DRValue

don't think that's right. here's chart from jpm Thanks. Do you have more of the source?

Updated bull thesis. [*]Cali was prepared to help in 2017, and allowed PG&E to issue recovery bonds - https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180SB901 [*]The 2017 Tubbs fire liabilities (est. $17b of $30b total) have gone away after pg&e are deemed not liable. [*]Cali wants to help after the 2018 fires, while the 2017 liability was still assumed - https://www.bloomberg.com/news/articles/2018-11-15/pg-e-faces-deepening-fire-crisis-with-12-billion-market-wipeout?srnd=premium [*]If a similar amount of recovery bonds would have been acceptable for the 2017 fire, and now those liabilities have gone away, why can't the same course of action apply to the 2018 fire? [*]If PG&E is wiped out, the cost of capital will increase across all providers in Cali. [*]There is no point having an inverse condemnation law and then not allowing the companies to earn their way out of it. That would create capital flight from the sector. [*]PG&E haven't acutally been found liable at this time, there is potential they weren't. Even if they were, the above applies. [*]PG&E have found bullet holes in and around equipment at the origin point of the fire - https://edition.cnn.com/2018/12/13/us/pge-camp-fire-report-outages/index.html [*]The NPV of claims will be lower than initial estimates of the gross value of $30b plus. I have read (and will try to find) an analyst believes the NPV of the Tubbs and Camp Fire Fires would be $22b. Excluding Tubbs could well halve that value. [*]A break-up of PG&E or nationalization saddles the state with the claims from constituents, and the debt that goes with it. [*]If the state pays the claims, that could be politically difficult as the state has to do a good job administratively and at some point will have to deny claims. Politicians, I assume, would have an easier life criticizing PG&E's handling of claims and leaving the cost in the private sector. [*]Someone has to pay these claims. If it isn't PG&E, its the state. They wont want the state to pay No valuations yet, for me this is all about the practicalities of working this all out. Value comes next.

@cherzeca, Do you happen to know if cumulative preferred share dividends that are suspended are reduced during bankruptcy? Or does it depend on the judge and the bankruptcy plan? I'm assuming a scenario where the commons survive.

As left as Commiefornia is, I'd prefer to think they'd lean to privatisation not nationalisation. Also, if they take over or break up pg&e the state definitely has to pick up claims from constituents. That's a bad thing for the balance sheet and also politically because at some point they have to say no to claimants and deal with the political fall out from that. Far easier and palatable imo to leave this liability in the private sector. I'll need to add these points to the thesis.

I don't know as much re Buffett as others here. But a pound of flesh is what he got historically. Which means if preferreds are in play and Srs. may go he could ask for perpetual and cumulative. Which might give the Jrs. a little less value. you are right he would want cumulative, but I think he sees his greatest value as the validation effect he provides, which in this recap scenario is very important to GSEs, and therefore very valuable to Buffett This. The companies benefit with Buffets endorsement and Buffett gets to pull their pants down.

They'll still need to offer c.15% ROE or its not just Buffett that won't be interested. On this occasion the lower return may not impact Buffett too much as the risk will be much lower with more capital. Maybe he could do some convertible preferred deal like Goldman. Or was it BoA?

A summary of my bull thesis thinking so far: [*]Cali was prepared to help in 2017, and allowed PG&E to issue recovery bonds - https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180SB901 [*]The 2017 fire liabilities have gone away after pg&e are deemed not liable. [*]Cali wants to help after the 2018 fires, while the 2017 liability was still assumed - https://www.bloomberg.com/news/articles/2018-11-15/pg-e-faces-deepening-fire-crisis-with-12-billion-market-wipeout?srnd=premium [*]If a similar amount of recovery bonds would have been acceptable for the 2017 fire, and now those liabilities have gone away, why can't the same course of action apply to the 2018 fire? [*]If PG&E is wiped out, the cost of capital will icrease across all providers in Cali. [*]There is no point having an inverse condemnation law and then not allowing the companies to earn their way out of it. That would create capital flight from the sector. [*]PG&E haven't acutally been found liable at this time, there is potential they weren't. Even if they were, the above applies.

This position itself has been extremely contrarian. Joel Greenblatt talks about when he was running Gotham he would constantly be asked about the positions he owned in terms of "are you crazy? haven't you seen the news?!". Being contrarian =/= successful investing. But it's a common ingredient. Within the contrarian Fannie position one of my more contrarian ideas was that Warren Buffet's been sitting on $100bn and Fannie Mae... well... needs $100bn. Buffet loved these companies before the excessive risk taking. Buffet loves the banks post liquidity/capital rules. To me it's a perfect match. Crazy I guess.. There's also 0% chance that Buffet is not intensely aware of the details of the situation. Agree. When it's announced, it's gonna be one hell of a day.

Thoughts on whether Buffett will participate in the recap? I can see it happening...

i think you are right, fidelity said as long as the stock is trading, nothing changes, so in this case it would probably be a while if ever that PCG is actually delisted. I unfortunately didn't close the options yet (UGH) but still well positive, but about half of what I would have made if I sold when I actually should have. Still a lot of moving parts, so hoping for some more good news before my expiration. Not to colour your judgement, but I'm keeping track of whether they file because I will likely be interested in the debt, preferred and possibly common equity if they all get cheap enough. The reason I say this is that recent articles quoting analysts are saying that they still see the company filing regardless of the 2017 fire positive outcome. Just something to keep in mind.

https://seekingalpha.com/article/4235606-pg-and-e-get-will-go https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180SB901 Bill 901 referenced in the article was to apply to the fires that PG&E are no longer held liable for. The projected liabilities are similar (2017 - $17b) and having set precedent the previous year, I can't imagine a reason to have this bill not apply to the 2018 fires. One thing troubling me with the BK filing is that its the hold co. and op co. filing. In 2001, it was only the op co. so shareholders may suffer this time round.

I believe that if the stock is delisted you will be able to exercise or close your options but will not be able to buy. If the stock is not delistsed, I don't think it matters. I haven't been through this myself but have heard it. Not the most concrete answer I know. I would ask your broker or read your options agreement. Well done on your call, if you've closed.

I don't understand why congress is needed either.

https://finance.yahoo.com/news/pg-es-2001-bankruptcy-compares-144407067.html

https://amp.businessinsider.com/pge-stock-price-plans-to-seek-bankruptcy-protection-report-2019-1 "Recall that the doctrine of Inverse Condemnation (IC) calls for the utility to pay for all liabilities for fires started by its equipment whether it was negligent or not," the analysts Shelby Tucker and Wojciech Majerczak wrote. "Even if it is allowed to recover these liabilities, PacGas might find financing these claims too onerous prior to receiving appropriate recovery guarantees by the California commission." Bankruptcy to cap and finance claims. Hoping it falls when they file.

JP's need to vote on the conversion. They wouldn't vote for conversion if a post conversion warrant exercise went against them. However as long as they got par I guess they wouldn't care. Depends if they own common as well I guess.

They can't raise capital with the seniors unpaid and if I was asked to provide a common equity infusion one of my conditions would be that the government exercise their warrants before I invest. They'll exercise before the capital raise.

I agree. Mark calabria has critiqued the 10% rate and said it's too high. Also there's the "let the gse's pay us back act" which specified a rate of 5%. It just seems like a really simple way to get them tonnes of capital. Hopefully it goes our way but who knows.

I expect a pop but the price should (theoretically), settle to the discounted value of future dividends assuming they are to start again. I haven't worked this value out. I dent expect them to trade close to par until: [*]Dividends resume, or [*]Redemption is announced

I've read liabilities up to $17b. If camp fire is larger, say $20b, then with insurance and asset sales ($15.8b for gas network, San Fran office and insurance) that could leave only $4.2b to find. Whether the assets get that value in bankruptcy i don't know. I suspect they won't file but I could be a buyer if they do.

Stock up 76%. https://www.barrons.com/articles/pg-e-jumps-more-than-60-because-someone-else-was-ruled-responsible-for-a-2017-fire-51548363006 Not sure what the liabilities potentially were but not sure it impacts the camp fire.

I don't like copy/pasting copyrighted content, but suffice that house financial services minority ranking member ® seems to think he can work with maxine waters and address housing finance. the otting reporting that he may release a plan soon has obviously caught their attention, and they think congress should be the source of reform (similar to Watt). imo, this is the typical congressional bloviation. if house and senate couldn't produce something when Rs had both majorities, how can they realistically think they can do so now? I don't see otting/mnuchin giving this any credence. article does point out that if otting releases something the senators don't like, then Calabria's confirmation hearing may be compromised... Cheers Chris much appreciated

I was just about to post that. Based on the comments, I cant see how they don't do something with the SPSA to actually return capital to the GSE's. Maybe changing the interest rate from 10% to 5%? Bullish.