PG&E Creditors Join Fire Victims -- WSJ
September 20 2019 - 3:02AM
Dow Jones News
By Peg Brickley and Katherine Blunt
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 20, 2019).
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 pay
insurers and the people who invested in insurance claims stemming
from the fires $11 billion.
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.
"The bondholders' plan is an attempt to pay themselves more than
they are entitled to under the law and costs customers billions of
dollars," PG&E said in a statement. The company noted it has
settled with holders of insurance claims, and with Paradise,
Calif., and many other cities affected by the blazes.
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.
"The proposal presents a path forward that recognizes the
victims' losses and puts their interests ahead of shareholders,"
Robert Julian, one of the lawyers for the fire victims committee,
said in a statement.
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.
Recently, Judge Montali granted fire victims the right to go
before a jury to test not just local sentiment on the amount of
damages, but whether or not PG&E can be blamed for one of the
worst of the blazes, the Tubbs fire.
If the joint bondholder and fire victim plan moves ahead, the
Tubbs fire trial and the rest of the complex proceeding to estimate
what the fire damage claims are worth would be over. PG&E would
be in position for a timely exit from bankruptcy, to meet a June
2020 deadline for participation in a state wildfire fund,
bondholders say.
In its statement, PG&E said it is on track to meet the
deadline to qualify for the state fund, which is designed to
cushion utilities financially in the event of more fire
catastrophes.
Write to Peg Brickley at peg.brickley@wsj.com and Katherine
Blunt at katherine.blunt@wsj.com
(END) Dow Jones Newswires
September 20, 2019 02:47 ET (06:47 GMT)
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