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PG&E Corporation – Exposed Insurers Propose Alternative Plan to Protect $18.5bn in Subrogation Claims, Seek Immediate Termination of Exclusivity Periods


July 23, 2019 – Accepting an invitation by the Court to file an alternative Plan, a group of subrogation claim holders (the “Ad Hoc Subrogation Group”) filed a term sheet in respect of an alternative Plan; and, in order to file that Plan, filed a motion to "immediately" terminate the Debtors’ exclusive Plan filing and solicitation periods [Docket No. 3147]. “Subrogation Claims” are wildfire claims arising from subrogation, assignment, or otherwise in connection with payments made (or to be made) by an insurer to insured wildfire victims. The Ad Hoc Subrogation Group asserts that holders of Subrogation Claims have reported $18.5bn of payments and policy reserves to the California Department of Insurance.

The motion states, “At the May 22 hearing on the Debtors’ motion to extend the Exclusive Periods, the Court invited parties that were committed to advancing these chapter 11 cases to submit proposed plans of reorganization. Specifically, the Court said, ‘[t]he door is half open to the ad hoc committee, the tort claimant committee, or any other party who believes there’s a way to come up with a credible, potentially confirmable plan, other than what the debtors’ counsel may have.’ 

Since that hearing, the Ad Hoc Subrogation Group has worked tirelessly to present the Court with a credible, confirmable plan (the ‘Subrogation Plan’), the key terms of which are reflected in the term sheet attached hereto as Exhibit A. In light of the Subrogation Plan’s numerous benefits discussed below, and the inability of the Debtors to effectively use the Exclusive Periods to build consensus around a plan structure, the Ad Hoc Subrogation Group submits that the Debtors’ Exclusive Periods should be terminated immediately in order to enable the Ad Hoc Subrogation Group to file the Subrogation Plan.

The Subrogation Plan not only incorporates a reasonable settlement of the total value of all Subrogation Claims, but also preserves the ability of individual fire victims to assert their claims against a well-funded trust and realize a full recovery on their claims. Admittedly, the major open issue in the Subrogation Plan is the total funding required for the individual fire victims’ trust, which will be resolved following further negotiations, or (only if necessary) a targeted estimation process that will address only the individual Wildfire Claims.

Customer safety is a paramount concern for members of the Ad Hoc Subrogation Group. The Subrogation Plan term sheet includes specific provisions to ensure wildfire prevention and mitigation are a top priority for the reorganized PG&E. A majority of the directors will be appointed to help safeguard that appropriate investments are made in upgrades to PG&E’s transmission system, forest management and other efforts to reduce the risk and severity of future wildfires. In summary, the Subrogation Plan also:

  • Provides for payment of Individual Wildfire Claims from a well-funded settlement trust;
  • Includes an expedited and efficient claim process for individuals to be paid based either on individual claim settlements with the trust or contingent upon proving their claims, to enable the individual wildfire victims to rebuild and move forward in their recovery;
  • Resolves Wildfire Subrogation Claims at an amount significantly less than full recovery to help expedite the bankruptcy proceedings;
  • Converts a significant portion of all Wildfire Subrogation Claims into equity to strengthen the reorganized Debtors’ balance sheet and reduce the amount of new money (and substantial related costs) necessary for the Debtors to exit chapter 11;
  • Creates a strong balance sheet for the reorganized Debtors that allows the company to maintain an investment grade rating and positions the reorganized utility to (a) maintain compliance with state renewable energy standards, and (b) invest in requisite grid improvement and safety enhancement initiatives;
  • Maintains rate neutrality for all of the Debtors’ customers;
  • Contributes approximately $5 billion to the proposed wildfire recovery fund for future wildfire claims;
  • Strengthens and extends the relationship with the reorganized Debtors’ active workforce;
  • Assumes the Debtors’ current retirement plan; and
  • Allocates more value to existing equity holders than any other option presently on file.”

The Court scheduled a hearing for August 13, 2019, with objections due by August 6, 2019.

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The post PG&E Corporation – Exposed Insurers Propose Alternative Plan to Protect $18.5bn in Subrogation Claims, Seek Immediate Termination of Exclusivity Periods appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.

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