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PG&E Corporation – Seeks Authority for $13.5bn Settlement of Individual Wildfire Claims; Asserts “No Real Obstacles to Swift Confirmation” of Amended Plan to be Filed by December 12th

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December 9, 2019 – The Debtors filed a motion [Docket No. 5038] seeking authority to enter into a December 6th restructuring support agreement (the “Tort Claimants RSA”) that resolves the treatment and discharge of individual fire claims arising from the 2017 and 2018 Northern California fires. The Tort Claimants RSA and a related term sheet, each attached to the Debtors’ motion, detail a $13.5bn settlement reached among the Debtors, the Official Committee of Tort Claimants (the “TCC”), the law firms representing individuals holding approximately 70% in number of prepetition fire claims filed against the Debtors (the “Consenting Fire Claimant Professionals”) and certain funds and accounts managed by Abrams Capital Management, LP and Knighthead Capital Management, LLP (the “Shareholder Proponents”); a settlement that will be reflected in an Amended Plan that the Debtors intend to file by December 12th.

Further to the terms of the Tort Claimants RSA, over $36.0bn in asserted pre-petition fire liabilities will be resolved through the contribution of cash and stock with an aggregate value of $13.5bn and assignment of certain rights and causes of action to a trust established for the benefit of the fire claimants. 

In a press release announcing the underlying settlement, the Debtors stated: "PG&E Corporation and Pacific Gas and Electric Company (together, ‘PG&E’) have agreed to a settlement with the Official Committee of Tort Claimants (TCC) and with firms representing individual claimants who sustained losses from the 2015 Butte Fire, 2017 Northern California Wildfires and 2018 Camp Fire. The settlement agreement is valued at approximately $13.5 billion and has the support of the TCC. The settlement will resolve all claims arising from those fires, including the 2017 Tubbs Fire as well as all claims arising from the 2016 Ghost Ship Fire in Oakland. 

With all major wildfire claims now on a path to be resolved and the total amount of wildfire liabilities determined, PG&E will now amend and finalize its Plan, which will satisfy all wildfire claims in accordance with Assembly Bill 1054 (AB 1054) and otherwise comply with all requirements of the Bankruptcy Code. The company remains on track to obtain regulatory approval and Bankruptcy Court confirmation of its Plan in advance of the June 30, 2020, statutory deadline set by AB 1054 for participation in the state’s go-forward wildfire fund."

The Debtors current motion states, “The Debtors filed these Chapter 11 Cases with the goal of achieving a fair, equitable, and expeditious resolution of billions of dollars in liabilities arising from the 2017 and 2018 Northern California fires (including Tubbs) and the 2015 Butte Fire. Today, the Debtors are significantly closer to realizing this goal, having reached, with the assistance of the Court-appointed mediator, a third, fundamentally important settlement to compromise previously unresolved claims of the last key constituency in these Chapter 11 Cases—the individual fire claimants.

Pursuant to the Tort Claimants RSA among the Debtors, the TCC, the law firms representing individuals holding approximately 70% in number of prepetition fire claims filed against the Debtors (the ‘Consenting Fire Claimant Professionals,’ as defined in the Tort Claimants RSA), and certain funds and accounts managed by Abrams Capital Management, LP and Knighthead Capital Management, LLP (the ‘Shareholder Proponents’), the parties have resolved, among other things, the treatment and discharge of individual fire claims under the Debtors’ chapter 11 plan in compliance with AB 1054. Pursuant to the Tort Claimants RSA, under the Debtors’ chapter 11 plan, over $36 billion in asserted prepetition fire liabilities will be resolved through the contribution of cash and stock with an aggregate value of $13.5 billion and assignment of certain rights and causes of action to a trust established for the benefit of the fire claimants.

The Debtors intend to file the Amended Plan on or prior to December 12, 2019. The Term Sheet summarizes the treatment of prepetition fire claims that will be set forth in the Amended Plan. The Debtors and the Shareholder Proponents will be co-proponents of the Amended Plan.

The importance of what has been achieved in the Tort Claimants RSA cannot be overstated. Having reached a settlement with the TCC and law firms representing an overwhelming number of the individual fire claimants, no real obstacles remain to a swift confirmation of the Amended Plan and a successful exit from these chapter 11 cases well within the June 30, 2020 deadline established under AB 1054. With this third and last critical milestone, and the Debtors’ previously negotiated settlements with the holders of Public Entities Wildfire Claims and the Subrogation Wildfire Claims, the Debtors’ Amended Plan has the full support and consensus of every necessary constituency to ensure the success of these cases, the benefits of the go-forward wildfire fund under AB 1054, and expeditious distributions to holders of Fire Claims.”

Key Terms of the Tort Claimants RSA

The motion highlights the following aspects of the Tort Claimants RSA: "

  • The Tort Claimants RSA and Term Sheet fully resolve the chapter 11 plan’s treatment of all prepetition fire claims for consideration having a value of approximately $13.5 billion. This represents a settlement and resolution of the over $36 billion in such claims previously asserted by the TCC and its constituency. 
  • The Tort Claimants RSA eliminates any reason or basis to continue the protracted competing chapter 11 plan process. Under the Tort Claimants RSA, the TCC and the Consenting Fire Claimant Professionals will support the Amended Plan….As a result, four major constituencies (the TCC and individual fire claimants, the Subrogation Claimants, the Public Entities, and the Shareholder Proponents), which represent all the impaired classes in these cases, will be fully supportive of one plan—the Debtors’ Amended Plan. 
  • The Tort Claimants RSA eliminates the substantial costs, risks, and uncertainties attendant to the estimation of the Fire Victim Claims and the Tubbs Cases. 
  • With all other classes of claims under the Debtors’ Amended Plan being unimpaired, approval of the Tort Claimants RSA will expedite the successful conclusion of the Chapter 11 Cases and distributions to holders of Fire Claims."

Further Background 

On September 9th, the Debtors filed a first iteration of their Plan insisting on an absolute cap on wildfire liability of $17.9bn, comprised of $8.4bn for Wildfire Claims and $8.5bn for Subrogation Claims and that "the Plan will not become effective" if those redlines were crossed. The first of those redlines was in fact crossed only days later when the Debtors agreed to a settlement that increased payouts as to Subrogation Claims from $8.5bn to $11.0bn. The Debtors' present abandonment of the $8.4bn redline as to Wildfire Claims comes after a number of Court reversals, including the Court's decision to allow the competing TCC/Ad Hoc Group Plan valued at $24.0bn and subsequently increased to $25.5bn, equal to the aggregate amount now offered by the Debtors in the three settlements.

The Debtors' press release stated: "PG&E Corporation and Pacific Gas and Electric Company (together, ‘PG&E’) have agreed to a settlement with the Official Committee of Tort Claimants (TCC) and with firms representing individual claimants who sustained losses from the 2015 Butte Fire, 2017 Northern California Wildfires and 2018 Camp Fire. The settlement agreement is valued at approximately $13.5 billion and has the support of the TCC. The settlement will resolve all claims arising from those fires, including the 2017 Tubbs Fire as well as all claims arising from the 2016 Ghost Ship Fire in Oakland. 

With all major wildfire claims now on a path to be resolved and the total amount of wildfire liabilities determined, PG&E will now amend and finalize its Plan, which will satisfy all wildfire claims in accordance with Assembly Bill 1054 (AB 1054) and otherwise comply with all requirements of the Bankruptcy Code. The company remains on track to obtain regulatory approval and Bankruptcy Court confirmation of its Plan in advance of the June 30, 2020, statutory deadline set by AB 1054 for participation in the state’s go-forward wildfire fund."

On October 17, 2019, following an October 9th Court decision to terminate the Debtors' Plan filing and solicitation exclusivity as it applied to the TCC/Ad Hoc Group Plan, those parties filed a competing Chapter 11 Plan [Docket No. 4257]. The TCC/Af Hoc Group argued that their Plan provided for a more comprehensive settlement of all wildfire claims against the Debtors, including subrogation claims, now valued at $25.5bn, paid with a mix of cash and equity of the Reorganized PG&E Corp., which both the TCC and the Ad Hoc Committee insisted had the best chance to fully and fairly compensate wildfire victims. In addition to its more comprehensive reach, the TCC and the Ad Hoc Committee argued that their financing was superior to that proposed by the Debtors, in that payments to victims under the Wildfire Claims Settlement and Alternative Plan will be satisfied from, among other sources, fully committed financing provided by the members of the Ad Hoc Committee—in contrast to what they viewed as "the highly conditional and illusory ‘financing’ that the Debtors hope will materialize to back the Placeholder Plan." 

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The post PG&E Corporation – Seeks Authority for $13.5bn Settlement of Individual Wildfire Claims; Asserts “No Real Obstacles to Swift Confirmation” of Amended Plan to be Filed by December 12th appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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