PETITION

Well, that sure didn’t last long. In “Is it a Plan or a Placeholder?,” we discussed the recently proposed plan of reorganization filed by PG&E Corporation and Pacific Gas and Electric Company ($PCG). We wrote:

Moreover, the plan also depends on the “Subrogation Wildfire Claims” — claims “held by insurers or similar entities in connection with payments made to others on account of damages or losses arising from such wildfires” — coming in at a max $8.5b.[] Will these numbers hold? We suspect the answer is an emphatic ‘no.’

As much as we like being right, we certainly weren’t expecting it to happen so soon.

A mere few days after filing its plan of reorganization, PG&E announced an $11b settlement with parties representing 85% of the Subrogation Wildfire Claims. This settlement, still subject to the approval of the Bankruptcy Court, “would satisfy and discharge all insurance subrogation claims against the Debtors arising from the 2017 Northern California wildfires and the 2018 Camp fire.” Per Reuters:

The company also amended its equity financing commitment agreements to accommodate the claims, and reaffirmed its $14 billion equity financing commitment target for its reorganization plan.

One amendment was an increase in the “Wildfire Claims Cap” to $18.9b from $17.9b. The debtors understand the signaling here: with the subrogation claimants almost immediately getting $2.5b more than what was in the plan, they prudently indexed higher to account for wildfire claimant expectations.

Despite the assumption of $3.5b more in liabilities (exclusive of earlier settlements), this is a net positive for PG&E. They removed one constituency from the board (assuming they don’t trade out of their claims and blow up the settlement), got a legitimate impaired accepting class to help usher the plan through, and moved themselves closer to a global settlement.

Anyway, the stock — somewhat mysteriously considering the marked INCREASE in liabilities — reacted favorably to the news, up over 11% on the week and erasing Monday’s post-plan blistering:

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