PG&E’s $ 13.5 billion deal with forest fire victims is at risk

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Lawyers who negotiated a crucial $ 13.5 billion deal for victims of the lethal fires caused by the equipment of PG&E Corp. express serious doubts as to whether the country’s largest utility will be able to afford the cost. total amount now that a recession should hit the economy.

The red flag raised in court documents filed Monday threatens to derail PG & E’s plan to go bankrupt this summer before the Northern California wildfire season enters its most dangerous period.

The concern centers on the recent stock market turmoil sparked by the coronavirus pandemic, which has radically changed the financial landscape since PG&E reached a $ 13.5 billion settlement with victims of the wildfires in December.

The agreement calls for half of the promised payments to be made in PG&E shares, making the victims of the forest fires the main shareholders of the company responsible for their lives. The equity portion of the settlement has not been popular among many victims, and the sharp drop in the stock market in the past two months has raised fears that the settlement is no longer worth $ 13.5 billion.

PG&E stocks have been hit particularly hard, losing more than half their value since reaching a six-month high of $ 18.34 on February 11. As the market rallied on Monday, PG&E stocks climbed almost 8% to $ 8.56. In the two months leading up to the transaction last fall, PG&E shares traded at $ 3.55 and $ 12.29.

Lawyers representing the victims’ committee have asked US bankruptcy judge Dennis Montali for permission to send a letter detailing the potential pitfalls of the settlement.

The committee “tried to get PG&E to fix the problems to comply with the intent of the settlement, but so far PG&E has not resolved them,” said Michael Carlson, committee member, lawyer. General of Caymus Vineyards in Rutherford, California.

The proposed letter to the forest fire victims and the dispute underlying it is expected to be the subject of a bankruptcy hearing scheduled for Tuesday.

If Montali approves the letter, it would also advise fire victims to suspend voting on the PG&E bankruptcy plan until May 2, which would give PG&E until April 28 to correct the potential flaws currently seen in the agreement. Voting is expected to be completed by May 15. PG&E is working to withdraw from bankruptcy by June 30 to meet a deadline to qualify for coverage of a California-created fire insurance fund.

PG&E said Monday it understands the reasons for the anxiety over its deal with the fire victims, but insisted that the settlement still represents the best hope of compensating victims for their losses as soon as possible. The company also pointed out that its share price is still higher than its average price in the two months preceding the conclusion of its agreement with the victims on December 6.

“The risk of fluctuating share prices was well understood by all parties” at the time of settlement, said PG&E.

In a brief also filed on Monday, lawyer Gerald Singleton urged Montali to reject the request to send the proposed letter, saying it would expose the victims to unnecessary risk and confusion. Singleton works on a legal team that represents more than 7,000 victims of forest fires.

The lawyers who want to send the letter work for a committee that is supposed to represent the interests of all victims of the forest fires, but they represent a minority of the more than 81,000 people who have filed a bankruptcy complaint, a said Singleton. The victims committee has been reduced to eight after three people have resigned in the past two weeks to protest the $ 13.5 billion deal with PG&E.

In his brief, Singleton also urged the judge to consider dissolving the committee because he has “performed his duties already”.



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