(Bloomberg) – PG&E Corp.’s shares collapsed after the company raised more than $ 5 billion in an offering of common stock and shares to help finance its exit from the largest utility bankruptcy in the history of the United States.
Shares of the California energy giant fell as much as 5.8% on Friday, to $ 9.17, after the sale of more than 420 million shares at $ 9.50 each. The shares were trading at $ 9.34 at 12:18 pm in New York.
PG&E’s offering is one of the year’s largest share sales and is part of the company’s plan to raise $ 9 billion in capital to help pay for wildfire claims through its Chapter 11 case. The company has also raised more than $ 13 billion in debt markets to finance its bankruptcy, which began after its team caused deadly fires in Northern California.
The company said it expects to exit Chapter 11 around July 1.
The broader market also fell on Friday, with U.S. stocks dropping to a two-week low as the resurgence of new virus infections drags the U.S. economy. That creates a challenge for PG&E as it brings a large number of new shares to the market.
“Obviously, it’s a substantial amount of dilution,” said Kit Konolige, an analyst at Bloomberg Intelligence. “Maybe people would have liked to see a higher price.”
PG&E’s offer price of $ 9.50 per share represented a 2.4% discount as of Thursday’s close of $ 9.73. The sale of shares, as well as the separate offering of capital units, which have a coupon of 5.50%, was worth the company about $ 5.15 billion, according to a statement released on Friday.
What Bloomberg’s Intelligence Says
“With the successful capital offerings of more than $ 9 billion paving the way for a bankruptcy exit by July 1, PG&E faces a key problem: surviving the summer wildfire season.”
– Kit Konolige, Senior Public Services Analyst
Read the full report here.
Goldman Sachs Group Inc. and JPMorgan Chase & Co. sign the offer. Barclays Plc, Citigroup Inc. and BofA Securities Inc. are joint book administration managers.
PG&E filed for Chapter 11 last year facing $ 30 billion in liabilities for the fires, some of the worst in California history. They included the Camp Fire, which destroyed the city of Paradise and killed more than 80 people. The company pleaded guilty last week to 84 counts of manslaughter. State regulators fined PG&E $ 1.9 billion in connection with the fires.
PG&E is raising money to help cover $ 25.5 billion in damages claims it settled in its bankruptcy through settlements with fire victims, insurers, and local government agencies.
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