SAN FRANCISCO (CN) – An unlikely alliance of Wall Street hedge funds and wildfire victims will propose a new plan to rescue Pacific Gas and Electric from bankruptcy that includes more than $24 billion for fire victims and insurers that covered their losses.
To strengthen their case for adopting a competing bankruptcy plan, the two groups said they would honor PG&E’s $11 billion settlement with insurers and provide more than $13 billion to settle other wildfire claims. The plan would go well beyond the $18 billion cap PG&E proposed for fire claims in its bankruptcy plan.
Representing a group of bondholders including the $38 billion hedge fund Elliot Management, attorney Michael Stamer made the announcement during a status conference in U.S. Bankruptcy Judge Dennis Montali’s courtroom Tuesday.
“In order to attract financing, you need to put a collar around, you need to cap wildfire claims,” Stamer said. “We have negotiated a cap on those claims.”
PG&E has attacked the bondholders’ previous bankruptcy proposals as self-serving attempts to seize control of the company. When bondholders and fire victims proposed the first version of their joint plan last week, a PG&E spokesman denounced it as “an attempt to pay” bondholders “more than they are entitled to under the law” and to force customers to shoulder those costs.
If their competing plan is adopted, Montali predicted it will make estimating PG&E’s total wildfire liability unnecessary. Montali previously ruled that estimating fire claims was the only practical way to resolve PG&E’s bankruptcy case by June 30, 2020. That’s the deadline state lawmakers set for PG&E to access a state-created insurance fund for future wildfire claims.
“That’s going to moot the estimation,” Montali said.
PG&E attorney Stephen Karotkin disagreed, arguing that PG&E shareholders are “entitled to have things estimated to determine if too much money is going to fire claimants.”
Also on Tuesday, PG&E denied accusations that it has kept wildfire victims in the dark and treated them unfairly as it struck backroom deals with other groups, including the $11 billion settlement with insurance companies and a $1 billion settlement with 18 government entities.
Representing fire victims, attorney Cecily Dumas complained PG&E has held “zero meetings” with her group and never consulted her or her colleagues about its bankruptcy plan.
“They’re playing it like we’re an irritant, a rock in your shoe,” Dumas said. “We’re not an irritant. We’re the communities you burned, the loved ones who were lost.”
Karotkin replied that PG&E has tried to hold meetings with the tort claimants, but those meetings never occurred because fire victims’ lawyers refused to provide information on their claims in advance.
Montali asked why PG&E can’t schedule a simple, face-to-face meeting with fire victims’ attorneys to “at least shake hands and communicate on the basics.”
Karotkin replied that PG&E would be “delighted” to do so, but added that such a meeting is unlikely “because the bondholders are basically precluding them from engaging in those negotiations.”
Stamer refuted that claim, telling Montali no document or agreement exists between the fire victims and bondholders to prevent the groups from meeting with each other.
“The reason they’re not talking to the [Tort Claimants Committee] is because they’ve chosen not to,” Stamer said.
PG&E also denied accusations that its $11 billion deal with insurers was intended to discourage insured fire victims from filing claims for losses not covered by insurance, such as physical injury and emotional distress claims.
Karotkin forcefully rejected the allegation, noting PG&E came up with a $20 million plan to notify all potential fire victims of the Oct. 24 deadline to file claims for recovery in the bankruptcy case.
“There is no evidence of what they’re talking about,” Karotkin said.
In a statement issued after the hearing Tuesday, PG&E complained that the bondholders have yet to propose a plan that does not “unjustly enrich themselves” at the expense of PG&E customers.
“The fact that the Elliott proposal was exposed as violating bankruptcy law, and has to be substantially revised only five days after it was submitted to the court, shows their plan is just another ploy to take over PG&E at a fraction of its value to the detriment of customers and California’s energy future,” PG&E spokesman James Noonan said by email.
PG&E believes the bondholders’ initial plan filed Sept. 19 violated bankruptcy law because it prioritized uninsured fire victims’ claims over insurers’ claims on behalf of fire victims.
Stamer said the bondholders and fire victims will file an amended version of their competing bankruptcy plan by the end of the day Wednesday. A hearing on the two groups’ motion to terminate PG&E’s exclusive right to propose its own bankruptcy plan is scheduled for Oct. 7.