ML023100320
| ML023100320 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon  |
| Issue date: | 10/31/2002 |
| From: | Aronzon P, Moore R, Sorochinsky M Milbank, Tweed, Hadley & McCloy, LLP, Official Committee of Unsecured Creditors |
| To: | Office of Nuclear Reactor Regulation, US Federal Judiciary, Bankruptcy Court, Northern District of California |
| References | |
| 01-30923 DM, 94-0742640 | |
| Download: ML023100320 (6) | |
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9 In re PACIFIC GAS AND ELECTRIC COMPANY, a California corporation, Debtor.
Federal I.D. No. 94-0742640 Case No. 01-30923 DM Chapter 11 Case Date: November 8, 2002 Time: 1:30 p.m.
d Place: 235 Pine Street, 22n Floor, San Francisco. California NOTICE OF MOTION AND MOTION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS FOR AUTHORITY TO INCUR PLAN IMPLEMENTATION EXPENSES; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF
[Declaration of Paul S. Aronzon filed concurrently herewith]
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 LA1 #6248361vl Motion of the Official Committee of Unsecured Creditors for Authority to Incur Plan Implementation Expenses PAUL S. ARONZON, SBN 88781 ROBERT JAY MOORE, SBN 77498 MICHAEL I. SOROCHINSKY, SBN 166708 MILBANK, TWEED, HADLEY & McCLOY LLP 601 South Figueroa Street, 3 0th Floor Los Angeles, California 90017 Telephone: (213) 892-4000 Facsimile: (213) 629-5063 Attorneys for Official Committee of Unsecured Creditors UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION 1w 14t'po((~1
1 NOTICE OF MOTION AND MOTION 2
PLEASE TAKE NOTICE that on November 8, 2002 at 1:30 p.m., or as soon 3
thereafter as the matter may be heard in the Courtroom of the Honorable Dennis Montali, 4
located at 235 Pine Street, 2 2nd Floor, San Francisco, California, the Official Committee of 5
Unsecured Creditors (the "Committee") in the chapter 11 case of Pacific Gas and Electric 6
Company ("PG&E") will and hereby does move the Court for entry of an order approving the 7
Motion of the Official Committee of Unsecured Creditors for Authority to Incur Plan 8
Implementation Expenses (the "Motion").
9 This Motion is based on this Notice of Motion and Motion, the accompanying 10 Memorandum of Points and Authorities, the Declaration of Paul S. Aronzon, filed concurrently 11 herewith, the record of this case and any evidence presented at or prior to the hearing on this 12 Motion.
13 PLEASE TAKE FURTHER NOTICE that pursuant to the Order Granting Ex Parte 14 Application of the Official Committee of Unsecured Creditors for Order Shortening Time on 15 Motion of the Official Committee of Unsecured Creditors for Authority to Incur Plan 16 Implementation Expenses entered on October 31, 2002, any written opposition to the Motion 17 and the relief requested herein must be filed with the Bankruptcy Court and served by facsimile 18 or e-mail upon the appropriate parties (including counsel for the Committee, the California 19 Public Utilities Commission and the Office of the United States Trustee) by 2:00 p.m. on 20 November, 7, 2002. If there is no timely opposition to the requested relief, the Court may enter 21 an order granting such relief without further hearing.
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-2 Motion of the Official Committee of Unsecured Creditors for Authority to Incur Plan Implementation Expenses
1 MEMORANDUM OF POINTS AND AUTHORITIES 2
Pursuant to Bankruptcy Code sections 363(b)(1) and 105(a), the Official 3
Committee of Unsecured Creditors (the "Committee") in the Chapter 11 case of Pacific Gas 4
and Electric Company ("PG&E") requests an order authorizing payment by the PG&E estate of 5
$250,000 for an Indicative Ratings Letter (the "Ratings Letter") from Standard & Poors 6
("S&P") related to the confirmation and implementation of the Amended Plan of 7
Reorganization for PG&E filed by the Committee and the California Public Utilities 8
Commission (the "Committee/CPUC Plan").'
9 10 I. FACTUAL BACKGROUND 11 PG&E filed a voluntary petition for relief under Chapter 11 of the Bankruptcy 12 Code on April 6, 2001. The Official Committee of Unsecured Creditors was appointed on 13 April 10, 2001. The Committee, in conjunction with the California Public Utilities 14 Commission (the "CPUC"), has proposed the Committee/CPUC Plan. The Committee/CPUC 15 Plan provides for issuance of debt and equity securities in the approximate amount of $8.8 16 billion to pay the claims of creditors in full, with interest. PG&E has filed a competing plan of 17 reorganization. The confirmation hearing on the Committee/CPUC Plan is scheduled to 18 commence on November 18, 2002.
19 PG&E has previously filed and obtained orders approving more than ten (10) 20 motions seeking authority to incur costs related to implementation of its plan. PG&E has 21 obtained approval for approximately $60 million pursuant to these motions.
22 This Motion seeks approval for the relatively small sum of $250,000 in plan 23 implementation-related expenses to obtain the Ratings Letter from S&P. Of this amount, 24
$125,000 would be immediately payable to S&P as an initial deposit. Upon receipt of this 25 initial payment, S&P would commence work on the Ratings Letter. S&P has stated that the 26 27 The Committee is in discussion with other rating agencies and in the future will likely make similar requests for payment of fees to these agencies to obtain indicative ratings letters.
28 LAI :#6248361vl Motion of the Official Committee of Unsecured Creditors for Authority to Incur Plan Implementation Expenses
1 Ratings Letter would be issued within not more than thirty (30) days2 after receiving the initial 2
payment. Upon issuance of the Ratings Letter, the remaining $125,000 would become due. 3 3
The purpose of the Committee's request for the Ratings Letter is to obtain 4
indicative ratings of the debt and equity securities that will be issued under the 5
Committee/CPUC Plan, if it is confirmed. Obtaining the Ratings Letter is an important step 6
prior to issuance of the securities and will be helpful to the confirmation and implementation of 7
the Committee/CPUC Plan.4 Although the Committee and the CPUC do not believe that 8
Bankruptcy Code section 1129 requires that the securities issued under the Committee/CPUC 9
Plan have an investment grade credit rating for the Committee/CPUC Plan to be feasible, 10 PG&E has indicated that it intends to argue during the confirmation proceedings that the 11 Committee/CPUC Plan would not be feasible if the securities issued do not achieve an 12 investment grade credit rating. Accordingly, the Ratings Letter is necessary.
13 14 II. THE PLAN IMPLEMENTATION EXPENSES SHOULD BE APPROVED 15 PURSUANT TO SECTIONS 363 (b)(1) AND 105(a) OF THE BANKRUPTCY CODE 16 The Committee seeks approval of payment for the Ratings Letter as a use of estate 17 funds pursuant to Bankruptcy Code section 363(b)(1). Since these expenses are related to the 18 implementation of the Committee/CPUC Plan, the Committee believes that the purposes and 19 scope of the expenditure maybe characterized as outside the ordinary course of PG&E's 20 business and therefore requires the Court's approval.
21 The Court has considerable discretion in approving a request pursuant to Section 22 363(b)(1) of the Bankruptcy Code. See In re Montgomery Ward Holding Corn., 242 B.R. 147, 23 24 25 2 S&P has agreed to this expedited process. Generally it takes sixty (60) to ninety (90) 26 days to obtain an indicative ratings letter.
- 3 See Declaration of Paul S. Aronzon in Support of Motion and Ex Parte Application, filed 27 concurrently herewith ("Aronzon Dec."), ¶ 4.
4 See Aronzon Dec., ¶ 3 28 LAI #6248361vi Motion of the Official Committee of Unsecured Creditors for Authority to Incur Plan Implementation Expenses
1 153 (D. Del. 1999) (noting that the bankruptcy court has considerable discretion in approving a 2
section 363(b) motion).
3 In determining whether to authorize a transaction under section 363(b)(1), courts 4
require a debtor to show that a sound business purpose justifies such actions, applying the 5
business judgment test. See, e Stephens Indus., Inc. v. McClung, 789 F.2d 386, 389-90 (6th 6
Cir. 1986); Committee of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 7
1063, 1071 (2d Cir. 1983); see also Lawrence P. King, 3 Collier on Bankruptcy ¶363.02[1][g]
8 (15th ed. rev. 1998).
9 Once the debtor has articulated a rational business justification, a presumption 10 attaches that the decision was made "on an informed basis, in good faith and in the honest 11 belief that the action taken was in the best interest of the [debtor]." See, e.g., Official Comm.
12 of Subordinated Bondholders v. Integrated Res., Inc. (In re Integrated Res., Inc.), 147 B.R.
13 650, 656 (S.D.N.Y. 1992) (citing Smith v. Van Gorkom 488 A. 2d 858 (Del. 1985)).
14 Sound business justifications exist for approval of the implementation costs 15 described above. The Ratings Letter is important to the confirmation and implementation of 16 the Committee/CPUC Plan. Furthermore, PG&E is solvent and has sufficient cash to pay the 17 expenses described herein without causing any detriment to itself. On that basis, the 18 Committee believes that the implementation expenses described herein are necessary and 19 should be approved so that work can commence promptly.
20 Furthermore, section 105(a) of the Bankruptcy Code provides the Court with the 21 power to "issue any order, process, or judgment that is necessary or appropriate to carry out the 22 provisions of [the Bankruptcy Code]." Courts have held that this provision should be 23 considered broadly, giving the Bankruptcy Court considerable power to fashion the appropriate 24 remedies. See United States v. Energy Resources Co., Inc., 495 U.S. 545, 549 (1990); In re 25 Roman, 283 B.R. 1, 13 (9th Cir. BAP) 2002; see also Lawrence P. King, 2 Collier on 26 Bankruptcy, T 105.01 (15th ed. Rev. 2001). Accordingly, the Court should approve the 27 implementation expenses to ensure that the confirmation proceedings and subsequent 28 implementation of the Committee/CPUC Plan proceed without delay.
LAI :#6248361vi Motion of the Official Committee of Unsecured Creditors for Authority to Incur Plan Implementation Expenses
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9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Respectfully, PAUL S. ARONZON ROBERT JAY MOORE MICHAEL SOROCHINSKY Milbank, Tweed, Hadley & McCloy LLP By:
Attorneys for the Official Committee of Unsecured Creditors LAI'#6248361vl
-6 Motion of the Official Committee of Unsecured Creditors for Authority to Incur Plan Implementation Expenses In addition, the Committee requests that the Court waive the 10-day automatic stay of enforcement of orders under Bankruptcy Rule 7062 and order PG&E to pay the $125,000 initial deposit to S&P immediately upon entry of an order granting this Motion.
III. CONCLUSION For all the foregoing reasons, the Committee respectfully requests that the Court approve the plan implementation expenses described above and grant such other and further relief as my be just and appropriate.
DATED: October 31, 2002