The Stock Exchange turmoil triggered by the coronavirus pandemic is Increasing Concerns that Pacific Gas & Electric’s $13.5 billion settlement with victims of catastrophic wildfires Could be worth Much less Compared to beleaguered Firm emerges from bankruptcy
BERKELEY, Calif. —
The stock market chaos triggered by the coronavirus pandemic is increasing worries that Pacific Gas & Electric’s $13.5 billion settlement with victims of catastrophic wildfires might be worth far less from the time the beleaguered firm emerges from bankruptcy.
A attorney who represents over 81,000 wildfire victims flagged the escalating concerns during a Wednesday court hearing held by conference telephone.
Attorney Robert Julian advised U.S. Bankruptcy Judge Dennis Montali the stock market‘s steep recession during the last month might require PG&E to supply more reassurances regarding the money meant to compensate victims for injury and property losses suffered during the fires in 2017 and 2018 blamed on PG&E gear.
PG&E agreed to put up the $13.5 billion fund for the victims as part of its strategy to emerge from bankruptcy this summer, with half of the amount coming from inventory in the business. The possibility of owning stock in the business that destroyed their lives hasn’t been popular among the sufferers, but it’s become even more unsettling throughout the industry upheaval.
Since hitting a six-month high of $18. 34 on Feb. 11, PG&E’s stock has lost roughly half its worth. The shares rose 42 cents Wednesday to close at $9. 25. That decline is much more intense than the benchmark Standard & Poor’s 500 index, which has fallen by roughly 25% during the same stretch.
Montali did not take any action requiring amendments to the PG&E plan, clearing the way for the company to start sending out ballots to over 400,000 parties that will vote on the reorganization plan. But he left the door open for additional supplements to the plan as lawyers for the victims and PG&E attempt to work out their hottest differences using a mediator.
“Like everyone else, we are dealing with all the craziness of this world tragedy,” Montali said, referring to the challenges posed by the coronavirus.
Julian told the judge the stock market’s volatility has unleashed a torrent of letters and calls from wildfire victims fretting about whether the PG&E inventory will truly be worth $6. 75 billion if and when the provider’s bankruptcy plan gets accepted. Using a mediator’s help, Julian said, victims’ attorneys hope to acquire more assurances from PG&E concerning the worth of the inventory in the settlement, in addition to when they’ll be permitted to sell their shares in the firm.
The settlement calls for wildfire victims to be given a block of stock which will give them a 21% stake in PG&E. If all that inventory were sold at the same time, it will push its value even further. To prevent that, a specified timeline will probably need to be installed for periodic windows where PG&E stock could be sold.
Those details have not been worked out with PG&E, but Julian said it is critical to clearly spell out when and how much inventory the sufferers can sell so they understand they could minimize the risk of loss if the utility’s obsolete equipment causes more fires in the future.
PG&E attorney Stephen Karotkin reiterated the firm’s belief that the $13.5 billion deal is the best bet to ensure victims are paid. Since filing for bankruptcy early last year, PG&E has repeatedly stated taking care of fire victims is its top priority.
However, some victims have voiced doubts about the sincerity of PG&E’s devotion, among the largest complaints centering on an all-cash $11 billion settlement with the insurance companies who paid policyholder claims. Some victims are upset they are being forced to accept as much company stock rather than cash.
Getting stock, however, could lead to the wildfire victims’ $13.5 billion being worth more than its initial price. Following PG&E’s previous three-year bankruptcy stopped in April 2004, its stock nearly tripled in value and appeared in 2017, prior to the first wave of deadly wildfires.