1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

DIEMER & WEI, LLP

Kathryn S. Diemer (#133977)

100 West San Fernando Street, Suite 555

San Jose, CA 95113

Telephone: (408) 971-6270

Facsimile: (408) 971-6271

Email: kdiemer@diemerwei.com

WILLKIE FARR & GALLAGHER LLP

Matthew A. Feldman (pro hac vice)

Joseph G. Minias (pro hac vice)

Daniel I. Forman (pro hac vice)

787 Seventh Avenue

New York, NY 10019-6099

Telephone: (212) 728-8000

Facsimile: (212) 728-8111

Email: mfeldman@willkie.com 

 jminias@willkie.com 

 dforman@willkie.com 

Counsel for Ad Hoc Group of Subrogation

Claim Holders

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

In re:

PG&E CORPORATION,

-andPACIFIC GAS AND ELECTRIC 

COMPANY, 

Debtors.

☐ Affects PG&E Corporation

☐ Affects Pacific Gas and Electric 

Company

 Affects both Debtors

* All papers shall be filed in the lead case,

No. 19-30088 (DM)

Chapter 11 

Bankr. Case No. 19-30088 (DM)

(Jointly Administered)

MOTION OF THE AD HOC GROUP OF 

SUBROGATION CLAIM HOLDERS TO 

TERMINATE THE DEBTORS’ EXCLUSIVE 

PERIODS PURSUANT TO SECTION 

1121(d)(1) OF THE BANKRUPTCY CODE

Hearing Date and Time: August 13, 2019 at 9:30 

a.m. (PT)

Objection Deadline: August 6, 2019 at 4:00 p.m. 

(PT)

Hearing Location: 450 Golden Gate Ave., San 

Francisco, CA, Courtroom 17

Judge: Hon. Dennis Montali

Case: 19-30088 Doc# 3147 Filed: 07/23/19 Entered: 07/23/19 10:56:24 Page 1 of

 15
i

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

TABLE OF CONTENTS

Page

PRELIMINARY STATEMENT......................................................................................................... 1

BACKGROUND................................................................................................................................. 6

A. General Background.......................................................................................................... 6

B. Background to the Motion................................................................................................. 6

ARGUMENT ...................................................................................................................................... 7

I. Termination of Exclusivity is Appropriate in These Cases................................................... 7

NOTICE ............................................................................................................................................ 11

CONCLUSION ................................................................................................................................. 12

Case: 19-30088 Doc# 3147 Filed: 07/23/19 Entered: 07/23/19 10:56:24 Page 2 of

 15
ii

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

TABLE OF AUTHORITIES

Cases Page(s)

In re Adelphia Commc’ns Corp., 

352 B.R. 578 (Bankr. S.D.N.Y. 2006).............................................................................7, 8

In re Adelphia Commc’ns Corp.,

336 B.R. 610 (Bankr. S.D.N.Y. 2006).................................................................................8

In re Dow Corning Corp., 

208 B.R. 661 (Bankr. E.D. Mich. 1997)..............................................................................8

In re Gibson & Cushman Dredging Corp., 

101 B.R. 405 (E.D.N.Y. 1989) ............................................................................................7

United Sav. Ass’n of Tex. v. Timbers of Inwood Forest Assocs., Ltd. (In re Timbers of Inwood 

Forest Assocs., Ltd.), 

808 F.2d 363 (5th Cir. 1987), aff’d, 484 U.S. 365 (1988)...................................................7

Statutes 

11 U.S.C. § 1121(d)(1) ...................................................................................................................7

Case: 19-30088 Doc# 3147 Filed: 07/23/19 Entered: 07/23/19 10:56:24 Page 3 of

 15
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

The Ad Hoc Group of Subrogation Claim Holders (the “Ad Hoc Subrogation Group”) in 

the above-captioned chapter 11 cases of PG&E Corporation and Pacific Gas and Electric Company 

(together, “PG&E” or the “Debtors”), by its attorneys Willkie Farr & Gallagher LLP and Diemer 

& Wei, LLP, hereby submits this motion (the “Motion”) pursuant to section 1121(d)(1) of title 11 

of the United States Code (the “Bankruptcy Code”) for entry of an order, substantially in the form 

attached hereto as Exhibit A, terminating the Debtors’ exclusive periods to file and solicit 

acceptances of a proposed plan of reorganization (the “Exclusive Periods”). In support of the 

Motion, the Ad Hoc Subrogation Group1respectfully represents as follows: 

PRELIMINARY STATEMENT

1. At the May 22 hearing on the Debtors’ motion to extend the Exclusive Periods, the

Court invited parties that were committed to advancing these chapter 11 cases to submit proposed 

plans of reorganization. Specifically, the Court said, “[t]he door is half open to the ad hoc 

committee, the tort claimant committee, or any other party who believes there’s a way to come up 

with a credible, potentially confirmable plan, other than what the debtors’ counsel may have.” May 

22, 2019 Hr’g Tr. at 76:9-13. Since that hearing, the Ad Hoc Subrogation Group has worked 

tirelessly to present the Court with a credible, confirmable plan (the “Subrogation Plan”), the key

terms of which are reflected in the term sheet attached hereto as Exhibit A. In light of the 

Subrogation Plan’s numerous benefits discussed below, and the inability of the Debtors to 

effectively use the Exclusive Periods to build consensus around a plan structure, the Ad Hoc 

Subrogation Group submits that the Debtors’ Exclusive Periods should be terminated immediately 

in order to enable the Ad Hoc Subrogation Group to file the Subrogation Plan. 

2. These cases were filed to address and resolve Wildfire Claims (as defined below). 

This point is underscored by the fact that (except for the Bondholder Plan’s (as defined below) 

contrived “impairment” of long term bond claims) both the Bondholder Plan and the Subrogation 

 

1 The Ad Hoc Subrogation Group is governed by a steering committee, which supports the relief requested 

herein. The steering committee of the Ad Hoc Subrogation Group collectively holds more than 85% of the 

group’s aggregate Subrogation Claims (as defined below). 

Case: 19-30088 Doc# 3147 Filed: 07/23/19 Entered: 07/23/19 10:56:24 Page 4 of

 15
2

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Plan propose to leave all other creditor classes unimpaired. Further, the Debtors have publicly 

acknowledged that such claims could exceed $30 billion.2 Holders of Subrogation Claims3alone—

the overwhelming majority of which are members of the Ad Hoc Subrogation Group—hold in 

excess of $20 billion of Wildfire Claims.4 By far, the two largest groups of creditors holding 

Wildfire Claims are the Ad Hoc Subrogation Group and the Official Committee of Tort Claimants 

(the “Tort Claimants Committee”). The Subrogation Plan is the only path forward that has 

garnered the support of at least one of these two critical constituencies, and the Ad Hoc 

Subrogation Group has spent considerable time and effort negotiating with the Tort Claimants 

Committee to push forward a joint plan (and will continue to do so).

3. The Subrogation Plan not only incorporates a reasonable settlement of the total value 

of all Subrogation Claims, but also preserves the ability of individual fire victims to assert their 

claims against a well-funded trust and realize a full recovery on their claims.5 Admittedly, the 

 

2 Declaration of Jason P. Wells in Support of First Day Motions and Related Relief [Docket No. 28], at p. 1. 

(“PG&E’s potential liability with respect to the 2017 and 2018 Northern California wildfires could exceed $30 

billion, without taking into account potential punitive damages, fines and penalties or damages with respect to 

‘future claims.’”).

3

“Subrogation Claims” are Wildfire Claims that include, but are not limited to, claims that arise from 

subrogation (whether such subrogation is contractual, equitable or statutory), assignment (whether such 

assignment is contractual, equitable or statutory), or otherwise in connection with payments made or to be made 

by the applicable insurer to insured tort victims, and whether arising as a matter of state or federal law, 

including, without limitation, Section 509 of the Bankruptcy Code. Insurers seek to recover the cost associated 

with claims it has paid to its affected customers, which in many cases results in the reimbursement of customer 

paid deductibles associated with the loss. Subrogation helps keep rates low for customers and controls insurer 

claim costs.

4 Holders of Subrogation Claims have reported approximately $18.5 billion of payments and policy reserves to 

the California Department of Insurance, which amount does not include estimated but not yet reserved future 

payments, estimated or accrued interest and attorneys’ fees, all of which are recoverable under applicable law. 

As of September 2018, holders of Subrogation Claims had reported approximately $10 billion in direct incurred 

losses resulting from the 2017 Northern California Wildfires. See http://www.insurance.ca.gov/0400-

news/0100-press-releases/2018/upload/nr106Insuredlosses090618.pdf (reporting losses for Lake, Mendocino, 

Napa, Nevada, Solano, Sonoma and Yuba). As of April 30, 2019, holders of Subrogation Claims had reported 

approximately $8.5 billion in direct incurred losses resulting from the 2018 Northern California Wildfires. See

http://www.insurance.ca.gov/0400-news/0100-press-releases/2019/upload/nr041-

19InsuredLosses2018Wildfires050819.pdf (reporting losses for November 2018 wildfires).

5 The Subrogation Plan contemplates that each individual fire victim will have the opportunity to realize a full 

recovery on his or her provable and compensable claim subject to the trust funding amount (including, for the 

avoidance of doubt, reimbursement of any deductibles paid prior to receipt of insurance policy proceeds). The 

Ad Hoc Subrogation Group intends to continue to work with the representatives of the Tort Claimants 

Committee and expects to file an amended term sheet that, in the judgment of the Ad Hoc Subrogation Group, 

provides for sufficient funding for a settlement trust in order to achieve this goal. While the Ad Hoc 

Case: 19-30088 Doc# 3147 Filed: 07/23/19 Entered: 07/23/19 10:56:24 Page 5 of

 15
3

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

major open issue in the Subrogation Plan is the total funding required for the individual fire 

victims’ trust, which will be resolved following further negotiations, or (only if necessary) a 

targeted estimation process that will address only the individual Wildfire Claims. 

4. The Court is currently scheduled to hear this Motion concurrently with the two 

motions of the Ad Hoc Subrogation Group and Tort Claimants Committee to lift the stay. 

Terminating exclusivity to permit pursuit of the Subrogation Plan and lifting the stay to allow 

determination of the Debtors’ liability on account of the Tubbs fire in state court can work in 

tandem, on parallel paths, to resolve these cases on a fair, equitable and timely basis.6In and of 

itself, lifting the stay to permit the prompt adjudication of liability for the Tubbs fire will remove a 

major impediment to a negotiated, consensual resolution of these cases, whether or not exclusivity 

is terminated. Similarly, if only exclusivity is terminated, the Subrogation Plan proposes a 

reasonable settlement of Tubbs liability that could be approved through the plan confirmation 

process. But lifting the stay and terminating exclusivity together will provide the best opportunity 

to have these cases successfully resolved by the June 2020 deadline for participating in the 

insurance wildfire fund and within a time frame that will expedite distributions to individual 

wildfire victims.7

 

Subrogation Group continues to negotiate with the Tort Claimants Committee, the Subrogation Plan described 

herein is expected to provide recoveries up to a higher level than the Bondholder Plan. To the extent the 

funding required for the settlement trust in order to pay victims impacts the plan’s feasibility, additional 

legislative or regulatory solutions may need to be explored and pursued.

6 See Motion of the Ad Hoc Subrogation Group for Relief from the Automatic Stay [Docket No. 2863]. Various 

parties that filed responses to the Bondholders’ Motion (defined below) were supportive of terminating 

exclusivity for a truly credible and potentially confirmable plan. Statement of the Official Committee of 

Unsecured Creditors Regarding the Ad Hoc Committee of Senior Unsecured Noteholders’ Motion to Terminate 

the Debtors’ Exclusive Periods Pursuant to Section 1121(d)(1) of the Bankruptcy Code [Docket No. 3064], at 

p. 3-4 (“The Official Committee suggests that any other party that may wish to propose a plan for the Debtors 

be granted similar relief if the Court determines, following notice and a hearing, that such party’s proposal 

constitutes a credible plan...”); Statement of BOKF, N.A. in Support of the Motion of the Ad Hoc Committee of 

Senior Unsecured Noteholders to Terminate the Debtors’ Exclusivity Period [Docket No. 3061], at p. 4 (“In the 

event any other non-Debtor party wishes to file and propose a chapter 11 plan, it should only be permitted to do 

so if it too can demonstrate that its proposed plan is real, credible and viable...”).

7 The Subrogation Plan is designed to work on a parallel path with Tubbs litigation (without being contingent on 

its outcome), because it proposes a reasonable settlement of Tubbs liability. Nevertheless, it is critical to 

commence litigating the Tubbs issues now so that these cases do not return to square one in the event the 

Subrogation Plan is not confirmed.

Case: 19-30088 Doc# 3147 Filed: 07/23/19 Entered: 07/23/19 10:56:24 Page 6 of

 15
4

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5. Customer safety is a paramount concern for members of the Ad Hoc Subrogation 

Group. The Subrogation Plan term sheet includes specific provisions to ensure wildfire prevention 

and mitigation are a top priority for the reorganized PG&E. A majority of the directors will be 

appointed to help safeguard that appropriate investments are made in upgrades to PG&E’s 

transmission system, forest management and other efforts to reduce the risk and severity of future 

wildfires. In summary, the Subrogation Plan also:

• Provides for payment of Individual Wildfire Claims from a well-funded settlement 

trust;

• Includes an expedited and efficient claim process for individuals to be paid based 

either on individual claim settlements with the trust or contingent upon proving their 

claims, to enable the individual wildfire victims to rebuild and move forward in their 

recovery;

• Resolves Wildfire Subrogation Claims at an amount significantly less than full 

recovery to help expedite the bankruptcy proceedings;

8

• Converts a significant portion of all Wildfire Subrogation Claims into equity to 

strengthen the reorganized Debtors’ balance sheet and reduce the amount of new 

money (and substantial related costs) necessary for the Debtors to exit chapter 11;

• Creates a strong balance sheet for the reorganized Debtors that allows the company to 

maintain an investment grade rating and positions the reorganized utility to 

(a) maintain compliance with state renewable energy standards, and (b) invest in 

requisite grid improvement and safety enhancement initiatives;

 

8 The aggregate recovery on account of Subrogation Claims is a settlement and compromise solely for purposes 

of the Subrogation Plan. If the allowed amount of all Subrogation Claims were litigated, holders of 

Subrogation Claims could and would assert claims in a substantially higher amount than the compromise 

amount proposed in the Subrogation Plan. Approximately $18.5 billion of payments and policy reserves have 

been reported to the California Department of Insurance, which amount does not include estimated but not yet 

reserved future payments, estimated or accrued interest and attorneys’ fees, all of which are recoverable under 

applicable law, and would raise the total amount of Subrogation Claims to over $20 billion. Upon confirmation 

of the Subrogation Plan, the compromised aggregate allowed claim will be binding on each individual class 

member and a binding allocation of the recovery among class members will be set forth in the Subrogation Plan 

or a supplement thereto.

Case: 19-30088 Doc# 3147 Filed: 07/23/19 Entered: 07/23/19 10:56:24 Page 7 of

 15
5

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

• Maintains rate neutrality for all of the Debtors’ customers;

• Contributes approximately $5 billion to the proposed wildfire recovery fund for 

future wildfire claims;

• Strengthens and extends the relationship with the reorganized Debtors’ active 

workforce;

• Assumes the Debtors’ current retirement plan; and

• Allocates more value to existing equity holders than any other option presently on 

file.

6. The motion of the Ad Hoc Group of Senior Unsecured Noteholders to terminate 

exclusivity, and their proposed term sheet, do nothing to move the needle on the key issue in this 

case—the resolution of Wildfire Claims—because their plan, and satisfaction of a key condition 

precedent to its confirmation, has no support from either of the two major Wildfire Claim 

constituencies and depends on an unrealistically low cap for all Wildfire Claims.

9

 Further, that 

plan (the “Bondholder Plan”) is deficient for all the reasons set forth in the Ad Hoc Subrogation 

Group’s objection and response to the related motion.

10

 Moreover, the Subrogation Plan is superior 

to the Bondholder Plan in many key areas. A chart comparing the two plans is below: 

Issue Bondholder Plan Subrogation Plan

Subrogation 

Claims Amount

Up to $7.795 billion11 $15.8 billion

Individual Claims 

Amount

Up to $6.045 billion12 Paid in full up to the trust funding 

amount

Municipal Claims 

Amount

$1 billion $1 billion

 

9 Motion of the Ad Hoc Committee of Senior Unsecured Noteholders to Terminate the Debtors Exclusive Periods 

Pursuant to Section 1121(d)(1) of the Bankruptcy Code [Docket No. 2741] (the “Bondholders’ Motion”).

10 See Objection and Response of the Ad Hoc Group of Subrogation Claim Holders to the Motion of the Ad Hoc 

Committee of Senior Unsecured Noteholders to Terminate the Debtors’ Exclusive Periods Pursuant to Section 

1121(d)(1) of the Bankruptcy Code [Docket No. 3062].

11 Excluding the potential 15% adjustment. 

12 Excluding the potential 15% adjustment and legal fees.

Case: 19-30088 Doc# 3147 Filed: 07/23/19 Entered: 07/23/19 10:56:24 Page 8 of

 15
6

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Treatment of 

Existing Funded 

Debt

Long term unsecured notes 

exchanged for replacement 

secured notes with claim priority 

over future wildfire victims and 

other unsecured creditors

Reinstated or refinanced (without 

security or priority over future 

wildfire victims and other 

unsecured creditors)

Contribution to the 

Wildfire Recovery 

Fund

$5 billion $5 billion

7. Accordingly, the Ad Hoc Subrogation Group respectfully requests that the Court 

terminate exclusivity in its favor and enter the order attached hereto as Exhibit B, so that the Ad 

Hoc Subrogation Group may prosecute the Subrogation Plan.

BACKGROUND

A. General Background

8. On January 29, 2019, PG&E Corporation and Pacific Gas and Electric Company (the 

“Utility”), as debtors and debtors in possession, commenced these voluntary cases under chapter 11 

of the Bankruptcy Code. 

9. The Ad Hoc Subrogation Group’s membership and collective holdings of claims and 

interests are disclosed in the Third Amended Verified Statement of the Ad Hoc Group of 

Subrogation Claim Holders Pursuant to Bankruptcy Rule 2019 [Docket No. 3020], as may be 

amended from time to time. 

B. Background to the Motion

10. On May 1, 2019, the Debtors filed a motion seeking their first extension of the 

exclusive period to file a plan of reorganization to November 29, 2019 and the exclusive period to 

solicit acceptances of their plan to January 28, 2020 [Docket No. 1797] (the “Exclusivity 

Extension Motion”). On May 22, 2019, this Court held a hearing on the Exclusivity Extension 

Motion and over certain objections, granted the Debtors an extension of the exclusive right to file a 

plan until September 26, 2019 and the exclusive right to seek acceptances for such plan until 

November 26, 2019.

11. On June 25, 2019, the Ad Hoc Group of Senior Unsecured Noteholders filed the 

Case: 19-30088 Doc# 3147 Filed: 07/23/19 Entered: 07/23/19 10:56:24 Page 9 of

 15
7

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Bondholders’ Motion. On July 18, the Ad Hoc Subrogation Group filed an objection to that 

motion. There, the Ad Hoc Subrogation Group explained why the Bondholder Plan is neither 

credible nor confirmable, and noted that it was working towards presenting its own plan which 

would satisfy this Court’s “credible and potentially confirmable” standard and would “(a) allow 

individual wildfire victims to elect to settle their claims promptly or proceed to litigate and 

ultimately recover the compensable value of their claims from a well-funded trust; (b) settle 

Subrogation Claims at a reasonable level; and (c) provide existing equity with the exclusive 

opportunity to participate in a rights offering to recapitalize the Debtors.”13 

ARGUMENT

I. Termination of Exclusivity is Appropriate in These Cases

12. The time has come for this Court to terminate exclusivity for a viable plan. Section 

1121 of the Bankruptcy Code provides that the court “may for cause reduce or increase” periods 

during which the Debtors enjoy the exclusive right to file and solicit acceptances of a plan. 11 

U.S.C. § 1121(d)(1); In re Gibson & Cushman Dredging Corp., 101 B.R. 405, 409 (E.D.N.Y. 

1989) (intention of section 1121 is to “cure the prior practice that gave debtors undue bargaining 

leverage to delay and thereby force a settlement out of otherwise unwilling creditors” (internal 

quotations omitted)); United Sav. Ass’n of Tex. v. Timbers of Inwood Forest Assocs., Ltd. (In re 

Timbers of Inwood Forest Assocs., Ltd.), 808 F.2d 363, 372 (5th Cir. 1987) (“Section 1121 was 

designed, and should be faithfully interpreted, to limit the delay that makes creditors the hostages 

of Chapter 11 debtors”), aff’d, 484 U.S. 365 (1988).

13. The Bankruptcy Code does not define “cause,” and the determination of cause is a 

fact-specific inquiry. In re Adelphia Commc’ns Corp., 352 B.R. 578, 586-87 (Bankr. S.D.N.Y. 

2006). While the Bankruptcy Code is silent as to what constitutes cause for extending or 

terminating exclusivity, the courts have identified nine factors for consideration: (1) the size and 

 

13 See Objection and Response of the Ad Hoc Group of Subrogation Claim Holders to the Motion of the Ad Hoc 

Committee of Senior Unsecured Noteholders to Terminate the Debtors’ Exclusive Periods Pursuant to Section 

1121(d)(1) of the Bankruptcy Code [Docket No. 3062], at p. 3.

Case: 19-30088 Doc# 3147 Filed: 07/23/19 Entered: 07/23/19 10:56:24 Page 10

 of 15
8

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

complexity of the case; (2) the necessity for sufficient time to permit the debtor to negotiate a plan 

of reorganization and prepare adequate information; (3) the existence of good faith progress toward 

reorganization; (4) the fact that the debtor is paying its bills as they become due; (5) whether the 

debtor has demonstrated reasonable prospects for filing a viable plan; (6) whether the debtor has 

made progress in negotiations with its creditors; (7) the amount of time which has elapsed in the 

case; (8) whether the debtor is seeking an extension of exclusivity in order to pressure creditors to 

submit to the debtor’s reorganization demands; and (9) whether an unresolved contingency exists. 

Adelphia, 352 B.R. at 586-87 (citing In re Dow Corning Corp., 208 B.R. 661, 664-65 (Bankr. E.D.

Mich. 1997); In re Adelphia Commc’ns Corp., 336 B.R. 610, 674 (Bankr. S.D.N.Y. 2006) (Gerber, 

J.), aff’d, 342 B.R. 122 (S.D.N.Y. 2006) (Scheindlin, J.)).

14. Importantly, as noted by the court in Dow Corning, “[w]hen the Court is determining 

whether to terminate a debtor’s exclusivity, the primary consideration should be whether or not 

doing so would facilitate moving the case forward.” 208 B.R. at 670 (emphasis added). Notably, 

this determination is one of practicality, which can override a mere “toting up of the factors.” Id. 

Terminating exclusivity to move the case forward is the overriding factor here, both because of the 

June 2020 deadline for participating in the wildfire fund, and the inability of wildfire victims to 

receive adequate compensation until a plan is confirmed.

15. Here, other factors also weigh in favor of terminating exclusivity to accelerate 

progress towards plan consummation before the June 2020 deadline. While the case is complex, 

these cases have unique and significant time exigencies. After over six months, the Debtors have 

reached a settlement with only a relatively small subset of all wildfire claimants, and no meaningful 

progress toward settlement or resolution with the remaining creditors in these cases whose claims 

need to be impaired. It is precisely this lack of progress and engagement that has necessitated the 

Ad Hoc Subrogation Group to seek the relief proposed herein. Without significant cooperation 

with the Wildfire Claim holders, any plan proposed by the Debtors would be illusory. Furthermore, 

termination of exclusivity is required because the Debtors failed to demonstrate urgency in utilizing 

their exclusive periods to negotiate a plan in earnest (factors 2, 3 and 6), and to this point the 

Case: 19-30088 Doc# 3147 Filed: 07/23/19 Entered: 07/23/19 10:56:24 Page 11

 of 15
9

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Debtors have failed to demonstrate a reasonable prospect for filing a viable plan (factor 5).

16. The Ad Hoc Subrogation Group has designed a plan that holders of Subrogation 

Claims will support, and constructively proposes a procedure whereby individuals with Wildfire 

Claims have the opportunity to realize a full recovery on their compensable claims. It is fully 

expected that the trust funding amount in the Subrogation Plan will significantly exceed the 

distributable amount for individual Wildfire Claims in the Bondholder Plan, which makes it more 

likely that the relevant condition to confirmation will be satisfied in the case of the Subrogation 

Plan. Moreover, through equitizing a significant portion of the Subrogation Claims, the Ad Hoc 

Subrogation Group has the resources to provide the necessary financing to render the Subrogation 

Plan both credible and confirmable. 

17. Features of the Subrogation Plan include (a) reinstatement or refinancing of all 

funded debt claims; (b) establishment of a sufficiently funded claims resolution trust to satisfy the 

claims of individual wildfire claimants; (c) equitization of 90% of the aggregate allowed 

Subrogation Claims; (d) the option for existing equity holders, if they timely choose to support the 

plan, to invest in the reorganized company through a rights offering;

14 (e) payment in full, or 

reinstatement of, general unsecured claims; (f) a balance sheet upon emergence that allows the 

reorganized Debtors to maintain an investment grade rating, and will position the reorganized 

Utility to continue its compliance with state renewable energy standards and invest in requisite grid 

improvement and safety enhancement initiatives; (g) the assumption of the Debtors’ existing 

retirement plan; and (h) rate neutrality for the reorganized Debtors’ customers.

18. All stakeholders stand to benefit from the Subrogation Plan, which gives these 

chapter 11 cases a viable path towards confirmation and emergence. Specifically:

• Current individual holders of Wildfire Claims will be able to recover quickly 

from a settlement trust funded with sufficient consideration to pay such 

 

14 If existing equity holders decline to participate in the rights offering, the Ad Hoc Subrogation Group is 

confident it will either (a) find other parties willing to participate, including existing stakeholders and/or outside 

parties, or (b) eliminate the need for further capital through additional sources of funding.

Case: 19-30088 Doc# 3147 Filed: 07/23/19 Entered: 07/23/19 10:56:24 Page 12

 of 15
10

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

claims;

• Future victims of wildfires will be able to look to the new proposed wildfire 

recovery fund and take advantage of the $5 billion contributed under the 

Subrogation Plan;

• Current holders of funded debt against the company will be reinstated against 

an investment grade issuer;

• The Utility’s customers will not suffer a net rate increase, and will benefit 

from a safer and more reliable network in line with the state’s renewable 

energy standards; and

• The Debtors’ employees’ and retirees’ jobs and benefits will be preserved.

19. The cornerstone of the Subrogation Plan is the willingness of holders of Subrogation 

Wildfire Claims to equitize their voluntarily reduced claims in exchange for mandatory convertible 

preferred equity (“MCP”).

15

 The MCP structure ensures the Subrogation Plan’s feasibility, as it 

minimizes the Debtors’ need to raise significant amounts of cash to emerge from chapter 11. 

Another chief benefit of the MCP structure is that objections to the plan based on enterprise value 

will be blunted because the Court will have the benefit of the market, not just experts, to help 

determine the value of the MCP issued under the Subrogation Plan.

20. This Motion is being filed on a date of great uncertainty in these cases. The 

Bondholders’ Motion, the two lift stay motions relating to the Tubbs fire, and the Debtors’ motion 

to estimate are all likely to be heard either before or concurrently with this Motion. In any potential 

set of outcomes, however, granting this Motion so that the Subrogation Plan, the most credible and 

potentially confirmable plan yet proposed, can be pursued will move these cases forward and put 

these cases on a viable path to an early resolution. For the reasons set forth herein, the Ad Hoc 

Subrogation Group respectfully requests that this Court enter the order attached hereto as Exhibit B

 

15 The MCP in the Subrogation Plan has been successfully implemented before. It was inspired by preferred 

equity with similar features in the 2013 bankruptcy of American Airlines. See Disclosure Statement for 

Debtors’ Second Amended Join Chapter 11 Plan, In re AMR Corp., No. 11-15463 (SHL) (Bankr. S.D.N.Y. 

June 5, 2013) [Docket No. 8591], at p. 11-14.

Case: 19-30088 Doc# 3147 Filed: 07/23/19 Entered: 07/23/19 10:56:24 Page 13

 of 15
11

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

and permit the Ad Hoc Subrogation Group to file and solicit acceptances of the Subrogation Plan. 

NOTICE

21. Notice of this Response will be provided to (a) counsel to the Debtors; (b) the Office 

of the U.S. Trustee for Region 17 (Attn: Andrew R. Vara, Esq. and Timothy Laffredi, Esq.); 

(c) counsel to the Official Committee of Unsecured Creditors (d) counsel to the Tort Claimants 

Committee; (e) the Securities and Exchange Commission; (f) the Internal Revenue Service; (g) the 

Office of the California Attorney General; (h) the California Public Utilities Commission; (i) the 

Nuclear Regulatory Commission; (j) the Federal Regulatory Commission; (k) the Office of the 

United States Attorney for the Northern District of California; (l) counsel for the agent under the 

Debtors’ debtor in possession financing facility; and (m) those persons who have formally appeared 

in these chapter 11 cases and requested service pursuant to Bankruptcy Rule 2002. The Ad Hoc 

Subrogation Group respectfully submits that no further notice is required.

Case: 19-30088 Doc# 3147 Filed: 07/23/19 Entered: 07/23/19 10:56:24 Page 14

 of 15
12

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

CONCLUSION

WHEREFORE, the Ad Hoc Subrogation Group requests that the Court grant the 

relief set forth in the proposed order attached as Exhibit B, or otherwise as is just and proper. 

Dated: July 23, 2019

Counsel for Ad Hoc Group of Subrogation Claim Holders

WILLKIE FARR & GALLAGHER LLP

/s/ Matthew A. Feldman 

Matthew A. Feldman (pro hac vice)

Joseph G. Minias (pro hac vice)

Daniel I. Forman (pro hac vice)

787 Seventh Avenue

New York, NY 10019-6099

Telephone: (212) 728-8000

Facsimile: (212) 728-8111

Email: mfeldman@willkie.com

jminias@willkie.com

dforman@willkie.com

DIEMER & WEI, LLP

Kathryn S. Diemer (#133977)

100 West San Fernando Street, Suite 555

San Jose, CA 95113

Telephone: (408) 971-6270 

Facsimile: (408) 971-6271 

Email: kdiemer@diemerwei.com

Case: 19-30088 Doc# 3147 Filed: 07/23/19 Entered: 07/23/19 10:56:24 Page 15

 of 15