ML020430027

Reservation of Rights of Certain Debtholders to the Joint Motion of Debtor and the Bank of New York, as Indenture Trustee, for Order Pursuant to Section 105( a) and 363 of the Bankruptcy Code Authorizing (1) Debtor to Enter Into Tri-Party A

ML020430027
Person / Time
Site:	Diablo Canyon
Issue date:	01/11/2002
From:	Pascoe W Pascoe & Rafton
To:	Office of Nuclear Reactor Regulation, US Federal Judiciary, Bankruptcy Court, Northern District of California
References
01-30923 DM
Download: ML020430027 (5)

Text

James E. Spiotto [Admitted ProHac Vice]

Chapman and Cutler 2 111 West Monroe Street 3 Chicago, IL 60603-4080 Telephone: (312) 845-3000 4 Facsimile: (312) 701-2361 5 William R. Pascoe, Esq. (State Bar #54284)

Pascoe & Rafion 6 1050 Northgate Drive Suite 356 7 San Rafael, CA 94903 8 Telephone: (415) 492-1003 Facsimile: (415) 492-3312 9

ATTORNEYS FOR CERTAIN DEBTHOLDERS 10 UNITED STATES BANKRUPTCY COURT 11 FOR THE NORTHERN DISTRICT OF CALIFORNIA 12 SAN FRANCISCO DIVISION 13 IN RE: )

)

14 PACIFIC GAS AND ELECTmC COMPANY, ) Case No. 01-30923 DM a California corporation )

15 ) Chapter 11 Case

)

16

) Date: January, 16,2001 17 ) Time: 9:30 a.m.

) Place: 235 Pine Street.

18 ) San Francisc6, California Debtor. )

19 20 RESERVATION OF RIGHTS OF CERTAIN DEBTHOLDERS TO THE JOINT MOTION OF DEBTOR AND THE BANK OF NEW YORK, AS INDENTURE.TRUSTEE,_WOORER "21 PURSUANT TO SECTIONS 105(A) AND 363 OF THE BANKRUPTCY CODE AUTHORIZING (I) DEBTOR TO ENTER INTO TRI-PARTY AGREEMENT, AND 22 APPOINENT "II) OF WHMIGTON TRUST COMPANY AS SUC TRUSTEE 23 24 Now COME the Debtholders1 and hereby respectfully submit their reservation of rights to the 25 Joint Motion of Debtor Pacific Gas and Electric Company (the "Debtor")and The Bank of New York 26 The Debtholders include the following entities: State Teachers Rvfiremeni System of Ohio, the Washington DC Water and Sewer Authority, Chandler Asset Management, Frankli Mutual Advisers, LLC., King Street Capital, 27 M.H. Davidson & Co., L.L.C., OZF Management LP., Pacific Investment Management Company LLC, Satellite Asset Management L.P., Security Benefit Life Insurance Co., Stark Investments, Angelo Gordon, & Co., and 28 Appaloosa Management LP.

1309497.01.07B 1540343 - 1/11/02 wa4/

DEMMO*DERS RESERVATION oFRIaHrS TO MOTION RE: A.,OIOMENT 0ý4,!141 OF *WHMMON TRUST COMPANY AS SUCCESSOR TRUSTEE I

as Indenture Trustee for an Order pursuant to Sections 105(a) and 363 of the Bankruptcy Code, 2

Authorizing, (i) Debtor -to enter into Tri-Party Agreement, and (ii) Appointment of Wilmington Trust 3

Company as successor trustee (the "Motion")2 . In support of the reservation of rights, the Debtholders 4

5 state as follows:

6 A. The Debtholders are holders of inter alia Floating Rate Notes, Senior Notes, Medium 7 Term Notes, Commercial Paper and other claims against the Debtor as those claims are defined in the 8 First Amended Plan of Reorganization., As holders of in excess of $2 billion in total claims, the 9 Debtholders represent- a significant portion of the unsecured creditors in this bankruptcy proceeding.

10 Over $1 billion of the claims held by the Debtholders were issued pursuant to the terms of the indenture 11 between The Bank of New York as indenture trustee (the "Indenture Trustee"),.dated as of September 12 1, 1987, as supplemented by -twosupplemental indentures (collectively, the "Indenture") and the 13 Debtor. With respect to certain series of the securities issued under the Indenture (the "Securities"),

the 14 Debtholders represent over a majority in principal amount of such series.

15 B. In the Motion, the Indenture Trustee indicates that, since it also serves as an indenture 16 trustee under certain secured debt of the Debtor, the filing of the bankruptcy petition in this case 17 18 triggered an event of default which created a conflict of interest for the Indenture Trustee under while 19 Section 310(b) of the Trust Indenture Act of 1939, (the "'TA"). The Indenture Trustee states that, 20 it tendered its resignation-as trustee under the Indentumreon July 3, 20A1, such resignation-is not-effective 21 until the appointment of a successor trustee.

22 C. In the Motion, the movants seek the Court's permission to enter into -a Tri-Party 23 Agreement with Wilmington Trust Company and the appointment of Wilmington Trust Company as 24 successor trustee under the Indenture (the "Successor Trustee"), even though Wilmington Trust 25 26 27 2 Capitalized terms not otherwise defined shall have the meaning ascribed to them in the Motion and exhibits thereto 28 unless the context shall indicate otherwise.

2

Company lacks a corporate trust office in Manhattan and thus, technically, does not meet the eligibility 2

requirements of the Indenture.

3 D. A copy of the proposed Tri-Party Agreement is attached to the Motion as Exhibit A.

4 Section 403 of the Tri-Party Agreement purports to govern the payment of the fees and expenses of both 6 the-Resigning Trustee and the Successor Trustee. Under Section 403, all property or funds collected by 7 the Successor Trustee in connection with the Indenture shall be distributed upon receipt: first, to 8 payment of all outstanding fees and expenses due and owing to the Resigning Trustee and the Successor 9 Trustee under the Indenture, and second, to the holders of the Securities.

10 E. While the Debtholders recognize the need for the Indenture Trustee to resign and support 21 the payment by the Debtor of the fees and expenses of the Resigning Trustee and Successor Trustee, 12 they submit the following reservation of rights.

13 RESERVATION OF RIGHTS 14 REMOVAL OF TRUSTEE 15

1. Under the terms of Section 610(c) of the Indenture, the trustee under the Indenture (the 16 17 "Trustee") may be removed at any time with respect to the Securities of any series by Act of the 18 Holders, as defined in the Indenture, of a majority in principal amount of the outstanding Securities of.

19 such series delivered to the Trustee and to the Company, the Debtor herein. The Debtholders reserve all 20 of their rights under the Indenture including pursuant-to this Section 610(c): While the Debtholders 21 know of no reason at this time why Wilmington Trust Company should not be approved as the 22 Successor Trustee, the Debtholders' lack of objection should not be deemed a waiver of any rights of the 23 Debtholders under Section 610(c) should circumstances change in the future.

24 REASONABLE FEES AND EXPENSES 25

2. Section 607 of the Indenture provides for compensation and reimbursement-of the Trustee 26 under the Indenture for its "reasonable" fees and expenses. Certain portions of Section 403 of the Tri 27 Party Agreement refer to "all outstanding fees and expenses." Pursuant to the terms of Sections 901 and 28 902 of the Indenture, although supplemental indentures without the consent of the Holders are 3

appropriate to evidence succession, they are not authorized to change any of the substantive rights of the 2

Holders. The Debtholders assume that the requirement of reasonableness is to be read into Section 403 3

of the Tn-Party Agreement. Moreover, the Debtholders are not implying that the fees would be 4

5 unreasonable. However, if the purpose of Section 403 is to modify the terms of the Indenture with reserve 6 respect to the standard for reimbursable fees and expenses of the Trustee, then the Debtholders 7 their rights to assert that such amendment is ineffective.

8 THE DEBTOR'S OBLIGATION TO PAY TRUSTEE'S FEES 9 3. The Summary Claims Table that appears in the First Amended Disclosure Statement for the 10 First Amended Plan of Reorganization dated as of December 19, 2001, which the Debtor filed in this II case, sets forth the estimated percentage of recovery for the Class 5 Claims, including Securities issued 12 under the Indenture, as 100%. It is the position of the Debtholders that the language in Section 403 of 13 the Tri-Party Agreement providing for consideration to be applied first to the payment of fees and 14 expenses under the Indenture is inconsistent with the estimated recovery as set forth in the Amended 15 Disclosure Statement. The Debtholders strongly support the payment of the fees and expenses of the 16 case. Given the facts and circumstances 17 Resigning Trustee and Successor Trustee by the Debtor in this that the fees and expenses of of this case, including the Debtor's solvent status, the Debtholders believe 19 such Trustees must be paid by the Debtor rather than borne by the Holders. The entry of the Order 20 accompanying the Motion should-not-be deemed an agreement by the Debtholders that the Securities 21 will be paid in full if the consideration received for the Securities can be diminished by exercise Of the 22 Trustee's "latch on rights" under the Indenture. The Debtholders do not waive their position that the 23 plan of reorganization in this case must separately deal with the claims of the Trustee in a manner that 24 will satisfy those claims in full by payment from the Debtor and obviate the need to exercise any latch 25 on rights. Under the language of the Indenture, see Section 607, the Debtor covenanted to pay the 26 reasonable fees and expenses of the Trustee. The Debtholders reserve the right to assert that any plan by 27 this solvent Debtor in which the fees and expenses of the Trustee are not paid separately from the claims 28 4

such Securities, with all the attendant I of the holders of the Securities is -not payment in full of

-2 -nifiji ations forjunior classes.

3 PROPER TREATMENT UNDERPLAN holder of any indentare security to.

4 ,4. Under Section 316(b) of the TIA the right of any or afcted of the principal of and interest on such security shall not be impaired 5 receive payment only the Holders of the the consent of such holder. Under Section 504 of the Indenture, 6 without Accordingly, only the Holders can 6 Securities, and not the.TrusiLe, can vote on a plan of reorganization.

all their rights with respect to the proper apprpo their treatment under a plan. The Debtholders reserve this case.

treatment of the Securities under any plan ofreorganization in 9

SUGGEST LA -GUAGE 10 language:

5. The proposed order should be modified to contain the following 11 of "Nothiug contained herein shall be deemed to (a) diminish the rights 12 any holders of securities issued under the Indenture, (b) waive the right of full under any holder of securities issued under the Indenture to be paid in applicable law or (c) dictate the provisions of or be an agreement by any 13 the securities creditor as to the terms of a plan of reorganization regarding 1i4 issued under the Indenture" 15 Motion as set forth 16 WHEEFOR, the Debtholders reserve their rights with respect to the 17 herein.

CHAPMAN ANO Ct~nER S18' PASCOB & RAFION 19

• 2o DATED: Janmry 11,2002

. William R. Pascoe (#54284) 21 22 24 25 26 Received Time Jan.11. 2:59PM