PG&E Fire Victims Again Seek Payout Guarantee Amid Virus Tumult

By  Joel Rosenblatt and Mark Chediak | April 17, 2020
Lawyers for a committee representing the victims want a guarantee that half of their $13.5 billion settlement with the bankrupt utility to be paid in stock is really worth $6.75 billion when they get the shares.Having failed to persuade the judge overseeing PG&E’s bankruptcy to sanction their effort, the lawyers are scheduled Thursday to ask a different federal judge in San Francisco to “carefully word” his valuation of the settlement deal to prevent the victims from being outmaneuvered by PG&E’s attorneys.The judge’s intervention is required “to avoid subjecting the fire victims to a situation in which they obtain devalued stock during the coronavirus market downturn,” the lawyers said in a filing. The epidemic “is causing a devaluation of the PG&E shares intended for the fire victim trust, to a value that is lower than the required $6.75 billion value.”

U.S. District Judge James Donato is tasked with confirming that PG&E’s damages to victims amount to $13.5 billion. The company argues in a filing that the committee’s request has no place in Donato’s court, calling it an attempt to “recut the deal that it agreed to” in the bankruptcy case.

Besides which, the utility says, it “never agreed that the stock to be deposited into the trust would have a cash value or a market value of $6.75 billion” on the day the bankruptcy plan is effective.

PG&E has warned that investors who have pledged to backstop $9 billion in equity may back out of their agreements if the power company changes the terms of its settlement with fire victims.

The victims’ committee may face a tough audience in Donato. In previous hearings the judge has been explicit that his role is circumscribed, in the way PG&E argues, to simply arriving at an amount of damages for which the company is liable. He concluded the parties had essentially done his work for him by reaching the $13.5 billion settlement.And the tens of thousands of victims are hardly a unified block. When the committee sought the bankruptcy’s court blessing to hold up victims’ votes on PG&E’s Chapter 11 plan until it got assurances about the value of the shares, lawyers representing other victims objected.

The committee “does not speak for the majority of the wildfire victim claimants,” lawyers who claim they represent more than 70% of the victims said in a filing this month. Voting on PG&E’s bankruptcy plan started April 1, according to the filing, “and tens of thousands of wildfire victim claimants have already voted.”

The case is In Re. PG&E Corp., 19-cv-05257, U.S. District Court, Northern District of California (San Francisco).

About the photo: A burned-out property and vehicle stand in Sonoma County, California, in Oct. 2019.

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