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PG&E: Bankruptcy court sets interest rate for four classes at 2.59%
By Caroline Salls
Pittsburgh, Dec. 31 – PG&E Corp. and Pacific Gas and Electric Co. won a battle over the interest rate to be paid to four groups of creditors under the companies’ plan of reorganization when the U.S. Bankruptcy Court for the Northern District of California ruled Monday that the interest rate should be set at 2.59%.
The PG&E debtors and some of their shareholders argued that the creditors in all four classes in question should receive interest calculated at the federal interest rate in effect as of the Jan. 29, 2019 Chapter 11 bankruptcy filing date.
The debtors said legal precedent dictates that unsecured creditors in a solvent case should receive post-bankruptcy interest calculated at that rate.
However, the ruling said several parties to PG&E’s Chapter 11 case, including the official committee of unsecured creditors, an informal committee of senior secured noteholders and an informal committee of holders of trade claims called for “application of various rates, generally determined by applicable contracts between the debtors and the respective claimants, judgment rates or some other rate.”
The court agreed with the debtors and shareholders, saying the federal interest rate applies to any plan under applicable law.
In addition, the ruling rejected the objecting parties’ claim that imposition of the federal rate renders them impaired under the plan.
“It is the Bankruptcy Code itself, not any plan provision, that imposes that rate,” the decision said.
PG&E is an electric and natural gas utility based in San Francisco. The company filed bankruptcy on Jan. 29, 2019 under Chapter 11 case number 19-30088.
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