San Francisco Chronicle - (Sunday)
Fire victims could wait years for funds
Dispute centers on sale of PG&E stock to pay claims
Victims’ attorneys have yet to reach a deal with PG&E on this crucial factor in the $13.5 billion deal.
Even as PG&E Corp.’s bankruptcy judge is poised to soon decide the outcome of the case, a crucial factor that will influence how and when wildfire victims get paid remains unresolved.
And the issue threatens to hold up part of victims’ estimated $13.5 billion settlement for as long as six years, according to one of the leading bankruptcy attorneys advocating for fire survivors.
It all comes down to a longdebated stock agreement. Half of the settlement for victims is supposed to be funded with PG&E shares, which a trust will sell off over time to pay the claims of people affected by wildfires that the company’s power lines caused.
The true value of that stock is not guaranteed because it will be determined by a formula at a later date. But the trust is expected to hold nearly 21% of PG&E shares. For a few months, victims’ attorneys have been in mediation with the company about how the trust can sell off its shares — and they’ve been unable to reach an agreement.
On Friday, during a trial about PG&E’s bankruptcy restructuring plan, attorney Bob Julian said that without a stockselling deal in place, federal regulations would bar the trust from selling all its stock for five to six years. Julian, who represents the bank
ruptcy committee of PG&E fire victims, said the same restrictions would not apply to hedge funds financing part of the company’s exit from Chapter 11.
Those large investors could cash in on their investment in months, Julian said, a prospect that he called “unfair.”
“It would be immoral,” he said, advocating for fire victims to be on a more level playing field with the other investors. PG&E bankruptcy attorney Stephen Karotkin expressed hope at the virtual court hearing that the parties will reach an agreement through mediation. He also suggested that U.S. Bankruptcy Judge Dennis Montali could delve into the matter after deciding whether to confirm PG&E’s plan — a decision that the company wants within the week.
The stockselling dispute is one of the most consequential outstanding matters as PG&E presses to secure court approval of its plan to restructure its finances, pay fire victims and emerge from bankruptcy. California law requires full approval of the plan by June 30 or else
PG&E won’t have access to an estimated $21 billion state fund that would insure the company against financial peril from future major fires.
PG&E has already made substantial progress. An overwhelming majority of fire victims whose votes were tallied supported the plan. State regulators at the California Public Utilities Commission approved the plan in late May and federal regulators granted their blessing earlier that month. But the company still needs a favorable ruling from Montali, who has spent several days presiding over a trial about whether to confirm the planned financial restructuring. Karotkin, the PG&E bankruptcy lawyer, asked Montali to make a decision about the plan within one week in order to help the company pull together the financing it needs. PG&E is trying to raise capital to fund its path out of bankruptcy this month because July is largely a “blackout period” on Wall Street, Karotkin said. The judge said he may issue a shorter ruling first and then follow up later with a more detailed explanation of his reasoning.
The stock agreement isn’t the only concern some people have with the bankruptcy plan. Santa Rosa wildfire survivor Will Abrams argued against the plan for several reasons, including because he felt PG&E has not done enough through the bankruptcy to reduce the risks of its power lines causing more catastrophes.
“At some point, we have to start saying the interests of shortterm investors are not ... more important than the overall health of the company and, more importantly, than the people living around the wires,” Abrams said.
PG&E leaders have only “thrown money at the problem,” Abrams said, describing it as “doomed to fail.”
Karotkin presented a different view at a hearing on Wednesday. He stressed that PG&E had won the “overwhelming support of virtually all constituencies” and warned of “draconian” consequences if the plan is not confirmed in court.
“It is plainly evident, your honor, that if this plan is not confirmed ... distributions to fire victims and others will be delayed for months, more likely years,” Karotkin said.
Also unresolved is a request from a 2018 Camp Fire victim, Karen Gowins, for the judge to appoint an examiner who would review how tens of thousands of fire victims voted on the plan. Nearly 45,000 votes — 88% of all tallied ballots — came in favor of the plan, far more than the twothirds needed by PG&E. But some fire victims have said they didn’t get ballots until the last minute or even after the May 15 voting deadline passed.
Montali heard the request from Gowins’ attorney Bonnie Kane on Thursday. At the hearing, Sonoma County fire survivor Helen Sedwick said the late ballots had “validated a feeling” among fire victims that “the vote was never meaningful at all.” She, Kane and another survivor, Theresa McDonald, implored Montali to appoint an examiner or find another way to address the voting problems.
But PG&E’s Karotkin said an outside review was unwarranted and could hamper the company’s ability to raise the money it needs to resolve the case. Montali was skeptical at times, too.
“It’s not a perfect system,” the judge said. “I would have a much different take on this if the vote was close. It wasn’t close.”
The judge has not yet ruled on the examiner request. He will preside over another confirmation trial hearing on Monday.