A little-noticed tweak to PG&E Corp.’s chapter 11 plan could add millions of dollars to the payout for victims of the California wildfires that forced the utility into bankruptcy, WSJ Pro Bankruptcy reported. In December, PG&E as part of a revised plan to exit bankruptcy signed over to the fire victims its rights to sue outside contractors and consultants involved in the allegedly lax safety practices that fed the blazes. Generally overlooked in the glare of attention focused on the plan’s other changes — including a $5 billion increase in the amount of cash and stock allotted to fire victims — the transfer of the right to sue contractors and consultants has put companies including Davey Tree Expert Co. and McKinsey & Co. squarely in the crosshairs of lawyers for fire victims. Subpoenas were sent last week, as victims lawyers assess the odds of collecting from San Francisco-based PG&E’s contractors for fire damages. Davey Tree’s in-house lawyer, Erika Schoenberger, said in a statement that the company, which provided tree-trimming services for PG&E, denies any fault and will vigorously defend any claims it is to blame for the disastrous fires. Managing vegetation around power lines “is increasingly perilous given a multitude of external factors, including climate driven risks and PG&E’s bankruptcy, which results in contractors becoming targets for lawsuits,” Shoenberger said. Regulators have faulted PG&E for failing to inspect and maintain its equipment, which failed and sparked fires that spread through heavily forested areas. Read more.
In related news, the hard-fought battle that’s kept the biggest utility bankruptcy in U.S. history dragging on for almost a year may finally be ending, Bloomberg News reported. PG&E Corp. is nearing a deal with a group of noteholders led by bond giant Pacific Investment Management Co. and activist investor Elliott Management Corp., who’ve repeatedly sought to derail the company’s $46 billion restructuring plan. The agreement would entitle them to a mix of equity and new debt in the California power giant if they scrap a rival proposal. A deal would turn some of PG&E’s most formidable adversaries into backers of its plan to emerge from bankruptcy and bring it one major step closer to getting a proposal approved by a state-imposed deadline of June 30. The San Francisco-based utility has spent months in court battling the creditors who’ve been offering to inject as much as $20 billion in cash into the company in exchange for virtually all its equity. That would leave California Governor Gavin Newsom as the last major obstacle for PG&E, which was forced into chapter 11 last year after its equipment was blamed for a series of catastrophic wildfires that saddled the company with $30 billion in liabilities. Newsom rejected PG&E’s latest plan and has been pushing the utility to include a provision that would allow the state to take it over should it fail to meet future safety standards. A deal hasn’t yet been struck, and the talks may still break off, the people familiar with the situation said. PG&E said in a statement that it’s been holding discussions with stakeholders on its reorganization and hopes “to make progress over the next week.” Read more.
