85% of wildfire plaintiffs OK PG&E's reorganization plan

Victims of historically destructive wildfires caused by Pacific Gas & Electric Co. voted to approve the utility's reorganization plan, according to a ballot count.

More than 85% of the claimants favored PG&E's proposal to exit bankruptcy, including a $13.5 billion settlement to fund a trust for roughly 70,000 victims.

U.S. Bankruptcy Judge Dennis Montali will scrutinize the vote when he considers whether to confirm PG&E's plan in proceedings starting Wednesday.

"Fire victims have spoken, and they have spoken loudly and resoundingly in favor of the plan," PG&E attorney Stephen Karotkin wrote in a court filing on Friday confirming support of the utility's $57.65 billion reorganization plan.

Company CEO Bill Johnson said in a statement the results move "PG&E one step closer to compensating fire victims and emerging from Chapter 11 as a stronger, financially sound company positioned for long-term success."

PG&E needed to secure backing from two-thirds of those who cast a ballot.

Although each claimant's vote was worth $1, votes from some large creditors such as AT&T and AdventHealth were given more weight. In re PG&E Corp. bankruptcy, 19-30088 (N.D. Cal., filed Jan. 29, 2019).

Voting remained open for six weeks from April 1 to May 15.

Critics objected the plan should not pass because the $13.5 billion settlement subjects victims to unfair risk because half of it will be provided in equity. They argued they will not be compensated the agreed-upon amount because of the likelihood of future wildfires and market turmoil caused by the COVID-19 pandemic.

Three members of the committee to represent victims in bankruptcy proceedings resigned in protest over the issue.

The committee continues to negotiate with PG&E on settlement trust details. Karotkin told Montali on Tuesday the utility and the group have resolved some of the disputes.

Karotkin and committee attorney Robert Julian, a partner at Baker & Hostetler LLP, did not immediately respond to requests for more details.

Some victims also objected the process was biased in favor of passing the plan because of the conduct of certain plaintiffs' attorneys submitting votes for their clients. Longtime objector and claimant Will Abrams argued votes from victims represented by Texas-based attorney Mikal Watts should be invalidated because he did not disclose an alleged conflict of interest with private equity firms holding PG&E debt that bought a $100 million loan to his firm.

Montali denied the motion May 18.

Montali will oversee a bench trial expected to last at least four days over confirmation of PG&E's reorganization plan. It will be conducted through Zoom video conference because of the Northern District of California courts' closure due to the COVID-19 pandemic.

Christina Pullo, Prime Clerk LLC vice president of global corporate actions, will be cross-examined Wednesday over the solicitation of votes and the tabulation of ballots.

PG&E Executive Vice President and Chief Financial Officer Jason Wells will then be cross-examined Thursday over circumstances leading to the utility filing for bankruptcy.

They have both submitted written declarations instead of testifying.

The California Public Utilities Commission will vote on the utility's exit plan Thursday.

PG&E must emerge from bankruptcy by June 30 to participate in a $20 billion state mitigation fund to cover the cost of future blazes.