Judge blocks effort to halt PG&E fire victim vote
The judge presiding over the massive PG&E Corp. bankruptcy on Tuesday declined to sanction an attempt to halt wildfire victims’ voting on the company’s restructuring plan, a setback for a group of lawyers that has tried to force changes to a crucial $13.5 billion settlement deal.
U.S. bankruptcy Judge Dennis Montali said in a written order that he would not approve a letter from a creditor committee of fire victims that would ask tens of thousands of people to delay casting a vote on PG&E’s plan to resolve the case. His decision came one day after attorneys for the committee asked for permission to send the letter, which was intended to get PG&E to provide stronger assurances about how fire victims will be paid for their losses.
“Hundreds, if not thousands” of victims have voted already, Montali wrote. “The (committee) apparently does not want to upset those votes, but it is beyond doubt that confusion will reign if the court permits the proposed letter to go out, leaving countless fire victims confused even more than they might be now.”
About 80,000 victims are able to vote for or against PG&E’s plan until May 15. The committee wanted them to wait a few weeks in large part because the economic turmoil caused by the coronavirus pandemic prompted concern that PG&E may not actually be able to provide the full $13.5 billion after the case concludes.
Half of the $13.5 billion, or about $6.75 billion, is supposed to come through PG&E stock granted to a trust that will pay fire survivors over time. But the actual stock value would be determined by a formula, which has been a major source of concern by those who have publicly critiqued the bankruptcy plan. The committee has tried to secure a guarantee from PG&E that it will grant the full estimate of $6.75 billion in stock.
Eric Lowrey, a restructuring expert working with another group of creditors, recently estimated in court papers that the value of the stock deal has already fallen to $4.85 billion and is “at significant risk of further decline in the wake of the COVID19 pandemic.”
Yet hours after a telephonic court hearing on the matter Tuesday morning, Montali, the bankruptcy judge, said that “virtually all” of the issues the victims’ committee raised in its proposed letter “were well known” when he approved a voter guide for creditors.
Montali said that agreeing to the committee’s request would “cause more harm than good, and court approval of its proposal is illadvised and must be rejected.”
The committee could choose to send the letter without the judge’s approval. Montali said bankruptcy law makes parties “free to attempt to persuade voters to vote for or against a plan” once the creditor guide is approved. If the committee goes that route, “it does so without this court’s approval or disapproval,” the judge said.
A spokesman for the committee declined to comment after the judge’s order. Bob Julian, one of the lead committee attorneys, said at the court hearing that the group was trying “to provide facts to empower victims to make an informed and meaningful decision.” Fire victims are the only creditor group that risks “not getting what they bargained for,” Julian said.
At the same hearing, PG&E attorney Stephen Karotkin said the committee lawyers’ request of the judge was “a blatant attempt to renegotiate the deal they signed.”
“The deal was very heavily negotiated,” Karotkin told the judge. “They signed it. It was approved by your honor. There is nothing in that agreement that guarantees the value of the stock.”
In an emailed statement after the judge released his order, PG&E spokesman Andy Castagnola said the company is on track to get its plan approved in the coming months and will fund the victims’ trust “as soon as possible thereafter,” Castagnola said.
“PG&E’s plan is the best method for victims to receive compensation,” he said in the email.
The committee has a separate motion trying to win a guarantee about the stock part of its settlement pending in U.S District Court. A judge has scheduled a hearing on that matter for April 16.