By Ann de Rouffignac
HOUSTON, Sept. 21, 2001 – Southern California Edison Co. Friday said it has a plan in place to oppose an involuntary bankruptcy petition, if one is filed by creditors.
Reports surfaced this week that two generators, owed millions by the utility, are looking for a third creditor to force the utility into bankruptcy. “We have significant grounds to oppose such a petition,” said Tom Walper of Munger, Tolles and Olson LLP.
Southern California Edison would oppose and fight such a filing in bankruptcy court, he said. “Discovery could take weeks or even months.”
Up to now, creditors have held off while the California legislature debated a bail out plan. But lawmakers adjourned without approving a plan. Gov. Davis called for a third special session in October. The governor appears determined, but the state Asssembly and the Senate have not been able to agree on a rescue package.
The financially strapped utility has also resisted filing for voluntary bankruptcy preferring to wait for the California legislature to act. Lawmakers have spent months negotiating to no avail, and Ted Craver, CFO of Edison International, parent of SCE, was not as optimistic as he has been in previous weekly discussions with creditors.
“The failure of the legislature to act has increased the risk of involuntary filing. We continue to believe creditors should forbear at this time,” he said.
The company has received several extensions on bank credit lines. The most recent extension expires Sept. 29. Craver said he didn’t know if the banks would continue to forbear, while the company continues to pursue the “negotiated path” during the upcoming special legislative session.
“I wouldn’t use the word ‘optimistic’. Instead I see an opportunity there,” said Craver. “The governor is committed to seeing this through and opposes having the state’s two largest utilities in bankruptcy.”
Pacific Gas & Electric Co. filed for bankruptcy protection Apr. 6 and Thursday filed a reorganization plan with the bankruptcy court. Both utilities were caught last year between escalating wholesale power prices and fixed retail rates. The financial problems worsened until the utilities could no longer borrow money to finance power purchases. The state stepped in to buy power on their behalf.
If the “negotiated path” ultimately fails, Craver said, the utility has prepared for the “other path,” an apparent reference to a bankruptcy filing.
“You hope for the best but prepare for the worst,” said Craver. “That’s the responsible thing to do, and we are a responsible company.”