A federal appeals court resuscitated a $200 million bankruptcy claim against PG&E Corp., ruling in favor of investment firms that argued the California utility underpaid them on accrued interest when it exited chapter 11 as a solvent company in 2020, WSJ Pro Bankruptcy reported. The Ninth U.S. Circuit Court of Appeals in San Francisco found that unsecured creditors of a solvent business like PG&E have an equitable right to interest payments after a chapter 11 filing at the original rate specified in the contract. PG&E’s chapter 11 plan didn’t pay full contractual interest of 10% or more, instead offering unsecured creditors the federal judgment rate of around 3%. Yet the bankruptcy plan also classified those creditors as unimpaired, or paid in full. Monday’s ruling sided with Citigroup Inc., Whitebox Advisors LLC and Olympus Peak Asset Management LP, but didn’t award them the $200 million interest outright. The bankruptcy court that oversaw PG&E’s restructuring must now “weigh the equities and determine what rate of interest the creditors were entitled to,” according to the decision. PG&E’s reorganization plan paid $25.5 billion in wildfire-related claims and covered its other financial debts under a complex compromise between shareholders and creditors.
