22 Jan

Why PG&E Stock Fell ~60% Last Week

WRITTEN BY Vineet Kulkarni

PG&E to file for bankruptcy

On January 14, PG&E (PCG) said that it’s preparing to file for Chapter 11 bankruptcy. The stock fell ~52% following the news. The utility is facing ~$30 billion in liabilities related to wildfires in 2017 and 2018. PG&E is expected to file for Chapter 11 of the US Bankruptcy Code around January 29.

Why PG&E Stock Fell ~60% Last Week

The utility said that it doesn’t expect the bankruptcy proceedings to impact its electric and gas services. PG&E filed for bankruptcy in 2001. PG&E stock fell ~80%, which has wiped out ~$22 billion of its market cap since the wildfires started on November 8. Broader utilities (XLU) fell marginally during this period.

BlueMountain’s challenge to bankruptcy

On January 17, BlueMountain Capital Management, an asset management company and a PG&E shareholder, sent a letter to PG&E’s board. BlueMountain Capital Management said that PG&E was solvent and had enough liquidity to manage its operations, while its liabilities remained uncertain and contestable. PG&E failed to make a $21.6 million interest payment due on its 2040 senior notes, according to Reuters.

The deadliest wildfire in California’s history, named “Camp Fire,” killed at least 86 people. PG&E was held responsible for starting wildfires in 2017. In 2018, PG&E reported more than $2 billion in charges related to the wildfires in 2017.

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