PG&E BANKRUPTCY RULING.
Judge issues decision in PG&E bankruptcy
The judge presiding over PG&E Corp.’s bankruptcy case decided Wednesday to allow wildfire victims and bondholders who want to seize control of the company to move forward with their own restructuring plan.
U.S. Bankruptcy Judge Dennis Montali’s decision is a major setback for PG&E’s current hedgefunddominated ownership, whose stake in the company could be massively diluted if the proposal is successful. And it’s a reversal of fortune for the bondholder group, led by the hedge fund Elliott Management, whose prior attempt to introduce its own plan was rejected by the judge.
PG&E stock plunged in afterhours trading, falling 27% to $8 per share.
In a written order, Montali said victims of the fires started by PG&E are “the parties most deserving of consideration” and noted they had “spoken loudly and clearly” that they want the court to weigh competing plans.
Whatever restructuring plan is ultimately approved will determine how PG&E resolves the fire liabilities that prompted its bankruptcy filing in January.
Bondholders and fire victims have outlined the terms of a proposal that includes creating a $14.5 billion trust from which PG&E would pay claims of people who lost loved ones and homes in fires the company’s equipment started.
PG&E’s current plan, meanwhile, would create a trust of $8.4 billion from which claims to individual fire victims would be paid.
After weighing arguments he heard from both sides on Monday, Montali decided that “the coming weeks will permit ample time to explore and resolve issues regarding both plans,” according to his order.
Montali cited the “looming deadline” posed by California’s recently enacted AB1054, which says the company and subsidiary Pacific Gas and Electric Co. need to resolve their bankruptcy by June 30 in order to access a new fund that will protect it from future
“The coming weeks will permit ample time to explore and resolve issues regarding both plans.” U.S. Bankruptcy Judge Dennis Montali
fire costs. The risk that PG&E’s plan may for some reason not pass muster “is not worth turning away a viable alternative,” he said.
“A dualtrack plan course going forward may facilitate negotiations for a global resolution and narrow the issues which are in legitimate dispute,” Montali said.
Patrick McCallum, who runs a group called Up from the Ashes that advocates for wildfire victims, said in a statement that the judge “made the right decision for true competition over who can best manage this utility to ensure public safety and profitability.”
PG&E said it was “disappointed” that the court allowed the advancement of a plan designed to “unjustly enrich” bondholders who want to control the company.
“We are confident that our fully funded Plan of Reorganization, which will satisfy all wildfire claims in full while treating all stakeholders fairly and protecting customers, is the better solution for all constituencies and will be confirmed,” spokesman James Noonan said in an email.