Business & Real Estate

Now it’s a three-way fight for PG&E. The latest in the battle for bankrupt utility

A third group emerged Tuesday with a plan to take over PG&E Corp., pay its wildfire liabilities and other debts, and pull the troubled utility out of bankruptcy.

A group of insurance companies that say they’re owed a combined $20 billion by Pacific Gas & Electric filed a proposal in U.S. Bankruptcy Court, calling it “the only path forward” to reorganize the utility.

The insurers’ proposal comes on the eve of a hearing Wednesday in bankruptcy court at which another group, PG&E’s bondholders, will fight for the right to formally submit their takeover plan to wildfire victims and other creditors.

The bondholders have offered to spend $19 billion to buy 85 percent of PG&E’s stock, giving them control of a company that could be an investment gold mine once its debts are cleared up. The bulk of the money would go to paying claims stemming from the 2017 and 2018 wildfires that have been blamed on PG&E equipment.

PG&E and its major shareholders are resisting the bondholders’ effort, which would significantly diminish the value of existing shareholders’ investment. PG&E is expected to submit its own repayment plan later this summer and normally would have first crack at making its case to the assorted creditors.

Among other things, PG&E has floated an idea to borrow the billions of dollars needed to pay fire victims. Gov. Gavin Newsom’s administration has indicated it doesn’t support that plan.

Under the insurers’ plan, much of their claims against PG&E — the result of paying damages to policyholders victimized by the wildfires — would be converted into new stock in PG&E. That would give them a sizable share of the company’s stock holdings, although the precise amount wasn’t clear from Tuesday’s filings.

Also unclear: how much the insurers are offering individual fire victims — those holding damages that exceed their insurance payouts.

The insurers said their plan “preserves the ability of individual fire victims to assert their claims against a well-funded trust and realize a full recovery on their claims. Admittedly, the major open issue ... is the total funding required for the individual fire victims’ trust.”

The insurers include some of the biggest names in the business, according to court filings, including Farmers Insurance, which is owed $2.4 billion; and State Farm, which is owed $2.5 billion. Also pushing the plan is Boston hedge fund Baupost Group LLC, which has acquired nearly $3.4 billion worth of insurance claims against PG&E and owns $460 million in PG&E stock.

In a prepared statement, PG&E said it has made “significant progress in developing a viable, fair and comprehensive plan of reorganization that will compensate wildfire victims, protect customer rates, and put PG&E on a path to be the energy company our customers need and deserve.”

Allowing the insurers to submit their plan ahead of PG&E’s proposal “would increase the potential for a long, drawn-out bankruptcy process and create unnecessary delay,” the company added.

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Dale Kasler covers climate change, the environment, economics and the convoluted world of California water. He also covers major enterprise stories for McClatchy’s Western newspapers. He joined The Bee in 1996 from the Des Moines Register and graduated from Northwestern University.