PG&E to raise £4.54 billion via public offerings to exit bankruptcy

Pacific Gas and Electric Company (NYSE: PCG) filed for Chapter 11 bankruptcy in the United States in 2019. In an announcement on Monday, the power provider said that it now seeks to raise £4.54 billion in new equity via public offerings in a bid to exit bankruptcy.

The announcement fuelled a 12.5% decline in the shares of the company in premarket trading on Monday. Despite the financial struggles, PG&E is still roughly 20% up year to date in the stock market after recovering from a low of £5.70 per share in March. Learn more about why prices rise and fall in the stock market.

Third Point and Appaloosa to make an £2.56 billion investment in PG&E

Upon successfully exiting bankruptcy, PG&E added, two of its prominent investors; Third Point and Appaloosa, will be making a sizeable investment to buy roughly £2.56 billion worth of its stock.  

According to the San Francisco-headquartered company, its common stock offering will reserve about £990 million for large shareholders. Up to 25% of the public offering, it added, will be available to the individual investors.

The company also highlighted on Monday that its private placement is likely to cap the per-share price at £8.28. This represents a 16% discount on the closing price of its stock on Friday.

PG&E to prepare a debt-financing package worth £8.68 billion

An investor close to PG&E’s funding plan also commented on Friday that the utility firm is likely to prepare a debt-financing package worth £8.68 billion to exit bankruptcy. The announcement resulted in the company’s stock climbing by 12% on Friday.

Investor George Schultze also highlighted that the package will comprise of term loans and high-yield bonds and is in line with the company’s previously announced goal of raising £21.30 billion via public offerings. Schultze founded Schultze Asset Management in 1988 that primarily focuses on investment opportunities in distressed securities.  According to Schultze:

“While the company comes out of this slightly overleveraged, it has a strong business and will be able to pay down the debt. The debt market is so hot right now that I’m sure this offering will be oversubscribed.”

Pacific Gas and Electric Company’s performance was also noted downbeat in 2019 with an annual decline of more than 50%. At the time of writing, the American investor-owned utility company has a market cap of £5.23 billion.