Bear market could cut into PG&E fire fund
The coronavirus is fueling more tension in PG&E Corp.’s bankruptcy as fire victims sound the alarm about concerns that the pandemic’s impact on the economy could hurt the amount of funds available to compensate them.
A committee of victims in the PG&E bankruptcy case on Thursday urged a federal judge to make the company guarantee that it will provide enough stock to cover half of the amount intended to pay individuals affected by disasters the company’s power lines caused.
The court filing came the same day that another member of the committee resigned, largely because of the stock issue.
PG&E and the committee have agreed on a settlement that would set up a $13.5 billion
trust, with $6.75 billion of the total coming through stock. But attorneys for the committee told U.S. District Judge James Donato that the company is currently not ensuring that the stock will actually be worth $6.75 billion “in the current coronavirus market collapse.” The Dow Jones industrial average has fallen by a third since February, entering an official bear market.
The stock portion of the settlement has been a major concern for many people affected by
PG&Ecaused wildfires who are trying to rebuild their lives. It was one of the reasons that 2018 Camp Fire victim Karen Gowins cited when she resigned from the committee on Thursday, saying in a letter that she felt the group’s “mandate has been subverted.”
Gowins said she was worried that the coronvirus’ economic impact could help make PG&E’s stock worth “a fraction of what it was” when attorneys negotiated the settlement.
“The risk is too great, and it is unfair and not in the best interests of the (fire victims) to be forced to bear it, unlike other creditors,” Gowin said in her resignation letter.
Rather than assuring a set value, PG&E’s plan would give the victims’ trust about 21% of the company’s common stock calculated by a formula, attorneys said. The committee wants to secure a guarantee that the company will actually provide $6.75 billion in stock when the bankruptcy concludes.
The committee’s filing comes as PG&E Corp. and subsidiary Pacific Gas and Electric Co. are working quickly to wrap up their bankruptcy case in the coming months. Fire victims, as creditors in the bankruptcy, are weighing how they want to vote on the company’s plan to resolve the case — but many of them have voiced concerns about the stock part of the deal. Those objections have become more urgent due to the economic problems caused by the pandemic.
Donato, the district court judge, was going to preside over a trial to estimate PG&E’s obligations to fire victims, but those proceedings were rendered moot when the company settled with victims’ attorneys. Last month, PG&E asked Donato to approve the the $13.5 billion figure and formally resolve his proceedings.
The committee wants
Donato to go one step further by approving the $13.5 billion arrangement — as long as it provides enough stock to actually be worth $6.75 billion. Attorneys requested that PG&E address that complaint and others before a scheduled May 21 hearing.
The committee’s lawyers said Donato needs to “carefully word” his order to avoid forcing victims into “a situation in which they obtain devalued stock during the coronavirus market downturn.”
“PG&E’s most important responsibility is the safety of our customers and the communities we serve, and we remain committed to doing right by the communities impacted by wildfires,” company spokeswoman Ari Vanrenen said in an email. She said the company is reviewing the committee’s filing and is still “dedicated to working with all stakeholders” to get its bankruptcy plan approved in court.
Kirk Trostle, one of the committee members who resigned last week, said he was pleased to see the group’s court filing, though he was skeptical that it could force PG&E to make needed changes.
“This is the stuff I’ve been trying to advise all fire victims of since I resigned from the committee,” he said. “This should have been done months ago, and it wasn’t.”