PG&E settlement fund $1 billion short for wildfire victims, trust’s leader warns

The trust established by PG&E Corp. to pay California wildfire victims is “more than $1 billion short” of what’s needed to pay anticipated claims, the trust’s overseer said.

In a letter to victims filed Tuesday in U.S. Bankruptcy Court, the head of the Fire Victim Trust said the shortfall is the result of a downturn in PG&E’s stock price, which makes up about half of the settlement fund.

“To date, with the stock at its present value, the Trust is more than $1 billion short of its intended settlement value,” wrote retired appeals court Justice John Trotter, the fund’s trustee.

Trotter’s warning doesn’t mean the estimated 80,000 victims won’t get all the money they were promised by PG&E, which exited bankruptcy last June. The trust plans to sell off its 477 million shares of PG&E stock deliberately with the intent of maximizing returns and avoiding any shortfalls.

“We have developed a careful ‘sell-down plan,’” Trotter wrote.

The possibility of stockprice fluctuations undermining the fire victims’ payout has loomed over the PG&E case for months. Under a carefully negotiated plan about that was wrapped up about a year ago, lawyers for fire victims agreed to a $13.5 billion settlement with victims of the Camp Fire, the 2017 winecountry fires and other disasters blamed on PG&E.

Although victims will ultimately be paid completely in cash, they’re receiving their payment from a trust that was funded with $6.75 billion in cash and $6.75 billion in PG&E stock.

The COVID-19 pandemic sent PG&E stock tumbling, however. At one point last spring, wildfire victims’ lawyers sought some sort of protection against stock fluctuations.

“The victims should not bear the economic risk,” victims’ lawyers wrote in a court filing last April. The plan “is not fair, equitable or in good faith.”

Ultimately, the victims agreed to take their chances with the PG&E stock and approved the company’s bankruptcy settlement. At the closing stock price Friday of $11.43 a share, the victims’ stock was worth about $5.5 billion.