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4831-5029-2652v4

Dennis F. Dunne (admitted pro hac vice) 

Samuel A. Khalil (admitted pro hac vice)

MILBANK LLP 

55 Hudson Yards

New York, New York 10001-2163

Telephone: (212) 530-5000

Facsimile: (212) 530-5219

and 

Gregory A. Bray (SBN 115367)

Thomas R. Kreller (SBN 161922) 

MILBANK LLP 

2029 Century Park East, 33rd Floor

Los Angeles, CA 90067

Telephone: (424) 386-4000

Facsimile: (213) 629-5063

Counsel for the Official Committee

of Unsecured Creditors

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION

In re: 

PG&E CORPORATION

- and -

PACIFIC GAS AND ELECTRIC 

COMPANY,

Debtors.

Case No. 19-30088 (DM)

Chapter 11

(Lead Case)

(Jointly Administered)

SUPPLEMENTAL OBJECTION OF THE 

OFFICIAL COMMITTEE OF UNSECURED 

CREDITORS TO THE DEBTORS’ SUBROGATION SETTLEMENT 

AND RSA MOTION 

Date: November 13, 2019

Time: 10:00 a.m. (Pacific Time)

Place: United States Bankruptcy Court

450 Golden Gate Avenue

San Francisco, CA 94102

Re: Docket Nos. 3992 & 4554 

 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).

The Official Committee of Unsecured Creditors (the “UCC”) hereby submits this 

supplemental objection (the “Supplemental Objection”) to the Motion Pursuant to 11 U.S.C.

Case: 19-30088 Doc# 4643 Filed: 11/11/19 Entered: 11/11/19 07:46:11 Page 1 of

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44553.00001

§§ 363(b) and 105(a) and Fed. R. Bankr. P. 6004 and 9019 for Entry of an Order (I) Authorizing 

the Debtors to Enter into Restructuring Support Agreement with the Consenting Subrogation 

Claimholders, (II) Approving the Terms of Settlement with Such Consenting Subrogation 

Claimholders, Including the Allowed Subrogation Claim Amount, and (III) Granting Related 

Relief (the “RSA Motion”) [Docket No. 3992] as it applies to the Amended and Restated 

Restructuring Support Agreement dated as of November 1, 2019 (the “Amended RSA”).

1 In 

support of its Supplemental Objection, the UCC respectfully states as follows:

SUPPLEMENTAL OBJECTION

As the Court is aware, the proposed treatment of the Subrogation Claims in the Debtors’ 

Joint Chapter 11 Plan of Reorganization Dated November 1, 2019 (the “Debtors’ Plan”) [Docket 

No. 4563] is premised on a settlement in the amount of $11 billion that is required to be paid in 

cash, is not subordinated to payments to the Other Wildfire Claimants and is coupled with third 

party releases for the Subrogation Claimants.

2

As an initial matter, while the UCC previously had no objection to a straight forward 

settlement of all Subrogation Claims for $11 billion dollars, given that the Kincade and other 

postpetition fires are not included in the settlement, the Amended RSA no longer serves as a global 

resolution of the claims of the Consenting Creditors.

3 This change in circumstances raises the 

question as to whether the settlement is now premature and should be reconsidered. The UCC

reserves it rights to further address this issue at the hearing. 

In addition, the UCC continues to object to many of the “plan related” provisions that 

remain embedded in the Amended RSA. Such provisions go well beyond providing the 

 

1 The UCC filed its initial objection to the RSA Motion on October 16, 2019 [Docket No. 4236] (the 

“Initial Objection” and, together with this Supplemental Objection, the “Objection”). Capitalized terms 

used but not defined herein have the meanings ascribed to them in the RSA Motion.

2 The UCC leaves the issues related to the priority and releases largely to the TCC.

3 The definition of “Wildfires” only covers prepetition fires. Amended RSA § 1.

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44553.00001

Subrogation Claimants with an allowed claim for $11 billion dollars and instead act as a “poison 

pill” that ties the Court’s hands with respect to confirming any plan of reorganization other than 

the Debtors’ Plan, including the plan proposed by the TCC and the AHG (the “TCC/AHG Plan”)

and economically punishes other creditors that would prefer to vote for the TCC/AHG Plan. 

Accordingly, because the relief sought in the RSA Motion, if granted, improperly tilts the 

balance in favor of the Debtors’ Plan, the UCC continues to oppose the RSA Motion as not being 

in the best interests of the Debtors’ unsecured creditors.

A. The RSA Motion Improperly Favors the Debtors’ Plan Over the TCC/AHG Plan.

The Amended RSA, like the original RSA, contains a combination of lock-up covenants

and termination provisions intended to permit the proposed $11 billion settlement to be 

consummated only pursuant to the Debtors’ Plan, even if a competing plan, such as the TCC/AHG

Plan, provides for the same treatment to the Subrogation Claimants, i.e. $11 billion dollars. The 

Consenting Creditors must vote in favor of the Debtors’ Plan (Amended RSA § 2(a)(ii)), vote 

against any alternative plan (Amended RSA § 2(a)(iii)), including the TCC/AHG Plan, and may 

not take any action directly or indirectly to support any other plan (Amended RSA § 2(b)(ii)). The 

Amended RSA further restricts the Consenting Creditors by not allowing them even to negotiate 

with other creditor constituencies or participate in mediation unless it is “together” with the 

Debtors (Amended RSA § 2(b)(ii)).

Moreover, the Amended RSA requires the Consenting Creditors to affirmatively “[s]upport 

and cooperate with the Debtors[’] [efforts] to obtain confirmation of the [Debtors’] Plan” 

(Amended RSA § 2(a)(i)), and not “delay, impede, or take any other action to interfere with the 

acceptance or implementation of the [Debtors’] Plan . . . .” Amended RSA § 2(b)(i). 

The Consenting Creditors presumably would be required to take such actions in support of 

the Debtors’ Plan, and against the TCC/AHG Plan (and any other plan), regardless of whether

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44553.00001

(a) the Court were to determine that the TCC/AHG Plan should be confirmed instead of the 

Debtors’ Plan (either out of necessity because the Debtors’ Plan has failed, or based on the 

creditors’ preference and the Court’s consideration of various confirmation issues), or (b) the

TCC/AHG Plan (or some other plan) offers the same treatment to the Subrogation Claims as does 

the Debtors’ Plan. 

Moreover, to the extent that the Debtors’ Plan is not allowed either to be solicited or 

confirmed by the Court, the termination provisions in the Amended RSA allow the Consenting 

Creditors unilaterally to walk away from the $11 billion settlement and assert the full $20 billion 

in damages that they have previously claimed. See Amended RSA § 5(a)-(d). Thus, even if they 

are given the same treatment in any plan other than the Debtors’ Plan, the Consenting Creditors 

are not locked into having the Subrogation Claims allowed at $11 billion, and they could well be

in front of this Court again seeking their full recovery notwithstanding the Amended RSA. 

That the $11 billion settlement only applies in the context of the Debtors’ Plan is especially 

problematic given that the Amended RSA effectively terminates any estimation proceeding with 

respect to the Subrogation Claims. See Amended RSA §§ 2(a)(iv)–(v); § 2(b)(iii). In fact, the 

Amended RSA expressly requires that the Subrogation Claims not be estimated. Amended RSA 

§ 2(a)(v). As a result, to the extent that the Debtors’ Plan cannot or should not be confirmed, the 

Court and creditors could be forced by the Consenting Creditors to have the Subrogation Claims 

estimated in the context of a cram down under section 1129 of the Bankruptcy Code under an 

extremely tight timeline given the June 30, 2020 deadline imposed by A.B. 1054.

Taken together, these provisions of the Amended RSA fly in the face of the Court’s 

decision to lift exclusivity and allow both the Debtors’ Plan and the TCC/AHG Plan to proceed on 

parallel paths. By design, the Amended RSA seeks to foreclose any attempt to have the TCC/AHG 

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44553.00001

Plan confirmed. It would also make negotiations among the parties, including with the Mediator, 

that much more difficult. 

These restrictions also run counter to the statements made by the Consenting Creditors’ 

counsel at the October 23, 2019 hearing that they would accept $11 billion in cash, regardless of 

what party offered it. As counsel recognized:

MR. FELDMAN: It goes to the fundamental issue, Your Honor, you raised when 

you terminated exclusivity. Would this bring parties together or would it push them 

apart? Unfortunately, it’s had the latter reaction. But I would also say, if it’s eleven 

billion dollars in cash, I accept. 

10/23/19 Hr’g Tr. at 228:4–12 (emphasis added). 

Given the dual track on which the Debtors’ cases are proceeding, any settlement of claims 

approved by the Court should be for the benefit of creditors and the estates as a whole, and not just 

for the benefit of a single plan proponent. This is especially true when so many material issues 

remain unresolved.

4

B. The Amendments to the RSA Are Cumbersome and Vague.

The amendments made to the original RSA were supposed to resolve the problem raised 

in the Initial Objection that would arise if the Debtors prove to be insolvent but the estates 

nonetheless remain obligated to pay the Subrogation Claimants $11 billion in cash, even if such 

payment would exceed their pro rata recovery and subject the estates to an administrative claim 

for damages. This problem was said to be an “unintended consequence.” 10/23/19 Hr’g Tr. at 

178:22. Rather than clearly and unconditionally resolving this apparent “glitch”, the Amended

RSA only adds confusion and complexity: before any of the insolvency exception provisions 

apply in favor of the Debtors, the Amended RSA requires the Court to make a finding of the 

 4 See In re Smart World Techs., LLC, 423 F.3d 166, 175 (2d Cir. 2005) (concluding that while Debtors 

may seek to enter into settlements under Bankruptcy Rule 9019, the Code “requires the debtor to 

[manage the estate’s legal claims] in a way that maximizes the estate’s value” and that such duty “is 

implicit in the debtor’s role as the estate’s only fiduciary”).

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Debtors’ insolvency, presumably through a contested valuation hearing. Moreover, the 

Subrogation Claimants continue to require that potential rights to subrogate their claims be waived.

Specifically, the Amended RSA states that:

provided that if the Bankruptcy Court determines the Debtors are insolvent, the 

Debtors may file a revised plan that does not pay subrogation claimants $11 billion 

in cash on $11 billion of allowed claims, provided, however, that such revised plan 

shall not subordinate the class of Subrogation Claims to the class of IP Claims (an 

“Insolvent Plan”);

Amended RSA § 3(a)(i). And this is notwithstanding that the Subrogation Claimants have the 

unilateral right to terminate their settlement if the Debtors are insolvent. Amended RSA § 5(c). It 

is unclear how such a process would fit into the currently proposed confirmation timeline. 

Regardless of its form and timetable, the process would likely be contentious, drawn out and give 

the Consenting Creditors undue leverage in the face of the June 30, 2020 deadline imposed by 

A.B. 1054. 

CONCLUSION

The Debtors have stated repeatedly that they aspire to act as a fiduciary for all constituents: 

“Your Honor, the debtors, unlike the tort committee, and unlike the ad hoc bondholder committee 

are fiduciaries for all economic stakeholders in these cases.” 10/23/19 Hr’g Tr. at 131:13-15).

As set forth above, the proposed settlement and Amended RSA are inconsistent with this 

aspiration. The terms described above were negotiated by stakeholders solely seeking to advance 

the confirmation of the Debtors’ Plan without regard to the Court’s decision to terminate 

exclusivity, the possibility that the Debtors’ Plan cannot or should not be confirmed, or the 

preference of creditors in respect of the two competing plans. Rather than serve as a means to 

streamline the confirmation process by facilitating a settlement for the benefit of all economic 

stakeholders in the cases, the Amended RSA only serves to further complicate it.

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44553.00001

For the reasons set forth in this Objection, the UCC respectfully requests that the Court:

(i) sustain the Objection; (ii) deny the RSA Motion; and (iii) grant such other relief as may be 

appropriate.

Dated: November 11, 2019

MILBANK LLP

/s/ Gregory A. Bray

DENNIS F. DUNNE

SAMUEL A. KHALIL

GREGORY A. BRAY

THOMAS R. KRELLER

Counsel for the Official Committee of 

Unsecured Creditors

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