Stand with PG&E Fire Victims
Stand with PG&E Fire Victims
We, as survivors of the PG&E fires, community members, and concerned citizens, are petitioning for your help.
Fire victims are being pushed to approve a flawed PG&E reorganization plan through an equally flawed voting process. The proposed Plan denies victims fair, timely, and secure compensation, yet they are being told to accept the Plan or they will get nothing.
A FLAWED SETTLEMENT PLAN
The proposed Plan has glaring flaws:
- $13.5 billion falls far short of original estimates of PG&E’s liabilities, and victims have no way of knowing what amount is fair and just. The estimation hearings were cancelled. Victims are being asked to believe that $13.5 billion, half in cash and half in stock, is the most PG&E is able to pay.
- Only 40% of the fire victims’ settlement is to be made in cash on the effective date of the settlement. In contrast, the Public Entities, and the Subrogation Rights Holders (who under California law should not be paid until victims are made whole) will receive 100% of their settlement in cash on the effective date. To sanitize this injustice, fire victims will be required to waive their rights under the Made Whole Doctrine.
- 10% of the fire victims’ settlement will be paid in 2021 and 2022 and is contingent upon PG&E’s monetizing its Net Operating Losses.
- 50% of the fire victims’ settlement will be paid in $6.75 billion of stock that won’t have an actual market value of $6.75 billion. The Plan values this stock at a forward price to earnings ratio of 14.9. A recent analysis by an independent consultant, Eric Lowrey, CRIA, determined that the 14.9 ratio overvalues the stock by $1.9 billion. [See Docket Entry #307] It is significant that equity backstop parties will be compensated with new stock valued at a forward P/E ratio of 10, nearly a third less than the formula used for fire victims.
- It is not known when the stock in the Fire Victims’ Trust may be sold to generate cash to pay fire victims. It is expected that a Registration Rights Agreement will restrict sales for 180 days after issuance and will limit future sales over a period of years, thus placing the stock value at risk over several fire seasons. Recently we heard that PG&E investors are insisting that they be permitted to sell their shares before the Fire Victims Trust, potentially depressing the value of victims’ shares.
A FLAWED VOTING PROCESS
AB 1054 had the commendable goal of pushing PG&E to exit bankruptcy by June 30, 2020, so victims would be paid and PG&E would make its initial contribution to the Go-Forward Wildfire Fund before the height of the 2020 fire season. However, PG&E and its Wall Street investors are manipulating the June 30 deadline in order to force a premature vote on the Plan.
Victims are being asked to vote on the Plan despite not knowing:
- When they will be paid;
- How much they will be paid;
- The actual market value of the supposed 6.75 billion in stock;
- When that stock may be sold;
- Whether the $1.35 billion that is to be generated by PG&E’s NOL tax scheme will ever materialize; and
- How the Trustee will value claims.
In addition, mass tort law firms are aggressively pushing a “Yes” vote by bombarding victims with text messages, robocalls, print, television, radio and social media advertising. The vote has been further marred by vote solicitations prior to victims receiving court-approved disclosure statements. Questionable voting methods are being employed, including vote by text with no paper record and “push” forms that automatically enter a “Yes” vote unless the claimant contacts their lawyer to vote “No.” There are reports of claimants who have tried to vote “No” being browbeaten by their own lawyers to vote “Yes.”
As of May 4, 2020, and as reported by Lily Jamali of KQED, it appears that many fire victims have still not received their voting packages either from Prime Clerk or their attorneys. These packages should have been mailed by March 31, 2020. Fire victims should not be forced to vote without adequate time to read and understand the disclosure materials.
While AB 1054 is being used to rush the vote, the Case Resolution Contingency Process (“CRCP”) is being used to delay payments. The RSA signed last December set an effective date of no later than August 29, 2020. However, the CRCP set a soft deadline of September 30 and a hard deadline of December 31, 2020. Now PG&E is using the CRCP to claim it is permitted to wait until December to fund the settlement, forcing fire victims to bear the risk of a full fire season.
PG&E IS A FINANCIAL HOUSE OF CARDS
PG&E petitioned for Chapter 11 relief when its liquidated debt was $23.45 billion. Under the Plan, PG&E will exit bankruptcy with a debt of $38 billion. The Plan should be considered a leveraged buy-out, according to Michael Wara, Senior Research Scholar at the Woods Institute for the Environment, and Director of Stanford’s Climate and Energy Policy Program. Wara says that PG&E's bonds are expected to be classed as “junk.”
To convince lenders to refinance their debt, PG&E agreed to convert billions of unsecured debt to secured debt, effectively moving unsecured lenders ahead of fire victims if another bankruptcy is filed. PG&E is proposing to securitize another $7 billion in debt. With its debt-load, PG&E will be hard-pressed to meet its commitment to provide affordable power safely and consistent with climate goals.
To make matters worse, PG&E has admitted that it may not have the financing to meet its obligations under the Plan until December 2020. There is a real possibility that PG&E could have a confirmed Plan by June 30, but never emerge from bankruptcy, especially if the company’s equipment triggers a major fire or fires this year. Under the bankruptcy agreements, equity backstop parties and lenders may terminate their commitments if more than 500 dwellings or commercial structures are damaged in a fire attributed to PG&E equipment. The Plan would fail.
Even the attorneys are confused about the consequences of such failure under AB 1054. Some lawyers contend that PG&E would still be entitled to recover 40% of its fire liabilities from the Wildfire Fund while others argue that PG&E would not be entitled to any reimbursement. If PG&E is able to draw on the Wildfire Fund without making its contribution or paying fire claims, then it has successfully shifted PG&E’s wildfire risk onto other publicly-owned utilities, California taxpayers, and victims.
HOW DID THIS HAPPEN?
The proposed PG&E Plan is the result of Wall Street investors hijacking the bankruptcy process to generate billions in profits at the expense of fire victims and the State.
As you probably know, Wall Street has purchased billions in PG&E’s distressed assets. Hedge funds and institutional investors own more than 90% of PG&E’s stock and debt. They purchased more than 80% of the subrogation claims at discounts of up to 70%. They will also earn $1.8 billion in backstop fees. Finally, according to recent reports by Lily Jamali of KQED and J.D. Morris of the San Francisco Chronicle, some of the same hedge funds hold the litigation financing of Watts Guerra, a Texas firm that claims to represent more than 16,000 fire victims and is hounding fire victims to vote to approve the proposed Plan via text messages, robocalls, public town halls, and relentless advertising.
By controlling so many sides of the deal, investors structured the Plan so that the investment managers that control the company as shareholders are paying themselves, as subrogation rights holders, a hefty profit via payment of $11 billion in cash. Some of the same investors are also earning backstop fees of $1.8 billion for taking on the supposed risk of buying stock at a discount.
These investors are in the business of risk and have made their purchases voluntarily while the victims, who did not choose their fate, are forced by this Plan to take on more risk without the generous compensation that the professionals have awarded themselves.
If the Plan goes into effect as proposed, then those who are profiting from the PG&E bankruptcy will not be sharing in the wildfire risks going forward; fire victims, ratepayers, taxpayers, and the State of California are taking on those risks.
We propose a solution that addresses several issues at once:
AMEND AB 1054 to (a) push back the AB 1054 deadline for PG&E to emerge from bankruptcy until August 29, 2020 and (b) clarify that the condition “the electrical corporation’s insolvency proceeding has been resolved pursuant to a plan” means the “Effective Date” under the Plan has occurred and the initial settlement funding has been delivered by PG&E.
These two changes will also provide the parties to the bankruptcy time to:
- negotiate and resolve the open issues, including registration rights, trust procedures, and stock valuation;
- provide material information to fire victims;
- allow victims to make an informed decision;
- assure performance by PG&E, lenders, investors and insurers.
Finally, these changes make the obligations under the Plan mutual. Without them, fire victims are bound by the compromises in the Plan, but PG&E is not. Now, PG&E can game the system by obtaining a confirmed Plan but never funding. It may choose, or be forced by circumstances, not to perform, and all fire victims, our communities and our State can do is wait. We cannot wait for PG&E to perform, especially now as the COVID-19 pandemic has made the need for safe, reliable power more critical than ever.
We thank you. We appreciate all you are doing to keep Californians safe.
Please sign to support us then share with others in your social media networks or by e-mail. You can use this link: http://chng.it/gpvsKtZp7j Help spread the word as time is of the essence. We are not looking to raise money but any you contribute through Change.org will go to promote the petition.
The Northern California wildfires include, but are not limited to, the following fires: 37, Adobe, Atlas, Blue, Butte, Camp, Cascade, Cherokee, Ghost Ship, Honey, La Porte, Lobo, Maacama, McCourtney, Norrbom, Nuns, Partrick, Pocket, Point, Pressley, Pythian (a.k.a. Oakmont), Redwood, Sullivan, Sulphur and Tubbs.