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A federal bankruptcy judge in San Francisco cleared the way on Wednesday for a group of PG&E bondholders and wildfire victims to submit a rival financial restructuring plan to compete with the utility’s own proposal.
PG&E filed for Chapter 11 bankruptcy protection in January, citing billions of dollars of liability for the 2017 and 2018 Northern California wildfires sparked by failures in electrical lines.
On Wednesday afternoon, U.S. Bankruptcy Judge Dennis Montali ended the so-called exclusivity period provided by bankruptcy law, during which PG&E was the only entity allowed to propose a financial plan.
The judge wrote that the wildfire victims, whom he called “the parties most deserving of consideration,” had “spoken loudly and clearly” that they wanted the rival plan to be considered.
The alternative proposal would provide up to $14.5 billion to compensate individual fire victims, while PG&E’s plan would furnish $8.4 billion. Both options would also give $11 billion to insurance companies for claims paid and $1 billion to local governments, under agreements previously reached by PG&E.
The rival plan would give a 59% share of the company to the bondholders, who would put new funding into the utility, and would greatly reduce current shareholders’ stake.
Montali’s ruling came as PG&E began a series of power shutoffs in Northern California to reduce the risk of wildfire during high winds.
The decision allows only the bondholders’ and victims’ group to submit an alternative plan and does not permit any others to do so.
The judge wrote that both plans are “on track as well as can be expected for now” and said he hoped the two-track process of finalizing plans “may facilitate negotiations for a global resolution and narrow the issues which are in legitimate dispute.”
PG&E spokesman James Noonan said the company is disappointed and believes that the rival plan will unjustly enrich bondholders and enable them to seize control of the company at a discount.
“We are confident that our fully funded plan of reorganization, which will satisfy all wildfire claims in full while treating all stakeholders fairly and protecting customers, is the better solution for all constituencies and will be confirmed,” Noonan said.
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