PG&E Bondholders Ally With Wildfire Victims to Propose New Bankruptcy Exit Plan --Update
September 19 2019 - 7:37PM
Dow Jones News
By Peg Brickley and Katherine Blunt
Bondholders are taking another run at PG&E Corp., forming an
alliance with victims of the wildfires that swept through
California in 2017 and 2018 to chart a path out of bankruptcy for
the state's largest utility.
Court papers filed by a group of PG&E bondholders, including
Elliott Management Corp. and by the official committee representing
fire victims, asked for the green light to put a chapter 11 plan on
the table that would compete with the company's own restructuring
framework.
PG&E has proposed a chapter 11 plan that would cap the
amount owed to wildfire victims at about $8.4 billion, and pays
insurers and the people who invested in insurance claims stemming
from the fires $11 billion.
The company wasn't immediately able to comment.
Bondholders have offered improved treatment for victims, who are
gearing up for high-stakes battles with PG&E to prove the
amount of their claims. Court papers say bondholders put the total
value of wildfire claims, including insurance, at $24 billion.
Bondholders must get court permission to formally file a
competing chapter 11 plan, but the announcement of an alternative
to the company's version of how to pay its fire damage claims puts
pressure on PG&E to come up with a workable deal.
Judge Dennis Montali rebuffed an earlier effort by Elliott-led
bondholders to control the terms under which PG&E would cover
fire damage claims, leaving the company's fate in its own
hands.
Shareholders and other critics faulted the bondholder's initial
proposal as an effort to seize control of PG&E in bankruptcy
and collect hundreds of millions of dollars of fees along the
way.
The proposed chapter 11 plan outlined Thursday on the docket of
the U.S. Bankruptcy Court in San Francisco could be even more
advantageous to bondholders, and damaging to shareholders, than the
first version.
PG&E has said bondholders would be paid in full under its
chapter 11 plan and thus have no right to vote on the terms.
Bondholders disagreed Thursday, saying they were being cheated of
their contract rate of interest as well as premiums they say are
due on the debt.
They said PG&E can't raise the money it needs to fund its
chapter 11 exit plan from other sources, including $14 billion in
new equity that would come from existing shareholders. PG&E's
plan would dilute shareholders' interests, but it has the support
of major equity owners that have committed to putting new money
behind the company.
Bondholders said they can offer $28.4 billion in new money for
about 59% of the reorganized PG&E. The rest of the equity in
the postbankruptcy company would be put into the trust that would
absorb wildfire claims.
An official committee of wildfire victims declined to comment.
Its lawyers have scored some crucial victories against PG&E in
bankruptcy court, winning the right to put some of the fire claims
before juries for decision.
PG&E filed for bankruptcy at the end of January, a move that
allowed it to avoid facing juries in communities hurt by fires
linked to its equipment.
Write to Peg Brickley at peg.brickley@wsj.com and Katherine
Blunt at Katherine.Blunt@wsj.com
(END) Dow Jones Newswires
September 19, 2019 19:22 ET (23:22 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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