SAN FRANCISCO (Reuters) – The judge overseeing the bankruptcy of PG&E Corp (PCG.N) on Wednesday issued an order opening the door to a group of noteholders and wildfire victims to file their own reorganization plan for the California power provider.
FILE PHOTO: A PG&E truck carrying an American Flag drives past PG&E repair trucks in Paradise, California, U.S. November 21, 2018. REUTERS/Elijah Nouvelage
PG&E’s shares tumbled 28% in after-hours trade to $7.90.
Bankruptcy Judge Dennis Montali said in his order filed in U.S. Bankruptcy Court in San Francisco that he favored allowing the noteholders to file their plan because it has the support of the committee representing victims of the massive California wildfires in 2017 and 2018 that pushed PG&E to seek Chapter 11 bankruptcy protection in January.
Allowing the noteholders, which include Apollo Capital Management and Elliott Management Corp among others, to file their plan while PG&E advances its own may help force the sides to negotiate a settlement of the case, Montali added.
The rival plan offers more money to wildfire victims and would give debt holders control of the company after it emerges from bankruptcy. Noteholders propose putting $29.2 billion in new money into the San Francisco-based power provider in exchange for new debt and a controlling equity stake.
PG&E’s plan, backed by current major shareholders, would use $34 billion in new debt and $14 billion in equity commitments to reorganize.
The committee of wildfire victims has “spoken loudly and clearly that they want their and the senior noteholders’ proposed plan to be considered,” Montali said in his opinion.
“The coming weeks will permit ample time to explore and resolve issues regarding both plans,” Montali added.
The committee for the wildfire victims backs the noteholders’ plan because it expects the proposal to provide more than the $8.4 billion in compensation the company has proposed for the victims.
Their claims may be worth $13.5 billion, a lawyer for the committee said at hearing on Monday.
When it filed for bankruptcy, PG&E estimated its total wildfire-related liabilities could top $30 billion.
In addition to the $8.4 billion it has proposed paying individual wildfire victims as part of a reorganization, PG&E recently agreed in a settlement to pay $11 billion to insurers to compensate them for their wildfire-related payments. Their claims were originally worth $20 billion.
The noteholders have offered to match the $11 billion settlement.
Reporting by Jim Christie, Editing by Rosalba O’Brien, Tom Brown and Sonya Hepinstall