On Wednesday, California’s largest utility, Pacific Gas & Electric (PG&E), suffered setbacks in bankruptcy court. This could change the company’s restructuring process which is expected to have a profound impact on millions of customers. Mr. Dennis Montali, the federal bankruptcy judge, decree that PG&E no longer has the sole right to make reorganization conditions. He opened the way for competitor supporters. The competition plan was created by a group of PG&E creditors, including well-known hedge funds. The plan is supported by entities claiming against the company for wildfire damages. In January, PG&E sought bankruptcy protection by saying that it is facing an estimated US$ 30 billion or more in debt related to wildfires, which caused property damage and dozens of deaths.
On Monday, after a controversial court hearing, hundreds of thousands of PG&E customers had no electricity. On Wednesday, the company shut down power in vast areas of its territory (including most of the Bay Area). This was attributed to reducing fire hazards driven by gusty winds after several months of dry weather. The loss of exclusive rights to propose restructuring clauses has dealt a heavy blow to PG&E’s management. Also, to its largest shareholder, including hedge funds. The company’s stock fell nearly 30% in long-term trading after the ruling was issued. The plan of creditors drawn by PG&E bondholders including Elliott Management, an activist hedge fund, will cause existing shareholders to have a small stake in PG&E once it arises from bankruptcy.
Lawyer for wildfire victims, Mr. Frank Pitre, said: “We are very pleased that the court has initiated procedures to promote competition for the company’s best plan to get out of bankruptcy, which shows that the victims of fire disasters receive attention of fair compensation.” PG&E opposes the plan of bondholders because it believes that the bondholders may buy large stakes in the company at a low price. Mr. James Noonan, a PG&E spokesperson said in an e-mail that the company is disappointed by the bankruptcy court as it has opened doors to unfairly enrich Elliott and other temporary bondholders and seize control of PG&E at a considerable discount. He added that the company was working hard to fairly resolve all remaining entities claims of wildfire.