PG&E Creditors Join Fire Victims -- WSJ

By Peg Brickley and Katherine Blunt 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 20, 2019).

Bondholders are taking another run at PG&E Corp., forming an alliance with victims of the wildfires that swept through California in 2017 and 2018 to chart a path out of bankruptcy for the state's largest utility.

Court papers filed by a group of PG&E bondholders, including Elliott Management Corp., and by the official committee representing fire victims, asked for the green light to put a chapter 11 plan on the table that would compete with the company's own restructuring framework.

PG&E has proposed a chapter 11 plan that would cap the amount owed to wildfire victims at about $8.4 billion, and pay insurers and the people who invested in insurance claims stemming from the fires $11 billion.

Bondholders have offered improved treatment for victims, who are gearing up for high-stakes battles with PG&E to prove the amount of their claims. Court papers say bondholders put the total value of wildfire claims, including insurance, at $24 billion.

"The bondholders' plan is an attempt to pay themselves more than they are entitled to under the law and costs customers billions of dollars," PG&E said in a statement. The company noted it has settled with holders of insurance claims, and with Paradise, Calif., and many other cities affected by the blazes.

Bondholders must get court permission to formally file a competing chapter 11 plan, but the announcement of an alternative to the company's version of how to pay its fire damage claims puts pressure on PG&E to come up with a workable deal.

Judge Dennis Montali rebuffed an earlier effort by Elliott-led bondholders to control the terms under which PG&E would cover fire damage claims, leaving the company's fate in its own hands.

Shareholders and other critics faulted the bondholder's initial proposal as an effort to seize control of PG&E in bankruptcy and collect hundreds of millions of dollars of fees along the way.

The proposed chapter 11 plan outlined Thursday on the docket of the U.S. Bankruptcy Court in San Francisco could be even more advantageous to bondholders, and damaging to shareholders, than the first version.

PG&E has said bondholders would be paid in full under its chapter 11 plan and thus have no right to vote on the terms. Bondholders disagreed Thursday, saying they were being cheated of their contract rate of interest as well as premiums they say are due on the debt.

They said PG&E can't raise the money it needs to fund its chapter 11 exit plan from other sources, including $14 billion in new equity that would come from existing shareholders. PG&E's plan would dilute shareholders' interests, but it has the support of major equity owners that have committed to putting new money behind the company.

Bondholders said they can offer $28.4 billion in new money for about 59% of the reorganized PG&E. The rest of the equity in the postbankruptcy company would be put into the trust that would absorb wildfire claims.

"The proposal presents a path forward that recognizes the victims' losses and puts their interests ahead of shareholders," Robert Julian, one of the lawyers for the fire victims committee, said in a statement.

PG&E filed for bankruptcy at the end of January, a move that allowed it to avoid facing juries in communities hurt by fires linked to its equipment.

Recently, Judge Montali granted fire victims the right to go before a jury to test not just local sentiment on the amount of damages, but whether or not PG&E can be blamed for one of the worst of the blazes, the Tubbs fire.

If the joint bondholder and fire victim plan moves ahead, the Tubbs fire trial and the rest of the complex proceeding to estimate what the fire damage claims are worth would be over. PG&E would be in position for a timely exit from bankruptcy, to meet a June 2020 deadline for participation in a state wildfire fund, bondholders say.

In its statement, PG&E said it is on track to meet the deadline to qualify for the state fund, which is designed to cushion utilities financially in the event of more fire catastrophes.

Write to Peg Brickley at [e-mail] and Katherine Blunt at [e-mail]

(END) Dow Jones Newswires

September 20, 2019 02:47 ET (06:47 GMT)

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