By Rich Heidorn Jr.
Attorneys for Pacific Gas and Electric urged U.S. Bankruptcy Judge Dennis Montali on Wednesday to quickly approve the utility’s proposed $11 billion settlement with insurance companies and hedge funds, warning that claims could rise much higher if it is rejected.
Opponents countered that the settlement would require wildfire victims to sign “one-sided” releases that could leave them far from whole for their losses.
“No one can challenge the reasonableness of the settlement,” PG&E attorney Stephen Karotkin told Montali during a nearly two-hour hearing, saying it represented a 45% “discount” from more than $20 billion in claims.
Karotkin asked Montali to rule by Friday, calling it a “serious drop-dead date” for the subrogation claimants seeking reimbursement for insurance claim payouts. Swift approval of the deal is essential to the utility’s ability to meet the June 30 deadline for eligibility to participate in an insurance fund for future wildfire claims under Assembly Bill 1054, he said.
“From the debtor’s perspective, we don’t want to take the risk that this [settlement] blows up,” he said.
But Robert Julian, representing the Official Committee of Tort Claimants, said the case could be settled within days if the “one-sided” release was eliminated.
Wildfire victims facing hospital bills or damaged homes will be forced to sign the release to obtain cash “because they’re so desperate. That’s not choice,” he said.
“You’re asking me to violate the ‘bird in hand rule’ and let this $11 billion bird fly away,” Montali responded, saying that if he rejects the deal, “maybe there will be a $20 billion or $25 billion set of claims. … That’s not a good thing for anybody.”
With the proposed release, “this case is not resolving,” Julian responded. “I can’t get lawyers to agree to any plan in this case or mediation … or anything because they can’t [endorse] something they can’t recommend under the law. … You’re forcing this release down our throats.”
Rebecca J. Winthrop, attorney for Adventist Health, whose Feather River Hospital was among 18,700 structures damaged or destroyed by the Camp Fire in November 2018, agreed that the release “is not symmetrical.”
“So, if I want to go against those tree trimmers or against my insurers, I can’t. … That is well beyond what is necessary to protect the insurance carriers,” she said.
Nancy Mitchell, representing Gov. Gavin Newsom, said the governor is concerned that the settlement will leave the utility without enough cash to meet the requirements of AB 1054. She echoed claims the governor’s office made in court filings last month that holders of subrogation claims, some of which also hold equity in PG&E, are using the settlement to improve their holdings. (See Fight Escalates over PG&E Settlement with Insurers.)
“This settlement is about leverage. It is not about a debtor who … is trying to do the right thing,” she said. “This plan is making it impossible for us to evaluate other plans because the debtor is only pursuing one plan.”
Gregory Bray, representing the official Committee of Unsecured Creditors, said the $11 billion settlement is “in the ballpark” but that it should apply also to competing reorganization plans.
In his closing remarks, Karotkin denied that the company was acting in bad faith or taking advantage of wildfire victims, insisting the release provisions challenged by the opponents “are customary and typical.”
“The debtors are not hell-bent on an equity-sponsored plan. What they are hell-bent on is having the best plan, a financeable plan, that is fair to all of the debtors’ economic stakeholders and will get these debtors out of Chapter 11 in a timely basis so they can participate in the wildfire fund.”
Montali ended the hearing with a pledge to make a ruling, “not to defer a ruling,” as some in the case had urged.
“I can’t promise you how soon it will be,” he said. “I’m trying to keep the decisions coming out. I’ll do my best.”
Bloomberg reported Wednesday that PG&E is close to finalizing a $13.5 billion settlement to wildfire victims, half in cash and the rest in stock in the reorganized company. PG&E stock rose 7% on news of the potential deal, closing at $9.47/share after trading as high as $10.75.
