(Bloomberg) -- PG&E Corp. bondholders battling with shareholders for control of the bankrupt California utility giant have teamed up with wildfire victims to present a new reorganization plan.
The creditors -- including Elliott Management Corp. and Pacific Investment Management Co. -- and the official committee representing fire victims said their new proposal includes a $24 billion settlement to pay all claims from fires blamed on PG&E’s equipment. That’s billions of dollars more than PG&E has offered to those who lost loved ones and homes in some of the most destructive fires in California history.
The coalition threatens to derail PG&E’s own reorganization plans and adds a new wrinkle to an already complex case involving the biggest utility bankruptcy in U.S. history. The creditors and wildfire victims are seeking to end the San Francisco-based company’s exclusive right to come up with a proposal so they can put forth theirs. Their joint one would virtually wipe out current shareholders while PG&E’s plan would allow them to keep stock and pay wildfire victims less than they’re demanding.
The group’s proposal “represents a path forward that recognizes the victims’ losses and puts their interests ahead of shareholders,” Robert Julian, an attorney for the official committee representing fire victims, said in a statement.
PG&E filed for bankruptcy protection in January in the face of an estimated $30 billion or more in liabilities from wildfires. Under PG&E’s reorganization plan, claims from individual wildfire victims would be capped at $8.4 billion, while insurers or insurance claim holders would get $11 billion under a settlement announced last week.
“The bondholders’ plan is an attempt to pay themselves more than they are entitled to under the law,” Lynsey Paulo, a PG&E spokeswoman, said by email. “Our plan of reorganization sets forth a framework to meet PG&E’s legal obligations in full while prioritizing victims and customers.”
The new bondholder proposal offers $28.4 billion in new money in exchange for 58.8% of the equity in the reorganized PG&E. Under an earlier proposal, creditors had offered financing in exchange for an 85% to 95% stake in the new company.
A $24 billion wildfire trust fund would be set up and financed through $12 billion in cash and $12 billion in stock, according to the filing. The trust would have a 39.5% stake in PG&E. Overall, the creditor group and the trust would end up with a combined 98.3% of the equity in PG&E.
Bankruptcy judge Dennis Montali had rejected an earlier request from creditors to be allowed to file their own bankruptcy plan.
The case is PG&E Corp., 19-bk-30088, U.S. Bankruptcy Court Northern District of California (San Francisco)
--With assistance from Joel Rosenblatt and Steven Church.
To contact the editors responsible for this story: Lynn Doan at [email protected], Boris Korby
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