PG&E Moving Out Of San Francisco After 100 Years Of Residence, Wants To Raise $11B From Favorable Debt Markets

PG&E Corp. PCG wants to sell its San Francisco headquarters and shift base to Oakland to save costs after being in the Golden City for more than a century. The utility also wants to raise $11 billion from debt markets, even as bankruptcy arguments continue in court.

What Happened

With a goal of achieving near-term cost savings, PG&E wants to relocate its headquarters to Oakland, California, in 2022.

In a statement Monday, Bill Smith, the company’s interim CEO said, “Our new Oakland headquarters will be significantly more cost-effective, is better suited to the needs of our business, and is a critical part of fulfilling our commitment to operate in a fiscally responsible way that will enable us to achieve our operational and safety goals.”

The Californian utility is also seeking to tap into corporate debt markets as it pursues financing to the tune of $11 billion.

While the courtroom proceedings on its bankruptcy continue, a judge said Monday he was open to allowing PG&E to raise the funds, if it can get the official creditors’ representatives to agree.

Why It Matters

The bond issuance will only cover a part of the $25.5 billion in reimbursement to the victims who suffered in the fires linked to PG&E’s equipment.

A PG&E lawyer told the WSJ that conditions in the market are now so favorable, the company was willing to risk raising the money even before it could be confirmed by the court.

The lawyer said that every point of interest paid on debt refinancing translates into a $100 million expense for PG&E.

If PG&E’s chapter 11 bankruptcy fails, it might have to return the money.

A lawyer representing fire victims said there is still one pending dispute to be resolved with the utility. The dispute is still in mediation, and without its resolution, PG&E will not be able to emerge from bankruptcy.

According to PG&E, it can only enter into a lease with a purchase option for its new Oakland headquarters after it receives permission from the bankruptcy court.

PG&E Price Action

PG&E shares traded 0.32% lower at $12.53 in the after-hours session on Monday. The shares had closed the regular session 0.40% higher at $12.57.

Image: Wikimedia