ML023610412
| ML023610412 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon  |
| Issue date: | 12/20/2002 |
| From: | Kaplan G Howard, Rice, Nemerovski, Canady, Falk & Rabkin, Pacific Gas & Electric Co |
| To: | Office of Nuclear Reactor Regulation, US Federal Judiciary, Bankruptcy Court, Northern District of California |
| References | |
| 01-30923 DM, 94-07420640 | |
| Download: ML023610412 (11) | |
Text
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9 10 11 12 HOWARD 13 NmE" 14 SMU 15 16 17 18 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:
January 22, 2003 Time:
1:30 p.m.
Place:
235 Pine St., 22nd Floor San Francisco, California Judge:
Hon. Dennis Montali PACIFIC GAS & ELECTRIC COMPANY'S NOTICE OF MOTION AND MOTION FOR ORDER FURTHER EXTENDING EXCLUSIVITY PERIOD FOR PLAN OF REORGANIZATION; SUPPORTING MEMORANDUM OF POINTS AND AUTHORITIES PG&E's MOTION TO FURTHER EXTEND EXCLUSIVITY PERIOD FOR REORGANIZATION PLAN JAMES L. LOPES (No. 63678)
WILLIAM J. LAFFERTY (No. 120814)
GARY M. KAPLAN (No. 155530)
HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN A Professional Corporation Three Embarcadero Center, 7th Floor San Francisco, California 94111-4065 "7
Telephone:
415/434-1600 "A
Facsimile:
415/217-5910 DO Attorneys for Debtor and Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION 19 20 21 22 23 24 25 26 27 28 A.,U1 0&Q P
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1 NOTICE OF MOTION AND MOTION 2
PLEASE TAKE NOTICE that on January 22,2003, 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, 22nd Floor, San Francisco, California, Pacific Gas and Electric 5
Company, the debtor and debtor in possession in the above-captioned Chapter 11 case (the 6
"Debtor" or "PG&E"), will and hereby does move the Court for entry of an order pursuant to 7
Bankruptcy Code Section 1121(d) further extending, from December 31, 2002 until April 8
30, 2003 (or such later date as the Court may hereafter order based upon a subsequent 9
motion filed on or before April 30, 2003), the period during which PG&E maintains "plan 10 exclusivity" (except with respect to the California Public Utilities Commission ("CPUC")
11 and the Official Committee of Unsecured Creditors ("Committee")) pursuant to Bankruptcy 12 Code Section 1121(c)(3) (the "Motion"). As set forth below, PG&E submits that there is HCWA 13 "cause" to grant the requested extensions pursuant to Bankruptcy Code Section 1121(d).
S14 This Motion is based on the facts and law set forth herein, the record of this case EIRAMI~q 15 and any evidence presented at or prior to the hearing on this Motion.
16 PLEASE TAKE FURTHER NOTICE that pursuant to Rule 9014-1(c)(2) of the 17 Bankruptcy Local Rules of the United States District Court for the Northern District of 18 California, any opposition to the Motion and the relief requested herein must be filed with 19 the Bankruptcy Court and served upon appropriate parties (including counsel for PG&E) at 20 least five (5) days prior to the scheduled hearing date. If there is no timely objection to the 21 requested relief, the Court may enter an order granting such relief without further hearing.
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PG&E's MOTION TO FURTHER EXTEND EXCLUSIVITY PERIOD FOR REORGANIZATION PLAN 1
MEMORANDUM OF POINTS AND AUTHORITIES 2
- 1.
3 FACTUAL BACKGROUND.
4
- 1.
On April 6, 2001 (the "Petition Date"), PG&E filed a voluntary petition under 5
Chapter 11 of the Bankruptcy Code. PG&E continues to manage and operate its business 6
and property as a debtor in possession pursuant to Sections 1107 and 1108 of the Bankruptcy 7
Code. No trustee has been appointed.
8
- 2.
As set forth in previous papers filed with the Court, PG&E has reported assets of 9
tens of billions of dollars and more than thirteen thousand creditors. In addition to the sheer 10 size of this case, it is exceedingly complex, based on, inter alia, PG&E's status as a utility 11 company subject to a myriad of state and federal statutes, rules and regulations. During this 12 bankruptcy case, PG&E has also continued to grapple with the effects of an unprecedented HONVA 13 energy crisis.
m 14
- 3.
Pursuant to Bankruptcy Code Sections 1121(b) and (c), PG&E had the exclusive 15 right to file a plan for 120 days after the Petition Date (i.e., until August 6, 20011), and, if it 16 filed a plan by such time, an additional sixty days during which it would maintain plan 17 exclusivity (i.e., until October 3, 2001).
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- 4.
By its "Order Extending Exclusivity Period" filed on July 20, 2001, this Court (a) 19 extended the exclusive period under Section 1121 during which only the Debtor could file a 20 plan by four months, until December 6, 2001, and (b) in the event that the Debtor filed a 21 plan by December 6, 2001, extended the period during which the Debtor maintained plan 22 exclusivity pursuant to Section 1121(c)(3) by four months, until February 4, 2002. That 23 Order expressly authorized PG&E to seek further extension of these time periods by filing a 24 subsequent motion on or before December 6, 2001 and February 4, 2002, respectively.
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- 5.
On September 20, 2001, PG&E (and co-proponent PG&E Corporation, PG&E's 26 1 The 120th day after the Petition Date was actually August 4, 2001. Since that date 27 fell on a Saturday, pursuant to Federal Rule of Bankruptcy Procedure 9006(a), the 120-day 28 period expired on Monday, August 6, 2001.
PG&E's MOTION TO FURTHER EXTEND EXCLUSIVITY PERIOD FOR REORGANIZATION PLAN 1
parent company) filed the "Plan of Reorganization under Chapter 11 of the Bankruptcy Code 2
for Pacific Gas and Electric Company" (as amended from time to time, the "PG&E Plan"),
3 and an accompanying Disclosure Statement (as amended from time to time, the "PG&E 4
Disclosure Statement").
5
- 6.
By filing the PG&E Plan prior to December 6, 2001, pursuant to the Court's July 6
20, 2001 Order, the Debtor maintained plan exclusivity pursuant to Section 1121 (c)(3) until 7
February 4, 2002, or such later date as the Court might order based on motion filed by 8
February 4, 2002.
9
- 7.
By its "Amended Order Further Extending Exclusivity Period for Plan of 10 Reorganization" filed on February 4, 2002, this Court extended the period during which the 11 Debtor maintains plan exclusivity (except with respect to the CPUC, as further discussed 12 below) pursuant to Section 1121(c)(3) of the Bankruptcy Code until June 30, 2002, or such 13 later date as the Court might order based upon a subsequent motion filed on or before June PhK "CM N
I14 30, 2002.2 INK 15
- 8.
By it "Order Terminating Plan Exclusivity with Respect to the California Public 16 Utilities Commission and Authorizing the California Public Utilities Commission to File an 17 Alternate Plan of Reorganization" filed on March 11, 2002, the Court terminated the 18 Debtor's exclusivity with respect to the CPUC effective as of February 27, 2002 and 19 authorized the CPUC to file an alternative plan and disclosure statement by April 15, 2002.
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- 9.
On April 15, 2002, the CPUC filed the "California Public Utilities Commission's 21 Plan of Reorganization under Chapter 11 of the Bankruptcy Code for Pacific Gas and 22 Electric Company" (as amended from time to time, the "CPUC Plan"), and an 23 accompanying Disclosure Statement (as amended from time to time, the "CPUC Disclosure 24 Statement").
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- 10. By its Order filed on April 24, 2002, the Court approved the PG&E Disclosure 26 27 2 Pursuant to Federal Rule of Bankruptcy Procedure 9006(a), since June 30, 2002 falls 28 on a Sunday, the applicable date is actually July 1, 2002.
PG&E's MOTION TO FURTHER EXTEND EXCLUSIVITY PERIOD FOR REORGANIZATION PLAN 1
1 Statement.
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- 11.
By its Order filed on May 17, 2002, the Court approved the CPUC Disclosure 3
Statement.
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- 12.
By its "Order Approving... Voting Solicitation Procedures... "filed on May 5
20, 2002, the Court established June 17, 2002 as the first date for soliciting acceptances or 6
rejections with respect to the PG&E Plan and the CPUC Plan. Pursuant to the Court's 7
Order, the last day to submit voting ballots on the PG&E Plan and CPUC Plan was August 8
12, 2002.
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- 13.
By its "Order Further Extending Exclusivity Period for Plan of Reorganization" 10 filed on July 9, 2002, the Court extended the period during which the Debtor maintains plan 11 exclusivity (except with respect to the CPUC and the Committee) pursuant to Section 12 1121(c)(3) of the Bankruptcy Code until December 31, 2002, or such later date as the Court 13 might order based upon a subsequent motion filed on or before December 31, 2002. That m
14 Order provides (at ¶ 3) that "[w]ith respect to the Committee, exclusivity pursuant to
&PRAI*cIN 15 Bankruptcy Code Section 1121(c)(3) is terminated, effective as of July 1, 2002.
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- 14.
On or about August 23, 2002, the Committee became a co-proponent of the 17 CPUC Plan.
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- 15.
Pursuant to various scheduling orders issued by the Court, the confirmation 19 hearing with respect to the CPUC Plan commenced on November 18, 2002, and the 20 confirmation hearing with respect to the PG&E Plan commenced on December 16, 2002, 21 and is scheduled to run through February 27, 2003.
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- 16. By this Motion, PG&E requests that the Court enter an order pursuant to 23 Bankruptcy Code Section 1121(d) further extending, from December 31, 2002 until April 24 30, 2003 (or such later date as the Court may hereafter order based upon a subsequent 25 motion filed on or before April 30, 2003), the period during which PG&E maintains plan 26 exclusivity (except with respect to the CPUC and the Committee) pursuant to Bankruptcy 27 Code Section 1121(c)(3).
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- 17. As discussed above, there are now two Chapter 11 Plans for which the Court has PG&E's MOTION TO FURTHER EXTEND EXCLUSIVITY PERIOD FOR REORGANIZATION PLAN 1
approved the respective Disclosure Statements, for which balloting has been completed, and 2
for which the confirmation hearing has been completed or is underway. The three primary 3
parties in this case (PG&E, the Committee and the CPUC) are each proponents of one of the 4
Plans, and no other party has formally sought to file a competing Chapter 11 plan for the 5
Debtor. If another party were to file a plan at this time, it would be both confusing and 6
counterproductive.3 Among other things, it would be impossible for such a plan to be 7
included on the same time track as the PG&E Plan and CPUC Plan, and would serve no 8
useful purpose.
9 10 II.
11 CAUSE EXISTS UNDER BANKRUPTCY CODE SECTION 1121(d) TO EXTEND THE EXCLUSIVE TIME PERIOD 12 UNDER SECTION 1121(c)(3) FOR THE PG&E PLAN.
11OWAM 13 RIKI m
14 A.
Section 1121(d) Permits A Court To Extend, For Cause, The Exclusivity Periods For The Debtor's Filing Of A Reorganization Plan Beyond The Initial 120 Day 15 And 180 Day Periods Provided Therein.
16 Pursuant to Bankruptcy Code Section 1121, Congress provided Chapter 11 17 debtors with time to attempt to reach agreement with their creditors, leaving to the 18 bankruptcy court the discretion as to how much time should be allowed. Section 1121(b) 19 establishes an initial period of 120 days after the order for relief during which only the 20 debtor may file a plan.4 If the debtor files a plan within the 120-day period, Section 21 3 Indeed, as the Court stated at the June 27, 2002 hearing on the Debtor's most recent 22 motion to extend exclusivity:
23 "1 do think there would be some unnecessary disruption and confusion to have a wholesale invitation for anyone to file a plan who feels a need to do so....
And 24 so I think I will leave the burden on other plan proponents at this time to come to court and show why they-it or they ought to be entitled to break the exclusivity 25 that I will continue for the debtor.... [I]f there is a serious proponent who wishes to file a plan, I will be willing to take a request to break exclusivity on an 26 expedited basis." (Id. at 54) 27 4 Section 1121(b) provides that "[e]xcept as otherwise provided in this section, only the debtor may file a plan until after 120 days after the date of the order for relief under this 28 chapter."
11 U.S.C. §1121(b). Pursuant to Bankruptcy Code Section 301, the order for 28 (continued... )
PG&E's MOTION TO FURTHER EXTEND EXCLUSIVITY PERIOD FOR REORGANIZATION PLAN 1
1121(c)(3) allows an additional 60 days during which only the debtor may obtain 2
acceptances of the plan.5 3
Bankruptcy Code Section 1121(d) provides that the Court may extend both such 4
exclusivity periods for "cause.",6 Although the Bankruptcy Code does not define "cause" for 5
purposes of Section 1121(d) or establish formal criteria for an extension of the exclusivity 6
periods, Congress recognized that the debtor should be given a meaningful opportunity to 7
formulate and negotiate a plan. H.R. Rep. No.95-595, at 231-32 (1977), reprinted in 1978 8
U.S.C.C.A.N. 5963, 6191 (hereinafter "House Report"). At the same time, Congress 9
recognized that an open-ended exclusivity period could encourage a debtor to stall in order 10 to exact undue concessions from creditors and could unnecessarily delay creditors. S. Rep.
11 No.95-989, at 118 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5904 (hereinafter, "Senate 12 Report"). Thus, the courts must necessarily strike an appropriate balance.
13 To achieve this objective, cause "is to be viewed flexibly in order to allow the NECME 14 debtor to reach an agreement." In re McLean Indus., Inc., 87 B.R. 830, 833 (Bankr.
&'RAWIqN 15 S.D.N.Y. 1987) (internal quotation marks omitted); Gaines v. Perkins (In re Perkins), 71 16 B.R. 294, 297 (W.D. Tenn. 1987) ("[t]he hallmark of [Section 112 1(d)] is flexibility"). This 17 standard allows the court "maximum flexibility to suit various types of reorganization 18 proceedings." In re Public Serv. Co., 88 B.R. 521, 534 (Bankr. D.N.H. 1988); accord In re 19 Gibson & Cushman Dredging Corp., 101 B.R. 405, 409 (E.D.N.Y. 1989).
20 21 22 23
... continued) 24 relief was entered on the Petition Date.
5 Section 1121(c)(3), provides, in relevant part, that non-debtor parties in interest may 25 file a plan "if and only if... the debtor has not filed a plan that has been accepted, before 180 days after the date of the order for relief under this chapter, by each class of claims or 26 interests that is impaired under the plan." 11 U.S.C. §I 121(c)(3).
6 Section 1121(d) provides, in relevant part, that "[o]n request of a party in interest...
27 the court may for cause reduce or increase the 120-day period or the 180-day period referred 28 to in this section." 11 U.S.C. §1121(d) (emphasis added).
PG&E's MOTION TO FURTHER EXTEND EXCLUSIVITY PERIOD FOR REORGANIZATION PLAN 1
B.
Congress And Courts Have Recognized That The Size and Complexity Of A Chapter 11 Case Provide Cause For Extending The Plan Exclusivity Periods.
2 3
Although the Bankruptcy Code does not define the circumstances that constitute 4
"cause" to extend the exclusivity periods contained in Bankruptcy Code Section 1121, the 5
legislative history makes clear that the initial 120-day period established by Section 112 1(b) 6 merely represents a baseline from which the Court is free to deviate, particularly in large and 7
complex cases such as PG&E's Chapter 11 case:
8 "In most cases, 120 days will give the debtor adequate time to negotiate a settlement, without unduly delaying creditors.
The court is given the power, 9
though, to increase or reduce the 120-day period depending on the circumstances of the case.
For example, if an unusually large company were to seek 10 reorganization under chapter 11, the court would probably need to extend the time in order to allow the debtor to reach an agreement." (House Report, at 232, 11 1978 U.S.C.C.A.N. at 6191 (emphasis added) (footnote omitted))
12 Thus, bankruptcy courts frequently identify the size and complexity of a Chapter 13 11 case as "cause" to warrant extension of the exclusivity periods. See, g.*&, In re Dow comw 14 Coming Corp., 208 B.R. 661, 665 (Bankr. E.D. Mich. 1997); In re Express One Int'l, Inc.,
&RAff<N 15 194 B.R. 98, 100 (Bankr. E.D. Tex. 1996); In re Public Serv. Co, 88 B.R. at 534-35; In re 16 Texaco, Inc., 76 B.R. 322, 325-27 (Bankr. S.D.N.Y. 1987); In re Perkins, 71 B.R. at 297 17 300; In re Pine Run Trust, Inc., 67 B.R. 432, 434-36 (Bankr. E.D. Pa. 1986); In re United 18 Press Int'l, Inc., 60 B.R. 265, 270 (Bankr. D.D.C. 1986).
19 In Perkins, 71 B.R. at 296-300, for example, the court held that a case involving 20 approximately $13 million in assets and claims held by about 100 creditors was sufficiently 21 "large and complex" to justify an exclusivity period of over 800 days. See also In re Public 22 Serv. Co., 88 B.R. at 537 (granting a seven-month extension due to size and complexity of 23 case); In re United Press Int'l., Inc., 60 B.R. at 270 ("[i]n many much smaller cases, 24 involving far less complications, two or three years go by before the debtor is in a position to 25 file a plan"); In re Express One Int'l, Inc., 194 B.R. at 100-01 (allowing exclusivity peiiod of 26 one year based on, inter alia, size and complexity of case).
27 The present case is of a much larger size and complexity than the foregoing 28 cases, involving tens of billions of dollars of assets, and claims of more than 13,000 PG&E's MOTION TO FURTHER EXTEND EXCLUSIVITY PERIOD FOR REORGANIZATION PLAN 1
creditors. In addition to the sheer size of this case, it is exceedingly complex, based on, inter 2
alia, PG&E's status as a utility company subject to a myriad of state and federal statutes, 3
rules and regulations, and the fact that PG&E continues to grapple with the effects of an 4
unprecedented energy crisis.
5 On these facts, the additional extension of four months of the plan exclusivity 6
period under Section 1121(c)(3) is both reasonable and appropriate.
7 8
C.
Courts Have Found Cause To Extend Exclusivity Periods In Circumstances Such As These Where The Debtor Has Made Substantial Progress Toward A 9
Successful Reorganization.
10 The legislative history and the case law interpreting Section 1121 have 11 established that exclusivity period extensions are appropriate where the debtor displays some 12 likelihood of a successful, consensual reorganization. Senate Report, at 118, 1978 13 U.S.C.C.A.N. at 5904 ("the granted extension should be based on a showing of some NNUF~tOVERI NEur 14 promise of probable success"). Thus, in evaluating whether there is cause for extending the ICK
&1?Am.NIN'
,...*15 exclusivity periods under Section 1121, courts have examined whether the debtor has made 16 good-faith progress toward reorganization, including the status of negotiations between the 17 debtor and third parties, which, if successful, would enable the debtor to file a viable plan.
18 See, e.g., In re McLean Indus., 87 B.R. at 834; In re United Press Int'l, 60 B.R. at 269; In re 19 Nicolet, Inc., 80 B.R. 733, 741-42 (Bankr. E.D. Pa. 1987); In re Perkins, 71 B.R. at 298.
20 For example, in Inre Pine Run Trust, 67 B.R. at 435, the court granted a 90-day 21 extension of both plan exclusivity periods where "substantial progress had been made in 22 negotiations [between the debtors and the creditors' committee] that, all concede, are critical 23 to a successful reorganization [and] there was no evidence presented that the debtors sought 24 this additional extension in order to pressure their creditors to accede to their reorganization 25 demands"). See also In re McLean Indus., 87 B.R. at 833-35 ("a finding that the debtor is 26 not seeking to extend exclusivity to pressure creditors to accede to [the debtor's]
27 reorganization demands.., and the fact that the debtor is paying its [postpetition] bills as 28 they come due" provided "cause" to extend the exclusivity periods) (citations and internal PG&E's MOTION TO FURTHER EXTEND EXCLUSIVITY PERIOD FOR REORGANIZATION PLAN 1
quotation marks omitted); In re Homestead Partners, Ltd., 197 B.R. 706, 720 (Bankr. N.D.
2 Ga. 1996) (cause exists to extend exclusivity where the debtor has made substantial progress 3
toward gaining acceptance of a plan, recalcitrance of certain creditors has posed a significant 4
hurdle to timely plan development and presence of complex legal issues has occupied much 5
of debtor's plan-making opportunity).
6 As discussed above, PG&E has already made substantial efforts towards a 7
successful reorganization. Indeed, in view of the size and complexity of this case, it is 8
unprecedented that in approximately the first year of this case, PG&E had already obtained 9
approval of the PG&E Disclosure Statement with respect to the PG&E Plan. In addition, the 10 PG&E Plan enjoys broad creditor support, and has been accepted by all but one class of 11 creditors who voted on the PG&E Plan.
12 Furthermore, there is nothing to suggest that PG&E seeks the requested 13 extensions in order to pressure its creditors to accede to its reorganization demands.7 Rather, ct 14 PG&E has continued to diligently work the plan confirmation process through a fast track, in 15 an effort to accelerate the resolution of this case for creditors and other interested parties as 16 quickly as possible. The requested extension will protect this process while the PG&E Plan 17 confirmation efforts are concluded, which could take several months.
18 19 III.
20 CONCLUSION.
21 Wherefore, PG&E respectfully requests that this Court enter its Order:
22
- 1.
Determining that notice of the Motion was appropriate under the 23 circumstances; 24
- 2.
Granting the Motion; 25
- 3.
Extending, from December 31, 2002 until April 30, 2003 (or such later date 26 27 7 Indeed, in view of the alternate CPUC Plan, PG&E would have difficulty pressuring 28 its creditors to accede to its reorganization demands in any event.
PG&E's MOTION TO FURTHER EXTEND EXCLUSIVITY PERIOD FOR REORGANIZATION PLAN 1
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10 11 12 HOWAD 13 a 14 E~UK A..d..- 15 16 17 18 19 20 21 22 23 24 25 26 27 28 as the Court hereafter may order based upon a subsequent motion filed on or before April 30, 2003), the period during which PG&E maintains plan exclusivity (except with respect to the CPUC and the Committee) pursuant to Bankruptcy Code Section 1121(c)(3); and
- 4.
For such other relief as this Court determines to be equitable and just.
DATED: December_0, 2002.
Respectfully, HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN A Professional Corporation By:
GAt
.KAPLAN Attorneys for Debtor and Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY WD 12120211-1419915/1042423/v3 PG&E's MOTION TO FURTHER EXTEND EXCLUSIVITY PERIOD FOR REORGANIZATION PLAN