PG&E’s Bankruptcy and Muni Bonds: What You Need to Know

As expected, PG&E Corp. filed Chapter 11 bankruptcy protection after wildfires in California left it with billions of dollars in liabilities. The company will now negotiate with creditors on a reorganization plan that would decide who gets paid, how much and when. Once the plan is written, a judge must sign off.

Those creditors include municipal-bond investors who hold about $880 million in debt sold through state and local government conduits on behalf of California’s largest investor-owned utility. Here’s how the company’s collapse affects those securities.

Letters of Credit

About $760 million of the bonds are backed by letters-of-credit provided ...