SAN FRANCISCO (CN) - A federal judge Wednesday advanced a competing $25.5 billion bankruptcy plan that would give hedge funds control of Pacific Gas and Electric, allowing it to move forward on a parallel track with PG&E's plan, which would cap wildfire claims at $19 billion.
"A dual-track plan course going forward may facilitate negotiations for a global resolution and narrow the issues which are in legitimate dispute," U.S. Bankruptcy Judge Dennis Montali wrote in a 4-page ruling Wednesday.
The ruling terminating PG&E's exclusive right to propose its own bankruptcy plan came after a three hour-hearing Monday, during which PG&E argued the rival plan would let hedge funds acquire the company at a "huge discount" and "at the expense of ratepayers and other stakeholders."
Despite PG&E's objections, Montali said he would "not second-guess the informed decision" of bondholders and wildfire victims who support the alternative proposal. The rival plan would provide $6.6 billion more to wildfire victims than PG&E has proposed.
Proponents of the rival plan said PG&E's plan might fall short if an estimate of the company's total wildfire liability comes in higher than expected.
Montali said he found merit in arguments that an alternative may be needed to ensure a viable plan is ready to go before a June 2020 deadline. PG&E must exit bankruptcy by June 30, 2020, in order to access a $21 billion state-created insurance fund for paying future wildfire claims, which provides financial security going forward.
PG&E said in a statement it was disappointed with Montali's decision because it opens the door to "consideration of a plan designed to unjustly enrich" New York-based Elliot Management and other hedge funds seeking to acquire 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," PG&E spokesman James Noonan said by email.
Cecily Dumas and Robert Julian, attorneys for the Tort Claimants Committee which represents wildfire victims, did not immediately return emails seeking comment Wednesday.
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