Judge’s ruling opens takeover fight for PG&E

The Sacramento Bee - - Front Page - BY DALE KASLER [email protected]

A judge turned the PG&E Corp. takeover fight into a freefor-all Wed­nes­day, ruling that Wall Street hedge funds try­ing to seize control of the trou­bled Cal­i­for­nia util­ity can be­gin press­ing their case right away.

In a ma­jor set­back for Pa­cific Gas and Elec­tric Co. and its par­ent, U.S. Bank­ruptcy Court Judge Den­nis Mon­tali said the util­ity’s bond­hold­ers can start sell­ing their cor­po­rate re­or­ga­ni­za­tion plan in di­rect com­pe­ti­tion with the com­pany it­self.

The ruling came the same day PG&E came un­der in­tense crit

icism for launch­ing a black­out cov­er­ing more than 500,000 cus­tomers as high winds blan­keted much of North­ern Cal­i­for­nia. The util­ity called the power out­age a de­fen­sive move to pre­vent more fires.

Un­til now, PG&E had the ex­clu­sive right un­til the end of Novem­ber to forge ahead with its re­or­ga­ni­za­tion plan. But Mon­tali was per­suaded by the bond­hold­ers’ re­cent al­liance with lawyers for tens of thou­sands of North­ern Cal­i­for­nia wild­fire vic­tims.

The bond­hold­ers have of­fered vic­tims of the 2017 wine coun­try fires and last Novem­ber’s Camp Fire about $14.5 bil­lion for dam­ages not cov­ered by in­surance. That’s about $6 bil­lion more than PG&E of­fered the fire vic­tims. Both sides have agreed to pay in­surance com­pa­nies $11 bil­lion for the set­tle­ments they’ve made with pol­i­cy­hold­ers.

The part­ner­ship with the fire vic­tims, who are sym­pa­thetic play­ers in the PG&E drama, gives the bond­hold­ers a ma­jor ad­van­tage.

Mon­tali, at a lengthy hear­ing Mon­day, seemed re­luc­tant to al­low the bond­hold­ers to move ahead with their plan, say­ing the fight could lead to ex­ten­sive lit­i­ga­tion that could de­lay pay­ments to fire vic­tims. But he de­cided ul­ti­mately that he wouldn’t “sec­ond-guess the in­formed de­ci­sion” of the bond­hold­ers and fire vic­tims’ lawyers to team up.

Time is crit­i­cal in the PG&E bank­ruptcy. The com­pany has un­til next June 30 to exit bank­ruptcy to be able to par­tic­i­pate in an in­surance fund cre­ated by the Leg­is­la­ture to cush­ion util­i­ties against li­a­bil­i­ties from fu­ture megafires.

The com­pany had ar­gued that it couldn’t match the bond­hold­ers’ of­fer to fire vic­tims with­out say­ing solid ev­i­dence of the size of the dam­ages. It added that, un­der bank­ruptcy law, it couldn’t risk over-pay­ing the fire vic­tims at the ex­pense of an­other group of cred­i­tors: its own share­hold­ers. It also ac­cused the bond­hold­ers, led by hedge fund El­liott Man­age­ment, of try­ing to grab the com­pany on the cheap.

The bond­hold­ers and fire vic­tims, how­ever, said PG&E was sim­ply try­ing to pro­tect its share­hold­ers at all costs. If the bond­hold­ers suc­ceed, they would control the com­pany and wipe out the in­vest­ments of cur­rent share­hold­ers.

PG&E said of Mon­tali’s ruling: “We are dis­ap­pointed that the Bank­ruptcy Court has opened the door to con­sid­er­a­tion of a plan de­signed to un­justly en­rich El­liott and the other ad hoc bond­hold­ers and seize control of PG&E at a sub­stan­tial dis­count. 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.”

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