01—Abstract
Summary
Summary of the 8-K filed August 1, 2024. Cited figures are marked; the original filing is the authoritative source.
On August 1, 2024, PG&E Recovery Funding LLC, a wholly owned issuing entity of Pacific Gas and Electric Company (the "Utility"), issued $1,419,285,000a aggregate principal amount of Senior Secured Recovery Bonds, Series 2024-A, under an Indenture and Series Supplement with The Bank of New York Mellon Trust Company, N.A.
The bonds were offered under a Prospectus dated July 24, 2024. In connection with the issuance, the Issuing Entity and the Utility entered into a Recovery Property Servicing Agreement, a Recovery Property Purchase and Sale Agreement, an Administration Agreement and a Joinder Agreement, each dated as of August 1, 2024. The bonds are secured by recovery property created under a California Public Utilities Commission financing order (Decision 24-02-011, issued February 16, 2024, final and non-appealable February 26, 2024), which authorizes recovery of costs related to catastrophic wildfires.
Proceeds from the sale of the bonds, net of issuance costs, were paid to the Utility in exchange for the recovery property. The filing attaches an opinion of Hunton Andrews Kurth LLP addressing federal and California constitutional questions.
That opinion concludes that the State Pledge likely forms a contractual relationship with bondholders, that bondholders could likely challenge impairing legislation under the Contract Clauses, and that the State would likely be required to pay just compensation if it took action in contravention of the pledge that constituted a taking. The opinion also notes there can be no assurance that such compensation would be sufficient to pay full principal and interest on the bonds.
02—Key points
Key Highlights
- Issuance of $1,419,285,000 aggregate principal amount of Senior Secured Recovery Bonds, Series 2024-A, on August 1, 2024, by PG&E Recovery Funding LLC
- Bonds were offered under a Prospectus dated July 24, 2024, and issued under an Indenture and Series Supplement with The Bank of New York Mellon Trust Company, N.A.
- Bonds are secured by recovery property created under CPUC Decision 24-02-011, issued February 16, 2024, and final and non-appealable as of February 26, 2024
- Proceeds, net of issuance costs, were paid to Pacific Gas and Electric Company for the sale and assignment of the recovery property
- Recovery property is tied to fixed recovery charges and is protected by a State Pledge under which California agreed not to limit or alter the recovery property or charges until the bonds are paid
- Hunton Andrews Kurth opinion concludes the State Pledge likely creates a contractual relationship and that the State would likely owe just compensation for a taking, but states no assurance such compensation would fully cover principal and interest
- Servicing, purchase and sale, administration and joinder agreements were executed with the Utility, each dated as of August 1, 2024
03—Questions
Frequently Asked Questions
What securities were issued and how large is the offering?
PG&E Recovery Funding LLC issued $1,419,285,000 aggregate principal amount of Senior Secured Recovery Bonds, Series 2024-A, on August 1, 2024.
What collateral supports the recovery bonds?
The bonds are secured by recovery property, which is the right to fixed recovery charges established by a CPUC financing order (Decision 24-02-011) under California's Wildfire Financing Law. The Indenture Trustee holds this property as collateral.
Who receives the bond proceeds and how is the recovery property transferred?
The recovery property was sold and assigned to the Issuing Entity by Pacific Gas and Electric Company under a Recovery Property Purchase and Sale Agreement dated as of August 1, 2024, in exchange for the bond proceeds net of issuance costs.
What legal protections do bondholders have against future state action?
The filing attaches a Hunton Andrews Kurth opinion stating that the State Pledge likely creates a contractual relationship with bondholders that could be enforced under the Federal and California Contract Clauses. It also concludes that the State would likely be required to pay just compensation for a taking, though it states there is no assurance such compensation would be sufficient to pay full principal and interest.
What agreements govern the ongoing servicing and administration of the bonds?
Pacific Gas and Electric Company serves as servicer under the Recovery Property Servicing Agreement and as administrator under the Administration Agreement, both dated as of August 1, 2024. A Joinder Agreement to the Collection Account Intercreditor Agreement, with Citibank, N.A. as Collection Account Agent, was also entered into.
04—Continue