PG&E subrogation group eyes termination of exclusivity, proposes plan

By Caroline Salls

Pittsburgh, July 23 – An informal group of PG&E Corp. and Pacific Gas and Electric Co. subrogation claim holders filed a motion with the U.S. Bankruptcy Court for the Northern District of California that includes a proposal outlining the key terms of a potential plan of reorganization for the PG&E Chapter 11 cases, according to a subrogation claimant news release.

The group, which holds more than $20 billion in unsecured claims arising from the billions of dollars in insurance claims paid to California wildfire victims, said its plan would provide a viable path toward confirmation and emergence for the PG&E debtors.

According to the release, the proposal would hold PG&E accountable for wildfire liability, maintain price stability for PG&E’s ratepayers, contribute billions of dollars to California’s wildfire recovery fund, preserve jobs and retiree benefits and enable PG&E to emerge from Chapter 11 financially able to invest in grid improvement and safety enhancement initiatives.

Under the group’s proposal, individual wildfire victims could assert their claims against a well-funded trust, providing the resources to help individual fire victims rebuild their homes and their lives. The group said it is in discussions with a tort claimants committee on the total funding required and potential alignment on a joint proposal that would treat all wildfire victims fairly.

The group said its proposal provides that subrogation claims would be settled at an amount significantly less than full recovery and that a significant portion of the settlement would be in the form of equity.

Specifically, the group said the proposal provides for payment of compensable individual wildfire claims from a settlement trust and a $5 billion contribution to the proposed recovery fund for future wildfire claims.

The subrogation claimants said its proposal is designed to accommodate a much higher distribution to individual wildfire victims than the plan proposed by an informal PG&E bondholder group.

The members of the informal subrogation group would receive 90% of the settlement in the form of mandatory convertible preferred equity securities in PG&E, thereby reducing the amount of new money necessary for PG&E to exit Chapter 11.

Also, under the proposal, rate neutrality would be maintained for all of the utility’s customers, and specific provisions to make wildfire prevention and mitigation a top priority for reorganized PG&E would be included.

Employee and retiree jobs and benefits would be preserved, including through assumption of PG&E’s existing retirement plan.

The group said PG&E’s balance sheet would be strengthened upon emergence from Chapter 11, allowing a reorganized PG&E to maintain an investment-grade rating and positioning it to maintain compliance with California’s climate goals and invest in requisite grid improvement and safety enhancement initiatives.

The release said PG&E’s potential emergence capital needs would be addressed, with existing equityholders presented with the option to invest in reorganized PG&E through a rights offering if they agree to support the plan.

Reinstated funded debt claims against PG&E would be against an investment-grade issuer, and general unsecured claims, such as trade claims, would be paid in full or reinstated.

The group said its proposal presents the best opportunity to successfully resolve the Chapter 11 cases by the June 2020 deadline for participating in the insurance wildfire fund and expedite distributions to wildfire victims.

The group’s motion asks the court to terminate PG&E’s exclusive periods for filing and soliciting votes on a Chapter 11 plan so the claimants may file their proposed plan.

The electric and natural-gas utility is based in San Francisco. The company filed bankruptcy on Jan. 29, 2019 under Chapter 11 case number 19-30088.

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