ML033170179
| ML033170179 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon  |
| Issue date: | 10/31/2003 |
| From: | Donnelly M Pacific Gas & Electric Co |
| To: | Office of Nuclear Reactor Regulation, US Federal Judiciary, Bankruptcy Court, Northern District of California |
| References | |
| 01-30923 DM, 94-0742640 | |
| Download: ML033170179 (7) | |
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10 11 JAMES L. LOPES (No. 63678)
JANETA. 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 Telephone:
415/434-1600 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 ARD 13 MCE NEMEPOV 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 1 1 Case Date:
November 21, 2003 Time:
1:30 p.m.
Place:
235 Pine Street, 22nd Floor San Francisco, California Judge:
Hon. Dennis Montali 19 20 21 22 23 24 25 26 27 28 DECLARATION OF MICHAEL J. DONNELLY IN SUPPORT OF PG&E'S APPLICATION FOR AUTHORITY TO INCUR PLAN IMPLEMENTATION EXPENSES IN CONNECTION WITH CERTAIN FINANCINGS e,@91A DONNELLY DECL. ISO PG&E'S MOTION FOR AUTHORITY TO INCUR IMPLEMENTATION EXPENSES
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I, Michael J. Donnelly, declare as follows:
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I am the Assistant Treasurer of Pacific Gas and Electric Company, a 3
position that I have held since September of 2000. Except as otherwise indicated, I make 4
this declaration based upon my personal knowledge concerning the matters stated herein. If 5
called as a witness, I could and would testify competently to the facts stated herein.
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I make this declaration in support of PG&E's Motion For Authority To 7
Incur Plan Implementation Expenses In Connection With Certain Financings (the "Motion").
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On July 31, 2003, PG&E, PG&E Corporation and the Official Committee 9
of Unsecured Creditors filed a Plan of Reorganization Under Chapter 11 of the Bankruptcy 10 Code for Pacific Gas and Electric Company Dated July 31, 2003 (the "Plan"), which 11 provides for payment in full of all allowed claims and enables the Debtor to emerge from 12 Chapter 11 with a financially sound and sustainable business. The Disclosure Statement for Ho-AD 13 the Plan was approved by the Court on July 31, 2003. The confirmation hearing has been NEMERC CANA 14 scheduled to commence on November 10, 2003.
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The principal source of funding for the payment of allowed claims under 16 the Plan will be the issuance and sale by the Reorganized Debtor of New Money Notes (as 17 defined in the Plan) in the original principal amount of up to approximately $8.7 billion, 18 subject to adjustment. In addition, the Plan provides for the reinstatement of certain 19 indebtedness. The Plan also provides for the Reorganized Debtor to establish one or more 20 credit facilities and one or more customer accounts receivable financing programs for the 21 purpose of (i) funding operating expenses and seasonal fluctuations in working capital; (ii) 22 providing letters of credit or other forms of credit support and (iii) to the extent the 23 Reorganized Debtor deems appropriate or necessary, to perform the Reorganized Debtor's 24 obligations under the Plan.
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Section 8.2 of the Plan provides that it is a condition precedent to the Plan 26 that "all actions, documents and agreements necessary to implement the Plan shall have been 27 effected or executed." Further, the Effective Date must have occurred on or before March 28 31, 2004. These conditions precedent require the efforts described below to commence DONNELLY DECL. ISO PG&E'S MOTION FOR AUTORITY TO INCUR IMPLEMENTATION EXPENSES
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I immediately so that the Debtor will be in a position to issue the New Money Notes, access 2
the above-referenced credit facilities and customer accounts receivable financing programs 3
and reinstate certain indebtedness on the Effective Date.
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In order to implement the Plan, certain expenses related to the various 5
financings and reinstatement of debt must be paid by PG&E, as the issuer or borrower.
6 Since the financings and the reinstatement of debt described herein are expected to take 7
place on or before the Effective Date of the Plan, or must be structured and arranged before 8
the Effective Date, work must commence, and certain fees and costs necessary to implement 9
the financings and reinstatement of debt must be incurred, well before the Effective Date of 10 the Plan. The categories of new or reinstated debt obligations and credit facilities or devices 11 that are to be in place prior to the Effective Date may include the following:
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New Money Notes. Pursuant to Section 7.2 of the Plan, on or before Hmv.RD 13 the Effective Date PG&E will sell and issue new debt securities (the "New Money Notes")
WCE NEMEMOVU c~l'All 14 in an original principal amount of up to approximately $8.7 billion, subject to adjustment, 15 for the primary purpose of satisfying allowed claims. These notes would be issued in 16 maturities of up to thirty (30) years from issuance, depending upon market conditions on the 17 date of issuance and PG&E's need or desire to stagger maturities. It is anticipated that some 18 or all of these New Money Notes would be issued pursuant to a registration statement filed 19 with the Securities and Exchange Commission (the "Registration Statement").
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Pollution Control Bonds. PG&E currently has outstanding 21 obligations with respect to various series of Pollution Control Bonds ("PC Bonds"). The 22 tax-exempt status of the PC Bonds offers lower cost financing than other indebtedness of 23 comparable maturity. PG&E has determined that it must take certain actions on or prior to 24 the Effective Date in order to preserve the benefits of the low-cost tax exempt financing 25 afforded by the PC Bonds. Due to the current structure of the obligations and their treatment 26 under the Plan, it may be necessary for certain actions to be taken with respect to the PC 27 Bonds in various classes of claims, including the following:
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(1)
Class 4a - Mortgage Backed PC Bonds. Under Section 4.7 of 2
the Plan, the Mortgage Backed PC Bonds will be redeemed or purchased in lieu of 3
redemption, if any of the New Money Notes are secured. In order to give PG&E the ability 4
to preserve the benefits of the lower cost Mortgage Backed PC Bond financing by 5
purchasing the Mortgage Backed PC Bonds in lieu of redemption, before the Effective Date 6
certain amendments must be approved by the Bond Trustee and the California Pollution 7
Control Financing Authority. In addition, prior to the Effective Date, PG&E may determine 8
to arrange a bridge loan and subsequent refinancing for such transaction which must be 9
appropriately documented.
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Class 4b - MBIA-insured PC Bonds. Under Section 4.9 of the 11 Plan, if any of the New Money Notes are secured, MBIA, the bond insurer, will receive a 12 contingent note as additional security for PG&E's obligations under its reimbursement HWD 13 agreement with MBIA. The possible conveyance of this security and any necessary c,A.
14 documentation must be arranged with MBIA before the Effective Date.
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Class 4d - Letter of Credit Backed PC Bonds. Under Section 16 4.10 of the Plan, the Letter of Credit Backed PC Bonds will remain outstanding in the public 17 markets if the necessary credit support is available on the Effective Date. If such credit 18 support is not available, these PC Bonds will be purchased and either subsequently credit-19 enhanced and remarketed or refunded on or after the Effective Date. Prior to the Effective 20 Date, new credit support or a bridge loan and subsequent refinancing must be arranged and 21 documented in order to complete these transactions.
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Class 4f-Prior Bond Claims. As described more fully in 23 Section 4.12 of the Plan, either PG&E will pay off, or PG&E or its assignee will purchase, 24 the outstanding reimbursement obligations related to the Prior Bonds. Prior to the Effective 25 Date, a bridge loan and/or refunding must be arranged and documented in order to 26 accomplish these transactions.
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Credit Facilities. Pursuant to Section 7.3 of the Plan, as of the 28 Effective Date, PG&E shall establish one or more credit facilities for the purpose of (i)
DONNELLY DECL. ISO PG&E'S MOTION FOR AUTHORITY TO INCUR IMPLEMENTATION EXPENSES 1
funding operating expenses and seasonal fluctuations in working capital (ii) providing letters 2
of credit or other forms of credit support, and (iii) to the extent necessary or appropriate, to 3
perform the Reorganized Debtor's obligations under the Plan. These facilities may be 4
secured in whole or in part, and may include revolving and term loan credit facilities. The 5
Reorganized Debtor may also establish one or more customer accounts receivable financing 6
programs for the same purpose.
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Other Potential Facilities.
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Class 3b (PC-Related Mortgage Bonds). As described more 9
fully in Sections 4.6 and 4.7 of the Plan, the PC-Related Mortgage Bonds back the Mortgage 10 Backed PC Bonds, which are classified in Class 4a. If the Class 4a bonds remain 11 outstanding, the Class 3b bonds will be replaced with New Mortgage Bonds issued pursuant 12 to the new mortgage indenture. Prior to the Effective Date, the new mortgage indenture and F^WU 13 New Mortgage Bonds must be arranged and documented.
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Structured Letters of Credit. It may be more efficient to F RABKIN 15 supplement or substitute traditional letters of credit with cash collateralized letters of credit, 16 where such collateral is funded by a debt placement. Before the Effective Date these 17 financings and the letters of credit would have to be structured and arranged.
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Other Credit Devices. In addition, the Reorganized Debtor may 19 be required to arrange for other credit devices, such as surety bonds and credit insurance 20 (which may be secured in whole or in part).
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PG&E anticipates incurring the following categories of expenses in 22 connection with the transactions described above (all amounts are approximate):
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Counsel Fees (Estimate-$6.000,000). This category includes (i) 24 bank counsel fees and costs for negotiating and drafting agreements with respect to the 25 facilities described above, and due diligence review; (ii) bond counsel fees and costs for 26 negotiating and drafting documentation for the PC Bond amendments; (iii) trustees' counsel 27 fees and costs related to the preparation of new mortgage indenture, PC Bond amendments 28 and new debt issuances, including the New Money Notes; (iv) underwriters' counsel in DONNELLY DECL. ISO PG&E'S MOTION FOR AUTHORITY TO INCUR IMPLEMENTATION EXPENSES 1
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-0 15 16 17 18 19 20 21 22 23 24 25 26 27 28 connection with drafting an indenture and due diligence for offerings of debt issuances (other than New Money Notes which are issued pursuant to the Registration Statement),'
which may be necessary or appropriate in connection with the debt facilities described in the Plan; (v) counsel to credit providers in connection with drafting amendments and other documents related to PC Bonds and (vi) opinion counsel for foreign banks.
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Trustee Related Expenses (Estimate-$200,000). Fees and costs related to indenture trustees include acceptance fees and administrative service fees related to the new debt offerings described above and to PC Bond document amendments; out of pocket expenses for overnight mail, couriers, outside fax services, conference call services and similar services; and escrow fees and fees for documentation and servicing of escrow accounts.
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CPUC Fees (Estimate-$1,950.000). The Debtor expects to incur substantial fees required by CPUC regulations in connection with new debt financings.
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Banks (Estimate-$3.500,000). Fees and expenses of various financial institutions that Debtor expects to incur include commitment fees, to reserve the lenders' commitments from the time of the syndication process until closing, and fees and expenses relating to disclosure documentation, as well as expenses relating to the syndication process, and costs for "road shows," including travel and meeting room rentals.
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Printing Fees (Estimate-$550.000). Debtor expects to incur substantial costs for the printing of offering documents.2
'PG&E previously obtained approval to pay underwriters' counsel fees relating to the New Money Notes (see Motion for Authority to Pay Fees of Designated Underwriters' Counsel (Docket No. 13460), approved by Order entered on September 10, 2003 (Docket No. 13605). The expenses sought herein were not covered in the previous Motion.
2PG&E previously obtained approval to pay certain printer's costs relating to the registration statement filing with the SEC (see Motion for Authority to Pay Filing Fee and Prnter's Costs in Connection with the Filing of Registration Statement with the Securities and Exchange Commission (Docket No. 13462), approved by Order entered on September 10, 2003 (Docket No. 13606)).
The printing expense for which this Motion seeks authorization was not covered in the previous motion.
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Pollution Control Bond Fees (Estimate-$600.000). Fees and costs to be incurred in connection with pollution control bonds include application and filing fees, and refundable performance deposit fees.
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Miscellaneous (Estimate-$2.,200,000). In each case, the fees and costs that the Debtor expects to incur are difficult to estimate in advance, and the actual amount incurred in any given category may vary from the estimates provided, due to variations in the timing of the debt issuances and other unpredictable factors. Accordingly, PG&E seeks authorization to incur up to an additional $2,200,000 in miscellaneous expenses to afford PG&E flexibility to expend greater amounts in certain categories, without the necessity of obtaining additional Court approval.
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The expenses set forth above are associated with the analysis, compilation and presentation of complex due diligence materials and negotiating, drafting and reviewing documents related to the financings, reinstatement of debt and related activities described above. The brief summaries herein are not intended to describe the entire scope of the services. The fees and cost estimates set forth herein are based on PG&E's estimates of the scope of the services and costs and, as such, are difficult to estimate in advance.
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Sound business justifications support PG&E's request to incur the implementation expenses described above. These costs must be incurred in order to undertake the financings that are necessary to implement the Plan. PG&E believes that the commitment to incur the fees and expenses must be made promptly in order to ensure that PG&E can timely meet the conditions precedent to the effectiveness of the Plan. Finally, PG&E is solvent and has sufficient cash to pay these expenses without causing any detriment to its creditors.
I declare under penalty of perjury under the laws of the United States of America that the foregoing is-true and correct.
Executed this 31st day of October, 2003, at San Francisco, California.
A, / i X
MIC aL J.DO AWD 103103/1-1419995/12011110488/v3 J
DONNELLY DECL. ISO PG&E'S MOTION FOR AUTHORITY TO INCUR IMPLEMENTATION EXPENSES