ML032410265
| ML032410265 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon  |
| Issue date: | 08/21/2003 |
| From: | Gordon B 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 D M, 94-0742640 | |
| Download: ML032410265 (8) | |
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10 11 JAMES L. LOPES (No. 63678)
JANET A. NEXON (No. 104747)
BARBARA GORDON (No. 52424)
HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN A Professional Corporation Three Embarcadero Center, 7th Floor San Francisco, California 94111-4024 6
7 5 Telephone:
415/434-1600 i a Facsimile:
415/217-5910 Attorneys for Debtor and Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION 12 HOWAR 13 NEMESISO cAN6^AM 14 15 16 17 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:
September 10, 2003 Time:
9:30 a.m.
Place:
235 Pine Street, 22nd Floor San Francisco, California Judge:
Hon. Dennis Montali 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION FOR AUTHORITY TO PAY FEES OF DESIGNATED UNDERWRITERS' COUNSEL; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF
[SUPPORTING DECLARATION OF MICHAEL J. DONNELLY FILED SEPARATELY]
MOTION FOR AUTHORITY TO PAY FEES OF DESIGNATED UNDERWRITERS' COUNSEL
1 PLEASE TAKE NOTICE that on September 10, 2003 at 9:30 a.m., or as soon 2
thereafter as the matter may be heard, in the Courtroom of the Honorable Dennis Montali, 3
located at 235 Pine Street, 22nd Floor, San Francisco, California, Pacific Gas and Electric 4
Company, the debtor and debtor in possession in the above-captioned Chapter 11 case 5
("PG&E"), will and hereby does move the Court for authority to pay the fees of designated 6
underwriters' counsel (the "Motion").
7 This Motion is based on this Notice of Motion and Motion, the accompanying 8
Memorandum of Points and Authorities, the Declaration of Michael J. Donnelly filed 9
concurrently herewith, the record of this case and any evidence presented at or prior to the 10 hearing on this Motion.
11 PLEASE TAKE FURTHER NOTICE that pursuant to Rule 9014-1 (c)(2) of the 12 Bankruptcy Local Rules for the Northern District of California, any written opposition to the HOmAD 13 Motion and the relief requested herein must be filed with the Bankruptcy Court and served NME1O J cow 14 upon appropriate parties (including counsel for PG&E, the Office of the United States 61ALBKJN 15 Trustee and the Official Committee of Unsecured Creditors) at least five (5) days prior to the 16 scheduled hearing date. If there is no timely objection to the requested relief, the Court may 17 enter an order granting such relief without further hearing.
18 19 20 21 22 23 24 25 26 27 28 MOTION FOR AUTHORITY TO PAY FEES OF DESIGNATED UNDERWRITERS' COUNSEL 4--
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15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM OF POINTS AND AUTHORITIES Pacific Gas and Electric Company ("PG&E"), the debtor and debtor in possession in the above-captioned Chapter 11 case, requests authority to pay the fees of designated underwriters' counsel in connection with the implementation of PG&E's Plan of Reorganization jointly proposed by PG&E, its parent corporation, PG&E Corporation
("Parent"), and the Official Committee of Unsecured Creditors. This request is made pursuant to Bankruptcy Code Section 363(b)(1).
I.
FACTUAL BACKGROUND' PG&E filed a voluntary petition for relief under Chapter 1 1 of the Bankruptcy Code on April 6, 2001. A trustee has not been appointed, and PG&E continues to function as a debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
Currently before the court is PG&E's proposed Plan of Reorganization Under Chapter 11 of the Bankruptcy Code For Pacific Gas and Electric Company Dated July 31, 2003 (the "Plan") filed by PG&E, PG&E Corporation, and the Official Committee of Unsecured Creditors (the "Committee"). The Disclosure Statement for the Plan (the "Disclosure Statement") was approved by the Court on July 31, 2003. The confirmation hearing has been scheduled to commence on November 3, 2003.
A significant component of the Plan involves the issuance of debt securities by the Reorganized Debtor as a means of financing the implementation of the Plan. The Plan provides for the Reorganized Debtor to issue and sell new debt securities in the original principal amount of approximately $8.7 billion, subject to adjustments (the "New Money Notes"), the general terms of which are set forth on the Summary of Terms of Debt Securities, Exhibit A to the Plan. PG&E will utilize the services of underwriters in connection with the financing. The underwriters' services will include assisting in
'The evidentiary basis and support for the facts set forth in this Motion are contained in the Declaration of Michael J. Donnelly filed concurrently herewith.
MOTION FOR AUTHORITY TO PAY FEES OF DESIGNATED UNDERWRITERS' COUNSEL I
structuring and marketing the New Money Notes to be sold to investors. As is customary in 2
offerings of securities and in order to satisfy certain statutory requirements under the federal 3
securities laws, the underwriters, together with their counsel, will conduct a due diligence 4
investigation of the issuer of the securities. Under the proposed settlement agreement 5
between PG&E, Parent and the California Public Utilities Commission, PG&E would agree 6
to name UBS Warburg LLC and Lehman Brothers as exclusive bookrunners and lead 7
managers ("Underwriters").
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A.
Services to be Provided by Skadden as Underwriters' Counsel.
10 PG&E has designated Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden")
11 to act as Underwriters' counsel ("Underwriters' Counsel"). In this capacity, Skadden's 12 services may include: (i) reviewing, drafting and/or negotiating the legal documentation, Hma-ag 13 including the registration statement and related prospectus to be filed with the Securities and NEMER_~
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14 Exchange Commission ("SEC") by PG&E for the offerings of New Money Notes to the 15 public; and (ii) conducting the due diligence investigation of PG&E as the issuer of the debt 16 securities being sold to the public. Specifically, Skadden will be responsible for reviewing 17 and assisting in creating the registration statement and prospectus for the offering of New 18 Money Notes for, among other things, compliance with federal and state laws, rules and 1 9 regulations relating to registered securities offerings as well as the descriptions of the debt 20 securities and the underwriting arrangements. In connection with the preparation of the 21 registration statement, Skadden will assist with the due diligence investigation of PG&E, 22 which will consist of a review of PG&E's material contracts, financing arrangements, 23 materials relating to pending or threatened litigation, environmental reports and assessments 24 and other materials, and will meet with members of PG&E's management and external 25 auditors to discuss business, legal and financial affairs. Skadden will also be responsible for 26 drafting, reviewing and/or negotiating the underwriting agreement, indenture and other legal 27 documents relating to issuance and sale of the New Money Notes. In connection with the 28 offering, Skadden will also provide the Underwriters with customary legal opinions with MOTION FOR AUTHORITY TO PAY FEES OF DESIGNATED UNDERWRITERS' COUNSEL 1
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& RABKIN 15 16 17 18 19 20 21 22 23 24 25 26 27 28 respect to matters relating to the offerings as well as a "negative assurance" letter providing the Underwriters with assurance that Skadden has no reason to believe that the registration statement or the prospectus contain any untrue statement or omission of a material fact.
Skadden will also be responsible for reviewing the "comfort letter" provided by PG&E's external auditors, covering the audited and unaudited financial information to be included in the registration statement.
Skadden will not represent PG&E in an attorney/client relationship with respect to its services as Underwriters' Counsel, although Skadden may continue to act as special regulatory counsel to PG&E.2 B.
Necessity for Services of Underwriters' Counsel.
Conditions precedent to the effectiveness of the Plan include the consummation of the sale of the New Money Notes by the Reorganized Debtor as contemplated by the Plan.3 Preparing the registration statement for securities offerings involves substantial legal work to ensure that the disclosure contained therein is accurate and complies with securities laws, rules and regulations. Once the registration statement is filed, there may be a lengthy SEC review process for the securities offerings before the registration statements are declared effective. Skadden, pursuant to its previous employment in this case, has devoted material time and attention to this process, albeit in connection with a prior plan. In order to meet the foregoing conditions precedent to the effectiveness of the Plan, the legal work by Underwriters' Counsel must be recommenced now in connection with the Plan. This legal work will include participating in the preparation of the registration statements and conducting the due diligence investigation, which will also require substantial coordination with the issuer and its counsel.
2 Skadden was approved as special regulatory counsel to PG&E by Order entered on July 24, 2001 (docket no. 1589). On March 8, 2002, Skadden filed the Supplemental Declaration of John S. Moot, disclosing its role as underwriters' counsel (docket no. 5078).
3 See Section 8.2 of the Plan describing the conditions precedent to the effectiveness of the Plan.
MOTION FOR AUTHORITY TO PAY FEES OF DESIGNATED UNDERWRITERS' COUNSEL 1
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& ROAKN 15 16 17 18 19 20 21 22 23 24 25 26 27 28 It is customary for the issuer to pay for the underwriters' legal fees in connection with complex debt offerings such as those involved under the Plan.
II.
PAYMENT OF FEES INCURRED BY UNDERWRITERS' COUNSEL IS APPROPRIATE PURSUANT TO BANKRUPTCY CODE SECTION 363(b)(1)
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Sound Business Purposes Support PG&E's Payment of Fees Incurred by Underwriters' Counsel.
The Court has considerable discretion in approving a request pursuant to Section 363(b)(1) of the Bankruptcy Code ("[t]he trustee, after notice and a hearing, may use, sell or lease, other than in the ordinary course of business, property of the estate"). See Dai-Ichi Kangyo Bank. Ltd. v. Montgomery Ward Holding CorM. (In re Montgomery Ward Holding Corp.), 242 B.R. 147, 153 (D. Del. 1999) (affirming the bankruptcy court's decision to approve expenditure for employee incentive programs, noting that bankruptcy court has considerable discretion in approving a Section 363(b) motion).
In determining whether to authorize a transaction under Section 363(b)(1), courts require a debtor to show that a sound business purpose justifies such actions, applying the business judgment test. See,
., Stephens Indus.. Inc. v. McClung, 789 F.2d 386,389-90 (6th Cir. 1986); Comm. of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063, 1071 (2d Cir. 1983); see also 3 Lawrence P. King, Collier on Bankruptcy
¶363.02[1][g] (15th ed. rev. 1998).
Once the debtor has articulated a rational business justification, a presumption attaches that the decision was made "on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the [debtor]." See, eg., Official Comm. of Subordinated Bondholders v. Integrated Res.. Inc. (In re Integrated Res.. Inc.!,
147 B.R. 650, 656 (S.D.N.Y. 1992) (citing Smith v. Van Gorkom, 488 A.2d 858 (Del.
1985)).
Sound business justifications support PG&E's request to pay the legal fees of MOTION FOR AUTHORITY TO PAY FEES OF DESIGNATED UNDERWRITERS' COUNSEL I
Underwriters' Counsel. It is necessary that the time-consuming and complex legal work to 2
be performed by Underwriters' Counsel be done promptly in order for PG&E to ensure that 3
it can timely meet the conditions precedent to the effectiveness of the Plan. Because the 4
issuer's payment of such fees is a common business practice for complex debt offerings, 5
PG&E believes that it is necessary to pay these costs in furtherance of implementation of the 6
Plan. PG&E is solvent and has sufficient cash to pay these expenses without causing any 7
detriment to its creditors.4 8
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Proposed Procedures for Review and Approval of 9
Fees Incurred by Skadden as Underwriters' Counsel.
10 PG&E requests authority to pay, on a monthly basis hereafter, the fees and 11 expenses of Skadden as Underwriters' Counsel, in accordance with the following 12 procedures:
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Following entry of an order approving this Motion, Skadden shall promptly NEMESI uc~l'A 14 transmit, by facsimile and first class mail, copies of any invoices for services provided
& RA2I(N 15 during September, 2003, to PG&E and its counsel, to counsel for the Committee and to the 16 United States Trustee.
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Beginning with the monthly billing cycle for October 2003, Skadden shall 18 transmit, by facsimile and first class mail, copies of its monthly invoices to PG&E and its 19 counsel, to counsel for the Committee and to the United States Trustee, no later than the 20th 20 day of the following month.
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If any of the parties receiving copies of Skadden invoices pursuant to 22 paragraphs I and 2 above (an "Objecting Party") believe that all or any portion of the 23 amounts reflected in any invoice are unreasonable, such Objecting Party shall provide 24 written notice, by facsimile and first class mail, of such objection to Skadden, within 10 days 25 of the receipt of the invoice in question (with a copy to PG&E and its counsel).
26 27 4As reflected in PG&E's June 2003 Monthly Operating Report, PG&E held more 28 than $3.7 billion in cash reserves as of June 30, 2003.
MOTION FOR AUTHORITY TO PAY FEES OF DESIGNATED UNDERWRITERS' COUNSEL I
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Promptly following the expiration of the 10-day period set forth in paragraph 3 above, PG&E may, without further order or authorization, pay any undisputed portion of such invoice(s). As to any disputed portion, PG&E may pay such disputed portion promptly following resolution of any objection with an Objecting Party, or, if any such objection cannot be consensually resolved, promptly following an order of the Court approving such disputed portion.
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The payment of any fees and expenses of Skadden as Underwriters' Counsel will be expressly subject to disallowance by the Court.
CONCLUSION For all of the foregoing reasons, PG&E respectfully requests that the Court approve the request set forth above to pay the fees of Underwriters' Counsel, and grant such other and further relief as may be just and appropriate.
DATED: August 21, 2003 Respectfully, HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN A Professional Corporation By:
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BARBARA ORDON Attorneys for Debtor and Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY WD 081403/1-1419995/1095968/vl MOTION FOR AUTHORITY TO PAY FEES OF DESIGNATED UNDERWRITERS' COUNSEL