The Wall Street hedge funds trying to take over PG&E Corp. have increased their proposed payout for wildfire claims as the investors seek to wrest control of the bankrupt California utility.
In a filing Wednesday in U.S. Bankruptcy Court, a group of bondholders offered to infuse Pacific Gas and Electric and its PG&E parent with $29.2 billion in “new money investments” to pull the company out of bankruptcy.
Of that, $25.5 billion would be spent on claims from the horrific wildfires of 2017 and 2018, with $14.5 billion going directly to victims who were uninsured or under-insured. The remaining $11 billion would reimburse insurance companies that have settled claims filed by their policyholders.
That represents an additional $1.5 billion for fire claims. A week ago, the bondholders offered $24 billion for wildfire claims and didn’t break down how much would go to victims vs. insurance companies.
The victims and insurers wouldn’t get paid all in cash. Instead, they’d receive a 50-50 mix of cash and stock and would end up owning about 40 percent of PG&E once it exits bankruptcy. The bondholders themselves would own 59 percent of the company. The plan would effectively wipe out the holdings of existing shareholders.
Last week the bondholders struck an alliance with the official committee representing wildfire victims in the bankruptcy case. That agreement could prove crucial as the bondholders attempt to gain momentum for their takeover bid. Thousands of Northern Californians suffered damages in the 2015 Butte Fire in the foothills east of Sacramento, the 2017 wine country fires and last November’s Camp Fire, the deadliest in California history.
The bondholders’ offer to insurance companies matches the $11 billion settlement PG&E has offered to insurers as part of a formal bankruptcy plan it has filed in court. The bondholders’ $14.5 billion offer to fire victims is higher than what PG&E has offered: $8.4 billion.
Nonetheless, PG&E dismissed the bondholders’ proposal. The utility said the bondholders, led by New York hedge fund Elliott Management, are “attempting to manipulate and profit from the Chapter 11 process. Despite these repeated distractions, we remain committed to working with the individual plaintiffs to fairly and reasonably resolve their claims, in a way that treats all stakeholders fairly and protects customers.”