SAN FRANCISCO (CN) – Pacific Gas and Electric lawyers on Wednesday blasted a request to fast-track a rival bankruptcy plan favored by wildfire victims as an attempt to avoid a "serious inquiry" into the actual value of wildfire claims.
Confirming a competing Chapter 11 reorganization plan, which would cap wildfire claims at $25.5 billion compared to PG&E's proposed $19 billion cap, would require a less thorough estimation of PG&E's total liability, a PG&E lawyer told U.S. Bankruptcy Judge Dennis Montali during a status conference.
"They're asking to have a very quick process in front of you that is pending before Judge Donato," PG&E lawyer Stephen Karotkin said.
U.S. District Judge James Donato is overseeing the process of estimating PG&E's total wildfire liability. An important piece of that estimate is also playing out in state court, where a jury will decide if PG&E is liable for the 2017 Tubbs Fire which killed 22 people and caused $6.2 billion in damage. Trials in both cases are set to begin early next year.
A group of bondholders and fire victims say their plan would make the Tubbs trial and estimation process moot because fire victims would agree to settle their claims regardless of the outcome.
Lawyers for PG&E and its shareholders say the estimation must still occur regardless to find out if the company is overpaying or underpaying fire claims.
"I see it as an effort to evade factual development," PG&E shareholders' attorney Bruce Bennett told the judge.
Representing bondholders, attorney Michael Stamer asked Montali to advance his clients' plan, arguing it would help ensure PG&E exits bankruptcy by the June 30, 2020, deadline it must meet to access a state-created $21 billion insurance fund for future wildfire claims.
"Our intentions are to minimize delay and maximize the likelihood of a successful outcome," Stamer said.
Stamer argued estimation carries a substantial risk because PG&E lacks financing to cover a higher payout to fire victims, a claim disputed by PG&E. The company and its shareholders say they could easily obtain funding from other sources that offer lower interest rates.
"There are other financial institutions willing to provide financing on substantially better terms," Karotkin said.
The bondholders plan would wipe out 99.9% of stock value for non-PG&E employee shareholders and enable hedge funds, including the $35 billion Elliot Management, to take over PG&E's board of directors.
Karotkin said the bondholders are "not altruistic investors" looking to help fire victims or ensure California meets its clean energy goals, but rather corporate opportunists looking to acquire PG&E at a substantial discount that will raise costs for ratepayers.
Montali disagreed with the bondholders' position that if their plan is confirmable, PG&E's plan is "dead on arrival."
"I don't think the [bankruptcy] code says you dump the debtor's plan because another plan can be confirmed," Montali said.
The judge ultimately decided not to schedule a confirmation hearing for the bondholders' plan, which would cap wildfire claims at $25.5 billion, including an $11 billion settlement with insurers, $1 billion settlement with 18 public entities and $13.5 billion for all other wildfire claims.
Cecily Dumas, a lawyer representing fire victims, said in court Wednesday that the federal government and California state agencies recently filed wildfire claims of $6.5 billion – leaving about $7 billion or less for individual uninsured fire victims under the bondholders' plan.