The judge overseeing the bankruptcy of PG&E Corp on Wednesday issued an order opening the door to a group of noteholders and wildfire victims to file their own reorganization plan for the California power provider.
PG&E’s shares tumbled 28% in after-hours trade to $7.90.
Bankruptcy Judge Dennis Montali said in his order filed in U.S. Bankruptcy Court in San Francisco that he favored allowing the noteholders to file their plan because it has the support of the committee representing victims of the massive California wildfires in 2017 and 2018 that pushed PG&E to seek Chapter 11 bankruptcy protection in January.
Allowing the noteholders, which include Apollo Capital Management and Elliott Management Corp among others, to file while PG&E advances its own plan may help force the sides to negotiate a settlement of the case, Montali added.
The rival plan offers more money to wildfire victims and would give debt holders control of PG&E after it emerges from bankruptcy. Noteholders propose putting $29.2 billion in new money into the San Francisco-based power provider in exchange for new debt and a controlling equity stake.
PG&E’s plan, backed by current major shareholders, would use $34 billion in new debt and $14 billion in equity commitments to reorganize.
The company in a statement provided to Reuters said it was disappointed by Montali’s order.
“We are confident that our fully funded plan of reorganization, which will satisfy all wildfire claims in full while treating all stakeholders fairly and protecting customers, is the better solution for all constituencies,” PG&E said.
Montali said he was swayed by the committee of wildfire victims, noting it has “spoken loudly and clearly that they want their and the senior noteholders’ proposed plan to be considered.”
Montali said he wants the noteholders to file their plan by Oct. 17.
The wildfire victims committee backs the noteholders’ plan because it expects the proposal to provide more than the $8.4 billion in compensation PG&E has proposed for the victims.
Their claims may be worth $13.5 billion, a lawyer for the committee said at hearing on Monday.
When it filed for bankruptcy, PG&E estimated its total wildfire-related liabilities could top $30 billion.
In addition to the $8.4 billion it has proposed paying individual wildfire victims as part of a reorganization, PG&E recently agreed in a settlement to pay $11 billion to insurers to compensate their wildfire-related payments. Their claims were originally worth $20 billion.
The noteholders have offered to match the $11 billion settlement.
Also on Wednesday, PG&E cut off electricity to more than 500,000 homes across California in a planned outage of unprecedented scale to lower the risk of hot, dry weather and high winds damaging its equipment and sparking fires.