“They took the cash. There’s no cash left,” fire victim lawyer Robert Julian said at a hearing Tuesday in the U.S. Bankruptcy Court in San Francisco, referring to a proposed deal that provides $11 billion cash to insurers that paid off fire damage claims.
Insurers have yet to collect the money, because the proposed settlement hasn’t been approved by the judge overseeing PG&E’s bankruptcy. After repeated delays, it is now slated for review in early December.
PG&E filed for chapter 11 protection in January, trying to tackle an estimated $30 billion in damage claims from years of wildfires linked to its equipment. The utility filed a chapter 11 exit plan that disappointed victims and has been caught up in court fights over how much must be set aside for fire claims, with the insurance settlement a particular sore spot.
While the legal wrangling continues, PG&E, the fire victims and other creditors are involved in a mediation that could ease a path out of bankruptcy. That mediation doesn’t include the insurers, and their requirement for a cash payment is limiting PG&E’s ability to negotiate, according to Mr. Julian.
“We can’t resolve this case because they have taken all the cash,” Mr. Julian said.
Matthew Feldman, a lawyer for the insurers, declined to discuss the mediation at Tuesday’s hearing. The group he represents includes both insurers that paid claims directly and investment funds such as the Baupost Group LLC that bought insurance claims in the secondary market. Insurance creditors want Judge Montali to approve the $11 billion settlement Dec. 4 and allow a lawsuit filed by fire victims challenging the deal terms to take its course.
When the insurance settlement was unveiled, PG&E and insurers said it would clear up potential legal complications and represented progress in the contentious case. Insurance creditors said they were willing to take a discounted recovery on $20 billion worth of payouts to stabilize their balance sheets while removing uncertainty about how much they would collect.
If the settlement proposal is rejected, Mr. Feldman said, insurance creditors will become active participants in proceedings over the size of PG&E’s fire liabilities, including a federal court action designed to estimate how much the utility must set aside if it wants to get out of bankruptcy.
In Securities and Exchange Commission filings, the company has signaled it will raise its offer to fire victims to counter the offer they got from bondholders led by Elliott Management Corp., who have proposed a rival chapter 11 plan.
PG&E, which was offering victims about $8.4 billion, has said the bankruptcy talks could produce a revised plan with a payout closer to the $13.5 billion mark, the amount bondholders have offered.