California fire victims: Protect us from market crash, or we may quit PG&E bankruptcy deal
Thousands of Northern California wildfire victims could thwart PG&E Corp.’s plan to exit bankruptcy unless the utility guarantees that the victims’ compensation won’t be hurt by the plunge in PG&E’s stock price.
In a series of legal filings Thursday and Monday, lawyers for the court-appointed committee representing thousands of victims attacked PG&E’s plan because the volatility in the utility’s stock jeopardizes the amount of money to be paid.
“The victims should not bear the economic risk,” they wrote in a filing Monday in U.S. Bankruptcy Court. The plan “is not fair, equitable or in good faith.”
Under a carefully negotiated settlement, some 80,000 victims would get $13.5 billion to cover uninsured losses from the massive fires of 2017 and 2018 that have been blamed on faulty transmission towers and other PG&E equipment. The deal says half the payout would come in the form of at least 21 percent of PG&E’s stock, worth $6.75 billion.
But the coronavirus pandemic has sunk PG&E’s share price by more than 40 percent, and the victims’ lawyers said PG&E has been unwilling to guarantee that victims won’t lose any compensation as a result. The lawyers said they’ve been meeting with PG&E representatives to resolve the differences but “the parties are now at an impasse.”
In court papers Monday, PG&E said the lawyers are trying to change a deal they “agreed to despite the fact that the agreement has the broad support of the parties and the Governor’s Office and is the best and fastest path to getting victims paid.”
The utility also said: “It is important to keep in mind that utility stocks have historically performed well during downturns and in the ensuing economic recovery.”
Deadline for deal is approaching
Fire victims’ approval remains one of the last major pieces of the puzzle before PG&E can get its bankruptcy plan confirmed in court by June 30, the deadline set by the Legislature.
If PG&E misses the deadline, it won’t be eligible for a state-run insurance fund to cover liabilities from future wildfires. Also, the state could force the sale of the company under an agreement the utility made with Gov. Gavin Newsom.
Victims have until May 15 to vote by mail on the plan. In a proposed letter to victims, their lawyers urged them to hold off on voting until they get assurances from PG&E about the stock component of the payout. The lawyers said they plan “to give PG&E until April 28, 2020 to fix these problems.”
The lawyers asked U.S. Bankruptcy Judge Dennis Montali for permission to send that letter to the fire victims.
It’s uncertain what would happen if the victims vote the plan down. Montali could still confirm the plan anyway, in what’s known among bankruptcy lawyers as a “cramdown.”
Some experts say Montali might employ the cramdown option because the alternative — having the PG&E plan collapse at a time of enormous uncertainty in the economy and financial markets — could force the utility to start from scratch on a financing plan. That would mean fire victims might get nothing for the foreseeable future.
This story was originally published April 6, 2020 at 10:36 AM.