PG&E Corp. tried to maintain control of a crucial stage of its bankruptcy case on Tuesday as bond debt owners and insurers jostled to move forward with their own plans to restructure the company.
At issue is whether PG&E will preserve its ability to be the only party that can formally propose a path out of bankruptcy protection, a document the company now says it will be ready to submit in a little more than three weeks. But the bondholder and insurance company groups do not want to wait, and they urged U.S. Bankruptcy Judge Dennis Montali to consider their competing proposals as soon as possible.
Montali did not make a ruling at the hearing in San Francisco, instead opting to factor in arguments at another important PG&E hearing on Wednesday. But his eventual decision will prove pivotal to shaping the timing and outcome of the rest of the PG&E bankruptcy proceedings that began in January because of deadly wildfires started by the company’s power lines.
“The time has come to engage in an open and competitive process,” said Robert Harris, an attorney for The Utility Reform Network consumer group, which supported the bondholders’ motion.
The bondholders, who first outlined a $30 billion plan to resolve PG&E’s bankruptcy in June, argued that allowing multiple proposals to advance does not have to become a chaotic process. PG&E needs to resolve its bankruptcy by the end of June 2020 in order to take advantage of a new fund that will protect it from future wildfire costs.
But Stephen Karotkin, an attorney representing PG&E, said the bondholders were merely trying to enrich themselves with their plan, which would give the debt owners a huge equity stake in exchange for their investment, diluting the existing shareholders.
“What we have here is an entity, a group of creditors, that are trying to benefit economically at the expense of other economic stakeholders,” Karotkin said.
In a sign of how skeptical some of the other interests in the case are of PG&E, however, Karotkin’s later characterization of PG&E as the “honest broker” in the case immediately prompted the courtroom behind him to break out in laughter.
Montali had previously extended PG&E’s so-called exclusive period to late September. But the company said in court papers on Monday that it is prepared to file its proposal by Sept. 9 under a timeline that would allow it to emerge from bankruptcy protection by May 1. Karotkin said Tuesday that the company had so far secured more than $13 billion in commitments from more than 30 investors supporting its plan.
Montali asked the insurance companies’ attorney why their plan had not garnered active support from any other party in the case. The lawyer, Matthew Feldman, said the insurers — who say they are owed more than $20 billion from PG&E to pay for claims on fires the utility caused — want to convert so much of their debt into equity that they don’t need huge amounts of outside financing. That reduces the opportunity for others like bondholders to make money off a deal.
None of the plans have won support from a key constituency: wildfire victims whose claims could total more than $30 billion by PG&E’s own estimate. Cecily Dumas, an attorney for the bankruptcy committee that includes wildfire victims, said no proposal has been “remotely acceptable” to her clients in part because they do not account for the 2017 Tubbs Fire.
State officials cleared PG&E of responsibility for the Tubbs Fire, which destroyed neighborhoods in and around Santa Rosa and killed about two dozen people. But wildfire victim lawyers still want to hold PG&E accountable — and on Wednesday, Montali will hear their request to try their Tubbs Fire case in state court.