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Bruce S. Bennett (SBN 105430) 

Joshua M. Mester (SBN 194783) 

James O. Johnston (SBN 167330) 

JONES DAY 

555 South Flower Street 

Fiftieth Floor 

Los Angeles, CA 90071.2300 

Telephone: (213) 489-3939 

Facsimile: (213) 243-2539 

E-mail: bbennett@jonesday.com 

 jmester@jonesday.com 

 jjohnston@jonesday.com 

Attorneys for PG&E Shareholders 

UNITED STATES BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

In re: 

PG&E CORPORATION 

- and - 

PACIFIC GAS AND ELECTRIC 

COMPANY, 

Debtors. 

Bankruptcy Case 

No. 19-30088 (DM) 

Chapter 11 

(Lead Case) 

(Jointly Administered) 

OBJECTION OF CERTAIN PG&E 

SHAREHOLDERS TO MOTION OF 

THE OFFICIAL COMMITTEE OF 

TORT CLAIMANTS AND AD HOC 

COMMITTEE OF SENIOR 

UNSECURED NOTEHOLDERS TO 

TERMINATE THE DEBTORS’ 

EXCLUSIVE PERIODS

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).

Date: October 7, 2019 

Time: 1:30 p.m. (Pacific Time) 

Place: United States Bankruptcy Court 

 Courtroom 17, 16th Floor 

 450 Golden Gate Avenue 

 San Francisco, CA 94102 

Re: Docket No. 3940 

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TABLE OF CONTENTS 

Page 

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

II. THE BONDHOLDER/TCC BID IS NOT A GOOD FAITH SETTLEMENT ........... 7

III. A PLAN BASED ON THE BONDHOLDER/TCC BID CANNOT 

BE CONFIRMED ........................................................................................................... 10

IV. TERMINATION OF EXCLUSIVITY WILL NOT ELIMINATE 

CLAIMS ESTIMATION OR TUBBS LITIGATION ................................................. 14

V. TERMINATION OF EXCLUSIVITY WILL NOT PROMOTE 

“COMPETITION” OR SETTLEMENT ...................................................................... 17 

VI. ATTACKS ON PG&E’S PLAN ARE UNFOUNDED ................................................ 18

VI. CONCLUSION ................................................................................................................ 19

 

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TABLE OF AUTHORITIES 

Page 

CASES

In re A&C Properties, 

784 F.2d 1377 (9th Cir. 1986) ...................................................................................................10 

In re Adelphia Commc’ns Corp., 

361 B.R. 337 (S.D.N.Y. 2007) ..................................................................................................12 

In re Age Refining, Inc., 

801 F.3d 530 (5th Cir. 2015) .....................................................................................................10 

In re Cardelucci, 

285 F.3d 1231 (9th Cir. 2002) ...................................................................................................11 

In re Lighthouse Lodge, LLC, 

No. 09-52610-RLE, 2010 WL 4053984 (Bankr. N.D. Cal. Oct. 14, 2010) ..............................10 

In re Smart World Techs., LLC, 

423 F.3d 166 (2d Cir. 2005) ......................................................................................................10 

Turney v. F.D.I.C., 

18 F.3d 865 (10th Cir. 1994) .....................................................................................................10 

In re Trans Max Techs., Inc., 

349 B.R. 80 (Bankr. D. Nev. 2006) ..........................................................................................15

In re Victory Constr. Co., 

42 B.R. 145 (Bankr. C.D. Cal. 1984) ........................................................................................15

In re Washington Mut., Inc., 

442 B.R. 314 (Bankr. D. Del. 2011) .........................................................................................12

In re Whispering Pines Estates, Inc., 

370 B.R. 452 (BAP 1st Cir. 2007) ............................................................................................10 

STATUTES

11 U.S.C. § 502 .........................................................................................................................11, 15 

11 U.S.C. § 1123 .......................................................................................................................12, 13 

11 U.S.C. § 1129 .............................................................................................................................13 

CAL. PUB. UTIL. CODE § 854 ...........................................................................................................14 

CAL. PUB. UTIL. CODE § 3292(b)(1)(B) ..........................................................................................16 

OTHER AUTHORITIES

7 COLLIER ON BANKRUPTCY ¶ 1129.03[4][a][i] (16th ed. rev. 2019) .............................................15 

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Certain owners of common stock of PG&E Corporation (the “PG&E Shareholders”)1

hereby object to the Joint Motion To Terminate The Debtors’ Exclusive Periods Pursuant To 

Section 1121(d)(1) Of The Bankruptcy Code [ECF 3940] (the “Motion”) filed by the Official 

Committee of Tort Claimants (the “TCC”) and the Ad Hoc Committee of Senior Unsecured 

Noteholders (the “Bondholder Group”). The PG&E Shareholders also respond below to the 

statements and joinders filed with respect to the Motion by the Official Committee of Unsecured 

Creditors (the “UCC”) [ECF 4049], creditors BOKF, N.A. [ECF 4051] and SLF Fire Victim 

Claimants [ECF 4056], and non-parties The Utility Reform Network [ECF 4048], The Public 

Advocate’s Office [ECF 4052], and the International Brotherhood of Electrical Workers 

[ECF 4046]. 

I. PRELIMINARY STATEMENT 

The Motion is the third effort by the Bondholder Group to limit or terminate exclusivity in 

order to draft and file a plan that would pay unsecured bondholder claims vastly more than their 

allowed amounts and result in Elliot Management Company and its hand-picked group of 

bondholders owning most of PG&E, displacing existing shareholders despite PG&E’s 

acknowledged solvency. 

The Court previously – and correctly – characterized those efforts as “the bankruptcy 

equivalent of a proxy fight or a hostile takeover.” ECF 3568 at 3. Just seven weeks ago, the 

Court concluded that “there is no purpose in” terminating exclusivity because “[t]he Debtors have 

placed before all a proposal that, if coaxed and guided to maturity[,] should result in a proper 

outcome for all creditors without needing to deal with all of these other issues.” Id. at 4. 

In the short period of time since the last hearing on exclusivity, PG&E put itself well on 

the way toward achieving that “proper outcome.” PG&E’s plan of reorganization dated 

 

1

 The PG&E Shareholders are the entities identified on Exhibit A to the Third Amended 

Verified Statement Of Jones Day Pursuant To Federal Rule Of Bankruptcy Procedure 2019

[ECF 3964]. The PG&E Shareholders are acting in their individual capacities but authorized 

the filing of this single submission for the purpose of administrative efficiency. Each of the 

PG&E Shareholders is expressing its independent views, and counsel does not have the actual 

or apparent authority to obligate any one entity to act in concert with any other entity with 

respect to PG&E equity securities. The PG&E Shareholders have not agreed to act in concert 

with respect to their respective interests in PG&E equity securities. 

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September 23, 2019 [ECF 3966 (the “Plan”)] provides for all creditors to be paid in full with 

postpetition interest at the legal (federal judgment) rate, is backed by binding financing 

commitments, and satisfies all of the criteria necessary for PG&E to resolve these cases by 

June 30, 2020, and participate in California’s new wildfire fund. 

Much hard work and genuine compromise has been necessary to get to this point. Just 

since the Court denied the Bondholder Group’s prior motion to terminate exclusivity less than 

two months ago: 

(1) PG&E filed its first plan of reorganization, embodying a $1 billion settlement 

of public agency wildfire claims reached after hard-fought, arms-length negotiations; 

(2) after hard-fought, arms-length negotiations, PG&E settled with one of its 

largest creditor groups – the insurance subrogation claimants – for $11 billion and filed 

the amended Plan to incorporate that settlement; 

(3) after hard-fought, arms-length negotiations, PG&E obtained more than 

$14 billion in equity financing commitments from dozens of financial institutions to help 

fund the Plan; 

(4) PG&E obtained debt financing commitments for obligations contemplated by 

the Plan, including the refinancing of PG&E’s high-coupon bonds with new debt at 

substantially lower interest rates in order to achieve billions of dollars of future savings 

for stakeholders and ratepayers; 

(5) proceedings to estimate wildfire liabilities commenced in the District Court 

before District Judge Donato and are on track for the estimation hearing to begin in midJanuary 2020; 

(6) litigation of claims regarding the Tubbs fire commenced in the state court 

before Judge Jackson, with the first day of trial scheduled for January 7, 2020; 

(7) the CPUC issued its Order Instituting Investigation opening proceedings by 

which the CPUC will consider regulatory approvals necessary to enable PG&E to exit 

chapter 11 with a confirmed plan; and 

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(8) briefing of issues relating to inverse condemnation, the potential for estimation 

of government fire-related claims, and treatment of bondholder claims for postpetition 

interest and prepayment (make-whole) premiums is scheduled to begin shortly. 

PG&E’s settlements with the insurers and public entities damaged by the wildfires are 

fair. The PG&E Shareholders supported those settlements because the goal, first and foremost, 

always has been to fairly compensate for wildfire losses and pay all allowed claims in full, 

without a windfall for those seeking excessive or inappropriate amounts. To that end, the PG&E 

Shareholders stand ready and willing to support a fair compromise with those who have not yet 

settled, including the wildfire plaintiffs represented by the TCC. PG&E similarly seeks 

compromise, as evidenced by its requests for mediation. 

Unfortunately, the Bondholder Group and TCC have chosen a different path. Despite all 

of the progress outlined above (or perhaps because of it), the Bondholder Group is back with 

another hostile takeover bid, this time with the support of the TCC, pushing a plan term sheet that 

purports to describe a “settlement” of wildfire claims while transferring away 99.9% of the equity 

held by current shareholders (with a current market value of well over $5 billion). That so-called 

“alternative proposal” is not progress and not remotely cause for terminating PG&E’s exclusivity. 

As the Court aptly noted at the last status conference, there is no “settlement” underlying 

the Bondholder/TCC bid. Sept. 24, 2019 Tr. (“Tr.”) at 63:5-8 (“THE COURT: My question to 

you is what is the discrete settlement between the bondholders and the TCC? There’s nothing to 

settle, is there? There’s no dispute to begin with. They’re different creditor groups with the same 

common debtor.”). Unlike the negotiations that led to PG&E’s settlements with the insurance 

and public entity claimants, there were no arms-length negotiations between adversaries on 

opposite sides of the table. There was no give-and-take resulting in compromises by both the 

Bondholder Group and the TCC in furtherance of a deal. There was no one negotiating to protect 

the interests of the estate itself or any other constituency. Instead, the Bondholder/TCC bid 

embodies exactly what one would expect when “different creditor groups with the same common 

debtor” get together to divvy up someone else’s money (in this case, the value of a solvent 

bankruptcy estate): bondholders pay themselves what they desire, wildfire plaintiffs pay 

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themselves what they desire, and the estate and tens of thousands of shareholders lose. The 

reality is that the Bondholder/TCC term sheet is just two demands for plan treatment not agreed 

to by any genuinely adverse party, surrounded by mostly non-controversial bankruptcy 

boilerplate included to create a false impression that meaningful plan terms have been negotiated. 

This is not progress. 

For example, on the bondholder side of the ledger, the Bondholder Group would: 

(1) Reinstate $15.8 billion in unsecured bonds with above-market interest rates as 

high as 6.35% (at a time when the 30-year Treasury note yields 2%) and convert them to 

secured status. In so doing, the Bondholder Group would pay $600 million in postpetition 

interest above the legal (federal judgment) rate mandated by the Ninth Circuit and cause 

PG&E to forgo the opportunity to refinance the debt at much lower interest rates. This 

proposed treatment would overpay unsecured bondholders by more than $3 billion. 

(2) Pay an additional $1.75 billion in unsecured bonds more than in full by 

providing for postpetition interest at the contract rate instead of the federal judgement rate 

and prepayment (make-whole) premiums that are not due under the governing indentures 

and would be disallowed as unmatured interest under the Bankruptcy Code in any event. 

(3) Expropriate for itself the right to buy equity in reorganized PG&E for roughly 

5¢ per share (far below the current share price and the $14.05 share price underlying the 

$14 billion in backstop commitments obtained by PG&E in arms-length negotiations with 

market participants) and $5.75 billion in new unsecured notes with above-market terms 

worth hundreds of millions of dollars more than the Bondholder Group proposes to pay. 

(4) Pay itself $670 million in fees. 

All told, this treatment would overpay the Bondholder Group and other unsecured bondholders by 

billions of dollars while diluting the equity stake of most current shareholders down to 0.1%. 

Notably, in order to curry favor with a politically influential constituency that occupies a seat on 

the UCC, a special discriminatory exception would be made for PG&E employees and retirees, 

whose accounts will be “trued-up for any dilution on account of the Plan.” 

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On the wildfire plaintiffs’ side of the ledger, $14.5 billion would be transferred to a trust 

from which wildfire claims are to be paid. That trust would be administered and governed by 

persons selected by the TCC, with PG&E having no oversight or ability to object to any payments 

from the trust. This fox-guarding-the-henhouse dynamic virtually ensures that every single dollar 

transferred to the trust would be spent. In the unlikely event that funds remained, the excess 

would be gifted to the California wildfire fund and none would be returned to PG&E, regardless 

of the actual amount of wildfire liabilities. 

Notable here is that the $14.5 billion funding of the trust is not a “settlement” of any sort, 

and it has nothing to do with any assessment of PG&E’s actual liability for wildfire damages. At 

the TCC’s urging, the Court set a very “late” bar date and authorized claimants to file proofs of 

claim without listing or identifying their alleged damages. That bar date has not yet occurred and 

the TCC recently expressed concern that relatively few proofs of claim have been filed to date, 

meaning that filed claims provide no indication of even the asserted wildfire liabilities, much less 

the actual allowed amount of those liabilities. The TCC simply does not yet know how many 

claims will be filed, how many claimants exist, or what the quantum of their damages might be. 

As a consequence, it has resorted to crude approximations (claiming, for example, that uninsured 

and underinsured damages somehow are equal to twice the amount of insurance payments made). 

Just as importantly, the Bondholder Group had similarly inadequate information with which to 

make any reasoned assessment of PG&E’s wildfire liabilities. 

But this information vacuum did not stop the Bondholder Group and TCC from 

purporting to “settle” wildfire claims. How did they do it? Not through a negotiation in which 

each side makes concessions in favor of the other. Instead, the Bondholder Group and TCC 

simply worked backwards from their assessment of PG&E’s “distributable value,” allocating it 

amongst themselves until nothing was left. As the TCC’s counsel (Ms. Dumas) put it at the 

recent status conference, the TCC “compromised” wildfire claims “based on a reasonable 

assumption . . . regarding the distributable value of the company.” Tr. 46:21-25. Or as Mr. Pitre 

more bluntly declared, “Let’s get our deal done and screw them all!”2

 

 

2

 PGE-EXC-AHC-00002529.

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As a consequence, the Bondholder/TCC bid will not advance this case and does not justify 

termination of exclusivity. A plan based on the Bondholder/TCC bid would violate the 

Bankruptcy Code and could not be confirmed for multiple, independent reasons: reinstatement 

and securitization of billions of dollars of above-market unsecured debt, payment of hundreds of 

millions of dollars of postpetition interest over the legal rate, sale of equity in the reorganized 

PG&E for billions of dollars less than it is worth, payment of hundreds of millions of dollars in 

fees to the Bondholder Group, the outright transfer of $14.5 billion to a wildfire trust with no 

estimation, and the trust’s unfettered discretion to disburse that entire sum without claims 

adjudication or judicial oversight. Any such plan will be hotly contested and, because it will be 

contested, cannot eliminate the ongoing estimation proceedings or the Tubbs fire litigation. 

Rather, it would only engender additional massive litigation, complicate and delay the ongoing 

proceedings before the CPUC, imperil the critical objective of a bankruptcy exit by June 30, 

2020, and significantly increase the already enormous cost of these bankruptcy cases. This is not 

the sort of plan that should serve as the basis for terminating exclusivity, whether as a “back up” 

or otherwise. 

Termination of exclusivity also will not promote “competition” or compromise. The 

major settlements to date were negotiated during the exclusive period and without threat of its 

termination. The Bondholder Group’s motions to terminate exclusivity were filed after and in 

reaction to PG&E’s announcements of those settlements, not vice versa. The existence of 

exclusivity has not remotely prevented or chilled settlement discussions among any interested 

parties (as evidenced by the negotiations between the TCC and the Bondholder Group). 

Moreover, competing plans – when authorized – are supposed to offer stakeholders a 

choice between differing proposed treatments. But the Bondholder/TCC bid is not about claim 

treatment. It is a naked attempt by two constituents to support each other in asserting positions 

on claim allowance divorced from the facts and law. Unlike in PG&E’s prior bankruptcy case, 

termination of exclusivity here will not give creditors a choice between two legitimate plan 

proposals offering different but valid claim treatments. And there is no issue of treatment in this 

case because PG&E’s Plan will pay all claims in full, including the claims of bondholders and 

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wildfire claimants, and judicial mechanisms already are in place to resolve to resolve any 

disagreements regarding that treatment: the Court has ordered briefing on issues respecting the 

Bondholder Group’s claim to postpetition interest at rates exceeding the federal judgment rate and 

make-whole premiums not contemplated by the governing debt documents; and the Tubbs trial 

and estimation proceedings before the District Court provide a platform for estimating the amount 

necessary to pay wildfire claims in full. Termination of exclusivity is not necessary to resolve 

those disagreements. 

For all of these reasons, the Debtors should be permitted to continue progressing their 

Plan and the Motion should be denied, with an order compelling mediation of all remaining planrelated disputes. 

II. THE BONDHOLDER/TCC BID IS NOT A GOOD FAITH SETTLEMENT 

The Motion touts the Bondholder/TCC bid as a “comprehensive settlement” of wildfire 

and other liabilities. Motion ¶ 2. It is nothing of the sort. It is a collection of demands in an 

effort to require PG&E to pay alleged claims of the “settling parties” (bondholders, the TCC, and 

their allies on the UCC) with shareholder value and without judicial scrutiny of the nature, extent, 

and allowability of the liabilities. 

The Court recognized this dynamic at the last status conference and repeatedly pressed the 

Bondholder Group’s counsel to explain how the Bondholder/TCC bid could be characterized as a 

settlement. Counsel refused to answer that simple question, repeatedly changing the subject. 

Tr. 63:5-13, 64:23-66:10. This evasion revealed the truth in the Court’s observation that “there’s 

nothing to settle” between the Bondholder Group and the TCC. Tr. 63:6-7. 

Indeed, discovery has shown that the Bondholder Group and the TCC couldn’t have 

engaged in arms-length negotiations because they had no material information about the alleged 

claims of the other. The Bondholder Group, for example, did not have documents and files from 

the insurers who paid wildfire claims (a good source of information that will show the limited 

extent to which insurance was inadequate to satisfy wildfire claims) or any other reliable data 

regarding the nature and extent of compensable wildfire losses. And, as the bar date has not 

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passed, the Bondholder Group could not have made any reasonable assessment of liabilities from 

filed claims. Rather, it apparently just kept “bidding up the torts” until the TCC accepted. 

Similarly, the TCC apparently did no analysis of the Bondholder Group’s disallowable 

claims for postpetition interest at the contract rate and for make-whole premiums. It did no 

analysis of the savings PG&E could realize by satisfying outstanding bonds with above-market 

interest rates instead of reinstating them. It did not consider whether the reinstated above-market 

bonds also would have to be secured due to the proposed incurrence of new secured debt by 

reorganized PG&E. And it did not investigate whether equity in reorganized PG&E could be sold 

for more than the five cents a share at which it will be sold to the Bondholder Group under the 

Bondholder/TCC bid. 

The record is clear that the Bondholder Group and TCC simply worked backward from 

their assessment of PG&E’s “distributable value,” allocating it amongst themselves until nothing 

but a 0.1% interest in reorganized PG&E was left for non-employee shareholders. As the TCC’s 

counsel frankly admitted: “We’ve decided that to move the case forward in a constructive way[,] 

we will compromise our claims based on a reasonable assumption . . . regarding the distributable 

value of the company.” Tr. 46:20-25 (comments of Ms. Dumas); see Tr. 130:17-22 (“MR. 

PITRE: And the difference between discussions that at least I have had, I’m talking about me 

now, and the bondholders is that there’s been complete transparency . . . as to what is available to 

resolve claims.”). In other words, the TCC’s demands are based on what it believes PG&E can 

pay rather than the amount of wildfire claims entitled to payment in full. The UCC – whose 

constituents are beneficiaries of the massive overpayment of claims under the Bondholder/TCC 

bid – put it well: “the TCC has accepted what the parties believe is the maximum amount that 

can be paid by the Debtors’ estates, while still ensuring that the estates remain solvent.” 

ECF 4049 ¶ 2. 

By reverse engineering “solvency” in this way, the Bondholder Group and TCC 

“negotiated” to distribute virtually every dollar of value to creditors, without regard to the actual 

allowable amount of claims, in order to prevent shareholders from receiving any material value. 

This is an embodiment of a “screw them all!” approach, and it is an utterly inappropriate way to 

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negotiate for the allowed amount of claims against an entity the TCC must concede to be solvent 

(or else it would not have agreed to support a plan that pays postpetition interest at amounts even 

higher than the rate dictated by governing Ninth Circuit law). 

The recent revisions to the Bondholder/TCC bid further demonstrate that there is no true 

“settlement” that would be put before the Court if exclusivity is terminated. Consider that the 

term sheet filed with the Motion purported to subordinate recoveries on insurance subrogation 

claims to the wildfire claims of other plaintiffs. Motion, Ex. A, Fire Claims Trust (“[A]t the end 

of Trust administration, after each Allowed Fire Victim Claim has been paid in full, the Trustee 

may then and only then pay an Allowed Subrogation Fire Claim(s) that corresponds to the paid in 

full Allowed Fire Victim Claim.”). At the status conference, after the Court questioned the 

legality of such subordination and proposed to set a briefing schedule on the issue, the 

Bondholder Group and TCC immediately agreed to remove the insurer subordination from the 

Plan and increase the amount payable to wildfire plaintiffs. Tr. 122:2-8. Two days later, the 

Bondholder Group and TCC did just that, filing the Amended Term Sheet to increase funds to be 

paid to wildfire claimants (individual, government, and insurer) by $1.5 billion. Amended Term 

Sheet, Transaction Overview. At the same time, the proposed treatment of bondholder claims did 

not change at all. Notably absent was any agreement by the constituency called upon to pay that 

additional $1.5 billion – namely, PG&E shareholders. Indeed, shareholders were not even 

consulted. This cannot possibly be the kind of “negotiation” contemplated by the Court and the 

Bankruptcy Code. It also cannot fairly be described as progress.3

 

3

 The Amended Term Sheet also incorporates the same releases of insurers that the TCC had 

just characterized as “too cute” and “too mastermindy”. Compare Tr. 53:2-5 (“MS. DUMAS: 

The insurance companies get releases from the victims, but the victims don’t get rel – I mean, 

it’s all – it’s all way too cute. It is all way too mastermindy cute.”) and Tr. 69:6-10 (“MR. 

QURESHI: [T]here is a provision in that settlement [between PG&E and the insurers] that we 

found to be very troubling, which is that i[t] requires a release by the individual tort claimants 

of any claims they may have against the insurers in order to recover any amount out of the 

trust. Again, we don’t think that’s appropriate.”) with Amended Plan Term Sheet, Releases

(“the Plan shall provide for consensual mutual releases of all claims and causes of action by 

and between each holder of a Fire Victim Claim (i) who votes to accept the Plan or (ii) is 

deemed to accept the Plan and each holder of a Subrogation Fire Claim (i) who votes to 

accept the Plan or (ii) is deemed to accept the Plan, based on or relating to, or in any manner 

arising from, the fires described in Schedule 1”). 

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Accordingly, the Bondholder/TCC bid is not entitled to the deference and consideration 

typically afforded to compromises reached between two adversaries after good-faith, arms-length 

negotiations. E.g., In re Lighthouse Lodge, LLC, No. 09-52610-RLE, 2010 WL 4053984, *8 

(Bankr. N.D. Cal. Oct. 14, 2010) (“[T]he ‘settlement’ here is not put forth by a fiduciary acting 

for the estate, is not negotiated in an arm’s length transaction, and is proposed unilaterally by the 

party who receives the benefit of the release. Thus, to the extent the law favors compromise and 

provides for a wide deference to the wisdom of the proponent’s view of the settlement, such 

deference will not be given here on these facts”); In re Whispering Pines Estates, Inc., 370 B.R. 

452, 461 (BAP 1st Cir. 2007) (“Where, as here, the ‘settlement’ is not put forth by a fiduciary 

having authority and responsibility to act for the estate and who negotiated it in an arm’s length 

transaction, but unilaterally by the very party who would be receiving the benefit of the release, 

there is no cause for deference in the matter.”); see also In re Smart World Techs., LLC, 423 F.3d 

166, 179-80 (2d Cir. 2005) (“[T]his case is a poster child for why the Code and Rule 9019 

authorize only the debtor-in-possession to pursue or settle the estate’s legal claims and why the 

derivative-standing exception to that policy is narrow: As a general matter, other parties to a 

bankruptcy proceeding have interests that differ from those of the estate and thus are not suited to 

act as the estate’s legal representative.”).4

 

III. A PLAN BASED ON THE BONDHOLDER/TCC BID CANNOT BE CONFIRMED 

The Bondholder/TCC bid also contemplates a plan that cannot possibly be confirmed. 

Bondholder Treatment. To start, the proposed treatment of PG&E’s unsecured 

bondholders violates the Bankruptcy Code in several ways. First, the Bondholder Group 

proposes to reinstate $15.8 billion in unsecured notes with high rates of interest instead of 

refinancing them with lower-coupon debt now available in the marketplace. Amended Term 

Sheet, Treatment Of Class 6B. This would result in the overpayment of more than $600 million 

in postpetition interest “at the contract rate” (compared to postpetition interest at the federal 

 

4 See generally In re A&C Properties, 784 F.2d 1377, 1381 (9th Cir. 1986) (“good faith 

negotiation” required for court approval of a compromise); In re Age Refining, Inc., 801 F.3d 

530, 540 (5th Cir. 2015) (considering “the extent to which the settlement is truly the product 

of arms-length bargaining, and not of fraud or collusion”) (quotations omitted); Turney v. 

F.D.I.C., 18 F.3d 865, 867 n.2 (10th Cir. 1994) (same). 

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judgment rate), contrary to governing Ninth Circuit authority,5 and lock PG&E (and its 

ratepayers) into substantially above-market interest rates for decades to come. To make matters 

worse, the Bondholder Group would cause PG&E to incur $8 billion in new secured debt, which 

in turn would trigger clauses in the unsecured note indentures that require conversion of the 

reinstated unsecured debt into secured debt. The end result of this maneuver would be to convert 

the Bondholder Group’s above-market unsecured debt into secured debt with interest rates vastly 

in excess of available market rates of interest. This treatment would overpay the Bondholder 

Group and other unsecured bondholders by more than $3 billion. 

Second, with respect to an additional $1.75 billion in unsecured notes to be paid on the 

effective date, the Bondholder Group not only proposes to pay postpetition interest at the contract 

rate but also “any prepayment premium, makewhole or other similar call protection” on those 

notes. Amended Term Sheet, Treatment Of Class 5B. However, there is no right to any such 

premium under the governing indentures and, even if there was, such make-whole amounts would 

be disallowed unmatured interest in any event. 11 U.S.C. § 502(b)(2). This treatment therefore 

would overpay the Bondholder Group and other unsecured bondholders by additional tens of 

millions of dollars. 

Third, the Bondholder Group would claim for itself the right to buy equity in reorganized 

PG&E for roughly 5¢ per share (Amended Term Sheet, New Money Investment In PG&E Corp.), 

far below the current share price and the $14.05 share price underlying the $14 billion in backstop 

commitments obtained by PG&E after arms-length negotiations with market participants. 

Incredibly, the Bondholder Group would acquire that equity at a $3 billion discount to the equity 

value implied under its own plan proposal.6

 The Bondholder Group also would give itself the 

 

5 The Ninth Circuit definitively has held that postpetition interest on claims against a solvent debtor 

accrues and is to be paid at the federal judgment rate as of the petition date. In re Cardelucci, 285 

F.3d 1231, 1234-36 (9th Cir. 2002). 

6

 The Bondholder Group proposes to acquire 59.3% of the equity for $15.5 billion. Amended 

Term Sheet, Transaction Overview and New Money Investment In PG&E Corp. This implies 

an equity value of $26 billion. But the Bondholder/TCC bid also values the 40.6% of the 

equity to be transferred to wildfire plaintiffs at $12.75 billion, implying an equity value of 

$31.4 billion. Amended Term Sheet, Transaction Overview. Thus, the Bondholder Group 

seeks to acquire equity at a $3 billion discount (17%) to its own plan value. 

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right to buy $5.75 billion in new senior unsecured notes with rich terms unattainable in today’s 

markets.7 

Notably, unlike the backstop financing commitments negotiated by PG&E – which enable 

PG&E to obtain financing in the capital markets on better terms than those negotiated with the 

backstop parties – the Bondholder Group’s equity and debt financing is almost entirely limited to 

members of the Bondholder Group. Amended Term Sheet, New Money Investment In PG&E 

Corp. The Bondholder Group would force PG&E to take the financing even if it can obtain better 

terms elsewhere (which it can, as demonstrated by the equity backstop commitments and debt 

financing letters PG&E already has obtained). In contrast, PG&E’s negotiated commitments 

afford it flexibility to raise debt and equity in the capital markets while ensuring that necessary 

financing remains in place if more favorable terms are not available elsewhere. 

In exchange for the exclusive right to purchase these bargain-priced securities, together 

with a commitment to backstop the issuance of $8 billion in new PG&E secured debt, the 

Bondholder Group would pay itself approximately $670 million in fees. Amended Term Sheet, 

New Money Investment In PG&E Corp. This would further overpay the Bondholder Group and 

potentially violate section 1123(a)(4) of the Bankruptcy Code, which requires that a plan “provide 

the same treatment for each claim or interest of a particular class.” 11 U.S.C. § 1123(a)(4); see, 

e.g., In re Washington Mut., Inc., 442 B.R. 314, 360-61 (Bankr. D. Del. 2011) (plan violates 

section 1123(a)(4) by preventing smaller class members from participating in a rights offering 

available to larger class members); In re Adelphia Commc’ns Corp., 361 B.R. 337, 363-64 

(S.D.N.Y. 2007) (“[T]here is a substantial possibility that Appellants will succeed in their 

argument that the distribution of certain benefits to some claimants but not others within a class 

violates section 1123(a)(4).”). 

Wildfire Claim Treatment. At the same time, a plan based on the Bondholder/TCC bid 

would irrevocably transfer $14.5 billion away from PG&E and into a trust dedicated to payment 

 

7

 For example, the new notes would carry an interest rate of 7.5% and prohibit PG&E from 

repaying them at any time in the first five years after the effective date, with prepayments 

after five years possible only with payment of a very large premium (7.5% premium after year 

five and 3.75% after year six). Amended Term Sheet, New PG&E Corp. Senior Unsecured 

Notes, and ECF 3962, Exhibit B. 

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of individual wildfire claims. Neither PG&E nor the Court would have oversight over the 

payment of claims from the trust. Instead, the trust would be administered and governed by 

persons selected by the TCC, who would consider and determine not only the claims of wildfire 

plaintiffs but also of their attorneys. See Amended Plan Term Sheet, Fire Victims Claim Trust. 

In the unlikely event any funds remain after claims are paid, the excess would be donated to the 

California wildfire fund and none would be returned to PG&E. Id. 

As a consequence, the Bondholder/TCC bid would dedicate an enormous sum of money 

($14.5 billion) to the payment of wildfire claims that no one – not the TCC, not the Bondholder 

Group – has quantified or analyzed in any meaningful way. Indeed, the deadline for claimants 

simply to assert claims has not even occurred yet. This would be objectionable if the trust or 

entity overseeing the liquidation and payment of those claims was concerned with the merits of 

the claims. It is especially objectionable here, where the TCC would appoint the very people who 

would determine whether and to what extent the claims of its own members (and the claims of 

other plaintiffs represented by the attorneys who represent the members of the TCC) get paid. 

All of this would be accomplished at the expense of current shareholders, including 

thousands of individuals who purchased PG&E shares as a conservative investment for retirement 

accounts and college funds, as well as large pension funds like CalPERS and CalSTRS entrusted 

with the retirement security of millions. There is, however, one notable exception. The 

Bondholder Group and TCC propose to protect PG&E employee and retiree shareholders – but 

only those shareholders and no others – from the massive dilution contemplated by the 

Bondholder/TCC bid. Amended Term Sheet, Other Employee Matters (“all PG&E Corp. 

common stock currently held by employees and retirees in pension accounts, 401(k) accounts and 

company-sponsored plans will be trued-up for any dilution on account of the Plan with new 

equity issuances within 90 days after the Effective Date”). This overt discrimination and 

disparate treatment among PG&E shareholders independently renders any plan based on the 

Bondholder/TCC bid unconfirmable. 11 U.S.C. §§ 1123(a)(4), 1129(b). 

Finally, if implemented, a plan based on the Bondholder/TCC bid – and its contemplated 

dilution of non-employee shareholders by 99.9% – almost certainly would result in a change of 

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control, thereby destroying PG&E’s net operating losses. Those NOLs could serve as an 

important source of value for satisfaction of claims, ongoing operations, and partial recovery of 

shareholder losses incurred as a result of unreimbursed wildfire damages.8 The willingness of the 

Bondholder Group and TCC to forgo that value speaks to the lack of good faith associated with 

their bid. 

IV. TERMINATION OF EXCLUSIVITY WILL NOT ELIMINATE 

CLAIMS ESTIMATION OR TUBBS LITIGATION 

One underlying premise of the Motion is that termination of exclusivity to enable a plan 

based on the Bondholder/TCC bid to proceed “may avoid the need for a lengthy and uncertain 

estimation process to determine the Debtors’ aggregate wildfire liability, as well as the state court 

trial with respect to the Tubbs fire, providing the Debtors with a clear path to resolution of these 

cases.” Motion ¶ 3; Tr. 118:11-14 (“MR. STAMER: from our perspective, and I think from the 

tort claimants’ perspective, and hopefully from the subrogation claimants’ perspective, it should 

moot the estimation process.”). 

It is easy to see why the TCC and wildfire plaintiffs would want this to be the case. They 

want to avoid litigation over whether PG&E is liable for the Tubbs fire notwithstanding CalFire’s 

thorough investigation and determination to the contrary. They want to avoid judicial estimation 

– after fulsome discovery and litigation – of the actual amount of PG&E’s wildfire exposure. 

Instead, they want to put the issue of wildfire liabilities up for bid. As counsel for the Singleton 

plaintiffs bluntly put it, “the chances of fire victims getting fully, fully, fully compensated is 

going to come through a competitive process. . . . TCC and bond holders may put up more 

money than Judge Donato does, and it may – if they put up enough money, to a certain extent, it 

may moot out estimation.” Tr. 84:2-16 (comments of Mr. Marshack); ECF 4056 at 4 (“Wildfire 

 

8

 A potential change of control also introduces significant regulatory risk, as the CPUC cannot 

approve a transaction resulting in a change of control unless it determines, among many other 

things, that it will “[p]rovide[] short-term and long-term economic benefits to ratepayers” and 

“[e]quitably allocate[], where the commission has ratemaking authority, the total short-term 

and long-term forecasted economic benefits, as determined by the commission, of the 

proposed merger, acquisition, or control, between shareholders and ratepayers[, such that] 

[r]atepayers shall receive not less than 50 percent of those benefits.” CAL. PUB. UTIL.

CODE § 854.

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Victims will probably not support the plan knowing that TCC is offering $14.5 billion to nonsubro Wildfire Victims as compared to $8.4 billion offered by the Debtor.”). 

But this is absurd. This case is not about “putting up more money than Judge Donato” or 

“offering” more for wildfire claims. It is not about “bidding up the torts” as the Bondholder 

Group’s lead representative – Elliott Capital Management – has threatened. It is about 

determining the appropriate amount of money necessary to satisfy PG&E’s wildfire liabilities in 

full. The fact is that, absent an arms-length settlement with PG&E, the wildfire liabilities must be 

estimated or adjudicated prior to or as a part of confirmation. 11 U.S.C. § 502(c)(1) (“There shall

be estimated for purpose of allowance under this section any contingent or unliquidated claim, the 

fixing or liquidation of which, as the case may be, would unduly delay the administration of the 

case.”) (emphasis added). Wildfire claimants cannot unilaterally liquidate their unliquidated 

claims by decree. 

And without estimation or adjudication, the Court cannot possibly determine whether a 

plan based on the Bondholder/TCC bid would satisfy the absolute priority rule of section 1129(b) 

or whether $14.5 billion (with no possibility that any funds are returned to the estate) will exceed 

the allowed amount of wildfire claims: 

The second major component of the “fair and equitable” requirement is that no 

creditor or interest holder be paid a “premium” over the allowed amount of its 

claim. Once the participant receives or retains property equal to its claim, it may 

receive no more. The reason for this rule is obvious, and goes back to the basic 

understanding between debt and equity. Holders of debt traditionally contract for 

repayment of principal and interest, but no more; after that, the residual goes to 

equity. 

7 COLLIER ON BANKRUPTCY ¶ 1129.03[4][a][i] (16th ed. rev. 2019); see, e.g., In re Trans Max 

Techs., Inc., 349 B.R. 80, 89 (Bankr. D. Nev. 2006) (“One component of fair and equitable 

treatment is that a plan may not pay a premium to a senior class.”) (valuation of the debtor 

“ensures that no class surviving confirmation will be paid more than in full through the capture of 

value that rightly belongs to the eliminated class”); In re Victory Constr. Co., 42 B.R. 145, 155 

(Bankr. C.D. Cal. 1984) (“It is clear that the drafters intended the court to deny confirmation 

where the plan proposes to pay more than 100 percent to a senior class without the consent of a 

junior.”). 

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Unsurprisingly, the Bondholder Group and TCC have cited no authority – and the PG&E 

Shareholders are aware of none – authorizing a large scale transfer of estate funds in satisfaction 

of purported estate liabilities that have not been adjudicated, estimated, or settled by the debtor or 

another representative of the bankruptcy estate. Whether there is one plan, two plans, or more, 

the Court cannot proceed to confirmation of any plan that provides for such a transfer absent 

either an informed arms-length settlement or judicial resolution through adjudication or 

estimation. The estimation process – conducted by the District Court after fulsome discovery and 

evidentiary proceedings – is necessary to ensure that PG&E is not forced to overfund a wildfire 

claims trust based on “bids” by the Bondholder Group with shareholders’ equity. 

That is precisely why the California Legislature required, as a condition to participation in 

the new statewide wildfire insurance fund, that the Court determine that PG&E’s plan of 

reorganization “provides funding or establishes reserves for, provides for the assumption of, or 

otherwise provides for satisfying any prepetition wildfire claims . . . in the amounts agreed upon 

in . . . any post-insolvency settlement agreements, authorized by the court through an estimation 

process or otherwise allowed by the court.” CAL. PUB. UTIL. CODE § 3292(b)(1)(B) (emphasis 

added). Because it lacks a true settlement or a mechanism for court estimation or allowance, the 

Bondholder/TCC bid cannot satisfy that requirement and imperils PG&E’s ability to participate in 

the new insurance fund. 

The risk of plaintiff overpayment under the Bondholder/TCC construct is no idle concern. 

At the TCC’s urging, the Court set a very “late” bar date (Tr. 129:10) and authorized claimants to 

file proofs of claim without listing or identifying their alleged damages. That bar date has not yet 

occurred and the TCC recently expressed concern that relatively few proofs of claim have been 

filed to date. ECF 3931 at 5 (“only a handful of wildfire claims – under 1,500 – have been filed 

to date”); Tr. 127:3-11 (“MR. PITRE: “[W]e may be coming before you and asking for an 

extension of time for the claims process. I want to see, everybody wants to see how well this 

process is working. But I’m very concerned. I’m very concerned that we are not getting in the 

requisite claims that should come in based on what we believed, in good faith, are the number of 

people . . . who have been impacted.”). As a result, the claims filed to date provide virtually no 

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indication of even the asserted wildfire liabilities, much less the actual allowed amount of those 

liabilities. 

It is clear from the claims filed to date that a scrupulous review process in fact will be 

necessary. According to the official claims agent (Prime Clerk), of the 725 wildfire proofs of 

claim asserting a specified damage amount filed through September 26, 2019, approximately 85 

claims (more than 10%) seek amounts of $2 million or more. The claims include one seeking 

$280 million in damages and another seven seeking $10 million or more. Without further 

information, the Court must assume that at least a sizable number of wildfire proofs of claim will 

be filed in inflated amounts. Moreover, the wildfire claims register already is riddled with 

duplicative claims, which are likely to multiply as the bar date approaches. This is an additional 

reason why estimation will remain a critical part of any confirmation process going forward. 

V. TERMINATION OF EXCLUSIVITY WILL NOT PROMOTE “COMPETITION” 

OR SETTLEMENT 

Many supporters of the Motion claim that exclusivity should be terminated in order to 

promote “competition.” ECF 4049 (UCC) ¶ 5 (“competition may result in the Debtors becoming 

more transparent and cooperative, and will continue to generate improvements in both plans that 

serve to increase the likelihood of a successful outcome in these cases”); ECF 4051 (BOKF) at 2 

(“a competitive, two-plan process”); ECF 4048 (TURN) at 2 (“Competition among plans”); 

ECF 4046 (IBEW) at 2 (“The IBEW continues to support plan competition”). 

But, as explained above, the “competition” presented by the Bondholder/TCC bid – in the 

form of inflated “offers” to pay more than the allowed amount of claims – is not the sort of 

“competition” the Bankruptcy Code seeks to foster. And the suggestion that the true progress in 

this case, in the form of PG&E’s multi-billion dollar settlements with the public entity and 

insurance claimants, is the product of “competition” is simply false. Consider that PG&E 

announced its settlement with the public entities on June 19, 2019. Six days later, on June 25, the 

Bondholder Group filed its first motion seeking to terminate exclusivity. After exclusivity had 

been extended, PG&E announced its settlement with the insurers on September 13, 2019. Six 

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days later, on September 19, the Bondholder Group and TCC filed the Motion seeking yet again 

to terminate exclusivity. 

It is not “competition” or the threat of “competition” driving progress in the case. Rather, 

the Bondholder Group is reacting to legitimate progress by attempting to up the ante in its 

increasingly desperate attempt to take over PG&E. Despite the Bondholder Group’s repeated 

attempts to undermine and terminate exclusivity, with all of the distraction and litigation those 

attempts have engendered, PG&E has made substantial progress. It is reasonable to expect that 

the pace of progress will accelerate once the Court makes clear that PG&E will have a full and 

fair shot at confirming its Plan. 

VI. ATTACKS ON PG&E’S PLAN ARE UNFOUNDED 

In the Motion, the Bondholder Group and TCC attack PG&E’s Plan as “drastically 

underfunded” and “severely undercompensat[ing] key impaired constituencies, most notably the 

wildfire victims and the holders of Funded Debt Claims.” Motion ¶ 14. These contentions are 

easily dispensed. 

First, the Bondholder Group and TCC assert that PG&E “do[es] not have committed 

financing to fund” the Plan. Motion ¶ 15. To the contrary, as PG&E previously announced, it 

has “received aggregate equity commitments in excess of the[] $14 billion target amount from a 

broad array of investors, including current shareholders.” ECF 3980 at 1. PG&E also now has 

obtained commitments for the debt financing component of the Plan. 

Next, the Bondholder Group and TCC assert that “the aggregate caps on wildfire claims 

proposed in the [] Plan are entirely inadequate, and instead of encouraging a consensual 

resolution with the TCC and individual victims, will assuredly encourage these parties to continue 

litigating and seeking a significantly higher estimation for the Debtors’ wildfire liabilities in the 

pending estimation proceeding.” Motion ¶ 17. But that is the point of the estimation proceeding. 

If the parties are unable to reach a settlement, the District Court will determine the appropriate 

aggregate amount of wildfire liabilities for purposes of PG&E’s Plan. The purported concern that 

estimation litigation “will likely extend these cases far beyond the June 30, 2020 deadline,” id., is 

unfounded given that Judge Donato already has indicated that he will be prepared to commence 

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estimation hearings by mid-January, at the latest.9 If Judge Donato’s estimated amount of 

wildfire liabilities exceeds $8.4 billion – the current condition to effectiveness of the Plan – 

PG&E can amend the Plan to accommodate the higher amount if it determines it is appropriate to 

do so. 

The Bondholder Group and TCC also decry the Plan’s treatment of bondholder claims for 

postpetition interest and alleged make-whole premiums. Motion ¶¶ 19-20. The Court has now 

ordered those issues to be litigated well before confirmation (Tr. 137:17-138:6), meaning that 

disputes over bondholder entitlements pose no risk to confirmation of the Plan by June 30, 2020. 

Notably, PG&E’s Plan is drafted to accommodate whatever findings the Court makes in this 

regard. Plan § 4.16(a) (“if it is determined that any holder of a Utility Funded Debt Claim is 

entitled to payment of a make-whole or similar amount or that postpetition interest is payable at a 

rate other than the Federal Judgment Rate, the treatment of such Claim shall be modified in a 

manner to render the Claim Unimpaired”). This hardly is “play[ing] fast and loose . . . with the 

concept of ‘impairment’” as the Bondholder Group and TCC allege. Motion ¶ 19. 

Finally, the Bondholder Group and TCC argue that the Plan “violates the absolute priority 

rule” because it entitles shareholders to a distribution. Motion ¶ 21. But this is just a rehash of 

the arguments respecting estimation of wildfire liabilities and impairment of bondholder claims. 

The Plan is designed to reserve for or satisfy in full every allowed or estimated claim. As shown 

above, holders of those claims (including the Bondholder Group and the TCC’s constituents) 

cannot invoke the absolute priority rule in the face of Plan treatment that will completely satisfy 

every dollar of their allowed claims. 

VII. CONCLUSION 

For all of these reasons, there is no cause to terminate exclusivity. PG&E has made 

tremendous progress towards confirmation and a chapter 11 exit by June 30, 2020, most recently 

through its $11 billion settlement of insurance subrogation claims and negotiation of $14 billion 

in Plan financing backstop commitments. The Bondholder/TCC bid is an attempt to use estate 

 

9

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above, the Bondholder/TCC bid would cause PG&E to lose access to the statewide wildfire 

insurance fund, which is the only reason that the June 30 legislative “deadline” is relevant. 

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value to pay bondholders more than they are owed and enable wildfire plaintiffs to avoid a full 

and fair assessment of PG&E’s wildfire liabilities through the judicial process. Far from 

advancing these cases, it would destroy billions of dollars of value, create significant additional 

litigation, imperil PG&E’s exit, and foreclose its ability to participate in the statewide wildfire 

insurance fund. 

The PG&E Shareholders thus respectfully submit that the Court should deny the Motion 

and give PG&E the opportunity to pay allowed claims in full and maximize value for all 

stakeholders. The PG&E Shareholders support mediation of the existing disputes in the case and 

join PG&E’s request that the Court order mediation at the earliest possible date. 

Dated: October 4, 2019 JONES DAY 

By: /s/ James O. Johnston

James O. Johnston 

Attorneys for PG&E Shareholders 

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