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>PG&E sought bankruptcy protection in January, citing more than $30 billion in potential liabilities from fires sparked by its equipment. This fall, the utility

>PG&E sought bankruptcy protection in January, citing more than $30 billion in potential liabilities from fires sparked by its equipment. This fall, the utility has blacked out millions of its own customers during strong winds to try to prevent its equipment from starting more fires, a move that has generated widespread criticism, including from California Gov. Gavin Newsom and other state leaders. How does this work if a private utility company seeks bankruptcy? Do its responsibilities get taken over by the government? Can they even seize operations?

nostrademons 7y ago
PG&E's in Chapter 11. In Chapter 11 bankruptcy the company continues operating as if nothing had happened. (Well, except that there may be layoffs and work furloughs if the company lacks sufficient cash to pay salaries, and they're probably not making major capital investments.) What changes is the capital structure - the payments due to creditors and dividends paid to shareholders. Basically the company is saying "Well, guess we don't have the money to pay all our debts, so nobody's getting anything until we work out a new arrangement that we can actually support with our assets and cash flows." In this case the bankruptcy was triggered by court judgments that found PG&E liable for the 2018 fires, so the bankruptcy means that the court settlements are suspended while another court figures out who's going to pay for them. In practice, what often happens during Chapter 11 proceedings is that the stock goes to nearly zero (it's close but not there yet with PG&E), on the assumption that many of the common stockholders will be wiped out and the debt recapitalized as shares. Bonds also become very risky, as bondholders expect that they may not see all of the principal repaid. Assets can be sold off to pay creditors - this is part of the negotiations in the bankruptcy proceedings. But ordinary workers largely keep on doing their jobs, though there's a big cloud of "will there be layoffs or not?" surrounding it. It's very rare (and almost unheard of in the U.S.) for a private corporation to be nationalized and taken over by the government; the government generally is not in the business of running complex operations, other than the military. Even in the financial crisis of 2009, bankrupt organizations were recapitalized by the government (where the government basically took over the debt and wiped out existing shareholders) rather than seized (where the government installs its own people and takes over operations).
- cardiffspaceman 7y ago
  At a certain point during Chapter 11 the title of the company seemingly changes to "ABC co, debtor in possession" and that goes on the checks, and those checks don't get honored as much. I believe this status is not permanent. The worker's unpaid vacation time becomes a debt and you don't end up with much of that debt paid off. I joined a company that was in Chapter 11 and none of this affected me adversely, so I think this is a passing phase, but it would not be fun for the long-time employees.

nostrademons 7y ago

PG&E's in Chapter 11. In Chapter 11 bankruptcy the company continues operating as if nothing had happened. (Well, except that there may be layoffs and work furloughs if the company lacks sufficient cash to pay salaries, and they're probably not making major capital investments.) What changes is the capital structure - the payments due to creditors and dividends paid to shareholders. Basically the company is saying "Well, guess we don't have the money to pay all our debts, so nobody's getting anything until we work out a new arrangement that we can actually support with our assets and cash flows." In this case the bankruptcy was triggered by court judgments that found PG&E liable for the 2018 fires, so the bankruptcy means that the court settlements are suspended while another court figures out who's going to pay for them. In practice, what often happens during Chapter 11 proceedings is that the stock goes to nearly zero (it's close but not there yet with PG&E), on the assumption that many of the common stockholders will be wiped out and the debt recapitalized as shares. Bonds also become very risky, as bondholders expect that they may not see all of the principal repaid. Assets can be sold off to pay creditors - this is part of the negotiations in the bankruptcy proceedings. But ordinary workers largely keep on doing their jobs, though there's a big cloud of "will there be layoffs or not?" surrounding it. It's very rare (and almost unheard of in the U.S.) for a private corporation to be nationalized and taken over by the government; the government generally is not in the business of running complex operations, other than the military. Even in the financial crisis of 2009, bankrupt organizations were recapitalized by the government (where the government basically took over the debt and wiped out existing shareholders) rather than seized (where the government installs its own people and takes over operations).

cardiffspaceman 7y ago
At a certain point during Chapter 11 the title of the company seemingly changes to "ABC co, debtor in possession" and that goes on the checks, and those checks don't get honored as much. I believe this status is not permanent. The worker's unpaid vacation time becomes a debt and you don't end up with much of that debt paid off. I joined a company that was in Chapter 11 and none of this affected me adversely, so I think this is a passing phase, but it would not be fun for the long-time employees.