Backstop Commitment Letter or other agreement. Nothing in this Backstop Commitment Letter shall be deemed to constitute a joint venture or partnership between any other person or entity nor constitute any party as the agent of
any other person or entity for any purpose. For the avoidance of doubt, no Backstop Party shall, nor shall any action taken by a Backstop Party hereunder, be deemed to be acting in concert or as any group with any other person or entity
with respect to the Backstop Commitment nor shall the Backstop Commitments hereunder create a presumption that the Backstop Party is in any way acting in concert or as a group with any other person or entity whether as a result of this
commitment or otherwise.
13. Each party hereto confirms that it has made its own decision to execute this Backstop Commitment Letter based upon its own
independent assessment of documents and information available to it, as it has deemed appropriate.
14. Except as expressly provided in this Backstop Commitment Letter, (a) nothing herein is intended to, or does, in any manner
waive, limit, impair or restrict the ability of each party hereto to protect and preserve its rights, remedies and interests, including, without limitation, any claims against or interests in any of the Debtors or other parties, or its
full participation in any bankruptcy proceeding, and (b) the parties hereto each fully preserve any and all of their respective rights, remedies, claims and interests as of the date hereof and upon a termination of this Backstop
Commitment Letter. Further, nothing in this Backstop Commitment Letter shall be construed to prohibit any party hereto from appearing as a party-in-interest in any matter to be adjudicated in the Chapter 11 Cases, so long as such
appearance and the positions advocated in connection therewith are consistent with this Backstop Commitment Letter, the Plan Term Sheet and the Plan, and are not for the purpose of, and could not reasonably be expected to have the effect
of, hindering, delaying or preventing the consummation of the transactions contemplated by the Plan Term Sheet and the Plan.
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Sincerely,
Backstop Party:
| | RIVA CAPITAL PARTNERS V, L.P. | | |
| | By: | Abrams Capital Management, L.P., | |
| | its investment manager | | |
| | | ||
| | By: | Abrams Capital Management, LLC, | |
| | its general partner | | |
| | | ||
| | By: | /s/ David Abrams | |
| | Name: | David Abrams | |
| | Title: | Managing Member | |
| | | ||
| | Notice Information: Alison Bomberg 222 Berkeley Street, 21st Floor Boston, MA 02116abomberg@abramscapital.com | | |
| | |||
CUSIP No. 69331C108
Accepted and agreed this ____ day of ___________, 2019, by:
PG&E CORPORATION
By:
Name:
Title:
CUSIP No. 69331C108
EXECUTION VERSION
Exhibit A
Mandatory Preferred Stock Term Sheet
CUSIP No. 69331C108
Term Sheet for
5.00% Mandatory Convertible Preferred Stock
5.00% Mandatory Convertible Preferred Stock
| Issuer: | | PG&E Corporation (“PG&E”) |
| Title of Securities: | | 5.00% Mandatory Convertible Preferred Stock of PG&E (the “Mandatory Convertible Preferred Stock”) |
| Shares of Mandatory Convertible Preferred Stock Offered by PG&E: | | Up to [●] shares |
| Offering Price: Issue Date: | $1,000 per share of the Mandatory Convertible Preferred Stock The Effective Date of the Plan | |
| Liquidation Preference: | | $1,000 per share |
| Dividends: | | 5.00% of the Liquidation Preference of $1,000 per share of the Mandatory Convertible Preferred
Stock per year (equivalent to $50 per annum per share), when, as and if declared by PG&E’s board of directors or an authorized committee thereof, payable in cash or, by delivery of additional shares of Mandatory
Convertible Preferred Stock or any combination of cash and shares of Mandatory Convertible Preferred Stock, as determined by PG&E in its sole discretion |
| Floor Price: | | 95% of the Initial Price, subject to standard ant-dilution adjustments |
| Dividend Payment Dates: | | If declared, January 1, April 1, July 1 and October 1 of each year, commencing on (TBD) |
| Dividend Record Dates: | | The March 15, June 15, September 15 and December 15 immediately preceding the next dividend payment
date |
| Redemption: | | The Mandatory Convertible Preferred Stock will not be redeemable |
| Initial Price: | | 80% of the Baseline Share Price (as defined in Exhibit B) |
| Threshold Appreciation Price: | | 110% of the Initial Price, subject to standard ant-dilution adjustments |
| Mandatory Conversion Date: | | 1/8th of the Mandatory Convertible Preferred Stock will convert into PG&E Common
Stock 90, 180, 270, 360, 450, 540, 630, and 720 days from Issue Date |
| Conversion Rate: | | Upon conversion on the Mandatory Conversion Date, the conversion rate for each share of the
Mandatory Convertible Preferred Stock will be not more than [●] shares of Common Stock (the “Maximum
Conversion Rate”) and not less than [●] shares of Common Stock (the “Minimum Conversion Rate”),
depending on the Applicable Market Value of the Common Stock subject to standard anti-dilution adjustments. The following table illustrates the conversion rate per share of the Mandatory Convertible Preferred Stock: |
CUSIP No. 69331C108
| Applicable Market Value of the Common Stock | | Conversion rate (number of shares of Common Stock to be received upon conversion of each share of the Mandatory Convertible Preferred Stock) | ||||
| Greater than 110% of the Initial Price (which is the Threshold Appreciation Price) | | [●] shares (approximately equal to $1,000 divided by the Threshold Appreciation Price) | ||||
| Equal to or less than the Threshold Appreciation Price but greater than or equal to the Floor Price | | Between [●] and [●] shares, determined by dividing $1,000 by the applicable market value of the
Common Stock | ||||
| Less than 95% of the Initial Price (which is the Floor Price) | | [●] shares (approximately equal to $1,000 divided by the Floor Price) | ||||
| Applicable Market Value: Conversion at the Option of the Holder: | | The “Applicable Market Value” shall be the 10-trading day VWAP immediately preceding the applicable Mandatory Conversion Date At any time prior to final Mandatory Conversion Date, holders of the Mandatory Convertible
Preferred Stock have the option to elect to convert their shares of the Mandatory Convertible Preferred Stock in whole or in part (but in no event less than one share of the Mandatory Convertible Preferred Stock), into
shares of Common Stock at the Minimum Conversion Rate of shares of Common Stock per share of the Mandatory Convertible Preferred. This Minimum Conversion Rate is subject to certain anti-dilution adjustments | ||||
CUSIP No. 69331C108
Exhibit B
Backstop Terms
| Backstop Party | Backstop Commitment Amount |
| Riva Capital Partners V, L.P. | $150,000,000.00 |
“Applicable Utility Index Multiple” shall mean the average normalized 2021 estimated price-to-earnings ratio of the U.S. regulated utilities in the S&P 500 Utilities (Sector) Index (after excluding
AES, EIX, EXC, NRG, PEG, and PPL) over the 20-day trading period before Effective Date per Capital IQ Consensus Estimates.
“Backstop Commitment Fee” shall mean a commitment fee equal to 1.0% of the total Backstop Commitment Amount as of the date on which the Debtors execute this Backstop Commitment Letter that shall be
paid in New Common Stock, which amount shall be determined using the Backstop Price.
“Backstop Funding Fee” shall mean a funding fee of 2.0% of the amount of the Backstop Commitment actually funded by the Backstop Party that shall be paid in New Common Stock, which amount shall be
determined using the Backstop Price.
“Backstop Price” will be calculated on a per share basis as 57.5% of the Baseline Share Price.
“Baseline Share Price” shall mean the (a) Applicable Utility Index Multiple, multiplied by (b)
PG&E 2021E Net Income, divided by (c) the fully diluted shares outstanding at the Effective Date, including the New
Common Stock.
“PG&E 2021E Net Income” shall mean PG&E’s forecasted 2021 net income, excluding the impact of restructuring expenses, financing fees, changes in reserves for fire claims, and any other
projected amounts that are not normally incurred by a utility.
67