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PG&E wildfire victims blast 'fast and loose' bankruptcy plan, pitch alternative

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PG&E wildfire victims blast 'fast and loose' bankruptcy plan, pitch alternative

Calling a joint bankruptcy reorganization plan recently filed by PG&E Corp. and its utility subsidiary Pacific Gas and Electric Co. inadequate, attorneys representing wildfire victims and bondholders of the companies on Sept. 19 asked the U.S. Bankruptcy Court for the Northern District of California to allow their alternative plan to proceed.

The request would require Judge Dennis Montali to terminate the companies' exclusive periods for filing and soliciting acceptance of their plan. At an Aug. 27 hearing, the judge said he would do that "very quickly" if the Pacific Gas and Electric, or PG&E, proposal proved "bogus" or not "legally permissible or couldn't be confirmed" amid objections from other parties.

That is the case, the attorneys said in their motion, requesting an expedited Sept. 24 hearing on the matter. The motion adds to concerns over PG&E's timeline for exiting bankruptcy protection by a state-imposed June 30, 2020 deadline in order to participate in a $21 billion fund to cover future wildfire claims.

The joint motion claimed that PG&E does not have the committed financing that it asserted in its plan, and called the proposal's $17.9 billion wildfire liability payment cap "entirely inadequate." The motion countered with a proposed "comprehensive settlement" for all wildfire liabilities, valued at $24 billion, that would be funded by a mix of cash and equity.

The debtors' "placeholder plan" plays "fast and loose" with impaired parties and "cannot be confirmed" without the consent of tort claimants and bondholders, the motion said. If not replaced with an alternative, "hard-fought and protracted litigation" will ensue, likely extending the Chapter 11 cases "far beyond" June 30, 2020.

A term sheet attached to the filing calls for $28.4 billion in new investment in exchange for common stock of the reorganized parent company, equal to approximately 58.8% of its outstanding common stock on a fully diluted basis, in addition to new debt of the reorganized utility.

Utility defends exit plan

In a Sept. 20 emailed statement, PG&E said its plan "sets forth a framework to meet PG&E's legal obligations in full while prioritizing victims and customers," noting that it has already settled with two of three major groups of wildfire claimants, including an $11 billion settlement with insurance companies that paid claims for wildfire damages and a $1 billion settlement with local governments.

The debtors "are committed to working with the remaining individual plaintiffs to fairly and reasonably resolve their claims," PG&E added. The alternative proposal, by contrast, is an attempt by bondholders "to pay themselves more than they are entitled" while costing customers billions of dollars, the company claimed.

"We are on track to achieve confirmation of our plan in advance of the June 30, 2020, statutory deadline and to emerge from Chapter 11 as a financially sound utility positioned to lead California's energy future," the utility said.