News
Bankruptcy
Aug. 7, 2002
Montali Won't Halt Creditors' Vote
SAN FRANCISCO - A federal bankruptcy judge Monday denied a request by the state Public Utilities Commission to order a new vote by creditors on competing reorganization plans for Pacific Gas and Electric Co.
The commission had pleaded for a restraining order to stop an aggressive campaign by PG&E to defeat an alternative reorganization proposal by the PUC and to allow creditors to vote again.
U.S. Bankruptcy Judge Dennis Montali said during a two-hour hearing that PUC attorney Paul Kornberg "has made a pretty convincing argument that there may have been some distortion here."
But Montali refused to order new balloting.
"I think the company is permitted to express its own views," he said. "I don't think there is serious harm."
An attorney for the creditors committee, Paul Aronzon, said a letter would be sent to all 70,000 creditors clarifying the disputed claims - without blaming PG&E for any misconduct - and asking if anyone wanted to change their vote.
Aronzon said he would rather take a limited re-vote now than delay the process later if the PUC plan is defeated. The PUC may renew its objection later, after the votes are counted.
But PG&E attorney William Lafferty strenuously objected to any letter because there would be "a sense that we did something wrong."
He said the company is prepared to demonstrate during the hearing to confirm the final plan that its statements are accurate, particularly the assertion that bonds under the PUC plan would be junk bonds.
Under bankruptcy rules, creditors may vote to accept one or both plans. If they vote to approve both, the creditor may then express a "preference" for one over the other.
PG&E incurred the anger of the PUC by sending out 74,000 letters and fliers to creditors making campaign phone calls in an effort to defeat the PUC plan.
Kornberg contended that the letters incorrectly led creditors to believe that under the PUC plan, shareholders would not get dividends and that the plan was not viable and would fail.
Voting will end Aug. 12.
Lafferty suggested PG&E would be forced to raise the stakes if the PUC were given the chance to send a clarification letter and seek a new vote.
He said PG&E, for its part, was incensed that the PUC had engaged in public misstatements of the PG&E plan in its own press releases and in pleas by commission president Loretta Lynch that creditors vote for the PUC plan.
"We would have to defend ourselves. We think they have made misstatements," Lafferty argued.
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Pamela Mac Lean
Daily Journal Staff Writer
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