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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 

-andWILLKIE FARR & GALLAGHER LLP 

Matthew A. Feldman (pro hac vice) 

Joseph G. Minias (pro hac vice) 

Benjamin P. McCallen (pro hac vice) 

787 Seventh Avenue 

New York, NY 10019 

Telephone: (212) 728-8000 

Facsimile: (212) 728-8111 

Email: mfeldman@willkie.com 

 jminias@willkie.com 

 bmccallen@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) 

Bankr. Case No. 19-30088 (DM) 

Chapter 11 

(Jointly Administered) 

DECLARATION OF HOMER 

PARKHILL IN SUPPORT OF THE AD 

HOC GROUP OF SUBROGATION 

CLAIM HOLDERS’ STATEMENT IN 

SUPPORT OF THE SUBROGTION 

SETTLEMENT AND RSA MOTION 

[DKT NO. 3992] 

Date: October 23, 2019 

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

Place: United States Bankruptcy Court 

 Courtroom 17, 16th Floor 

 San Francisco, CA 94102 

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HOMER PARKHILL, pursuant to 28 U.S.C. § 1746, hereby declares under penalty 

of perjury as follows: 

1. I am the co-head of the North American restructuring practice of Rothschild 

& Co US Inc. (“Rothschild & Co”). 

2. The Ad Hoc Group of Subrogation Claim Holders (the “Ad Hoc Subrogation 

Group”) retained Rothschild & Co to serve as its financial advisor and investment banker in 

connection with these Chapter 11 Cases. I am the lead senior banker for Rothschild & Co’s Ad Hoc 

Subrogation Group engagement and have testified as a witness pursuant to Federal Rule of Civil 

Procedure 30(b)(6) on behalf of the Ad Hoc Subrogation Group. 

3. I am familiar with the Debtors’ Motion Pursuant to 11 U.S.C. §§ 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 [Dkt. No. 3992] (the 

“Subrogation Settlement and RSA Motion”). I submit this Declaration in support of the Ad Hoc 

Subrogation Group’s Statement in Support of the Subrogation Settlement and RSA Motion. 

4. I, along with others on my team at Rothschild & Co and the Ad Hoc 

Subrogation Group’s legal counsel at Willkie Farr & Gallagher LLP (“Willkie”), represented the Ad 

Hoc Subrogation Group in negotiating a resolution of its members’ subrogation claims against the 

Debtors. During these negotiations, the Debtors were represented by their legal counsel at Cravath, 

Swaine & Moore LLP (“Cravath”) and Weil, Gotshal & Manges LLP (“Weil”), as well their 

financial advisor, Lazard Ltd. (“Lazard”). 

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5. Negotiations between the Ad Hoc Subrogation Group and the Debtors 

ultimately culminated in an agreement to settle the Ad Hoc Subrogation Group’s members’ claims 

for $11 billion, which the Debtors announced on September 13, 2019 (the “Subrogation 

Settlement”). 

6. The process of negotiating the Subrogation Settlement was protracted, 

conducted at arm’s length, extended over several months, and proceeded by fits and starts. On 

several occasions between May 2019 and September 2019, the Debtors and the Ad Hoc Subrogation 

Group (through their respective professionals) met—either in person or by telephone—to exchange 

their competing views of the legal and factual merits of the Ad Hoc Subrogation Group’s claims, 

and they traded several offers and counter-offers before bridging their differences and agreeing to 

the economic terms reflected in the Subrogation Settlement. During these negotiations and in 

connection with papering the settlement with the Debtors, the Ad Hoc Subrogation Group also 

provided the Debtors with information concerning the amount of its members’ subrogation claims 

for the Debtors to review and subject to due diligence. 

7. In May 2019, the Debtors offered to resolve the Ad Hoc Subrogation Group’s 

members’ claims for $4.5 billion, indicating that this was an initial offer intended to jumpstart 

discussions. On May 21, 2019, in connection with this offer, the Debtors’ counsel (Kevin Orsini of 

Cravath) gave a telephonic presentation to professionals representing the Ad Hoc Subrogation 

Group’s members, in which he explained the Debtors’ position with respect to the legal and factual 

merits of the subrogation claims asserted against them. 

8. The Ad Hoc Subrogation Group rejected the Debtors’ $4.5 billion settlement 

offer and, in June 2019, made a counter-offer of $15.8 billion. In connection with this counter-offer, 

counsel to the Ad Hoc Subrogation Group sent a detailed letter to Debtors’ counsel outlining the 

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legal and factual bases for the Ad Hoc Subrogation Group’s counter-offer. The Debtors quickly 

rejected the Ad Hoc Subrogation Group’s $15.8 billion counter-offer, and discussions between the 

Ad Hoc Subrogation Group and the Debtors stalled for several weeks. 

9. On July 1, 2019, the Ad Hoc Subrogation Group provided information to the 

Debtors demonstrating that the total amount of its members’ subrogation claims (at that time) was 

approximately $18.5 billion. This calculation excluded subrogation claims corresponding to 

insurance claims that the Ad Hoc Subrogation Group’s members expected would be paid but, at the 

time, had not been reported as either Paid Claims or Reserve Claims—which are known as incurred 

but not reported (“IBNR”) claims. Attached hereto as Exhibit A is a true and correct copy of an email from Matthew Feldman of Willkie (counsel to the Ad Hoc Subrogation Group) to Kevin Orsini 

of Cravath, Stephen Karotkin of Weil, and Ken Ziman of Lazard (the Debtors’ legal and financial 

advisors), dated July 1, 2019 (AHSG_PGE-00000098), setting forth this analysis. 

10. The analysis set forth in Exhibit A broke out the Ad Hoc Subrogation Group 

members’ claims, as of July 1, 2019, by wildfire and claim status. It demonstrated that: 

• With respect to the 2017 North Bay Fires (other than the Tubbs Fire), the Ad 

Hoc Subrogation Group’s members held approximately $2.277 billion in 

subrogation claims corresponding to paid insurance claims (“Paid Claims”) 

and another $439 million in subrogation claims corresponding to its 

members’ open insurance reserves (“Reserve Claims”), resulting in 

approximately $2.716 billion in subrogation claims arising from the North 

Bay Fires (other than the Tubbs Fire); 

• With respect to the Tubbs Fire, the Ad Hoc Subrogation Group’s members 

held approximately $6.227 billion in Paid Claims and another $1.217 billion 

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in Reserve Claims, totaling approximately $7.444 billion (excluding IBNR 

claims); and 

• With respect to the 2018 Camp Fire, the Ad Hoc Subrogation Group’s 

members held approximately $5.422 billion in Paid Claims and another 

$1.955 billion in Reserve Claims, totaling approximately $7.377 billion 

(excluding IBNR claims). 

11. On July 23, 2019, the Ad Hoc Subrogation Group filed a motion to terminate 

the Debtors’ exclusivity to enable the Ad Hoc Subrogation Group to file its own Chapter 11 plan of 

reorganization (see Dkt. No. 3147). The Ad Hoc Subrogation Group’s proposed plan term sheet 

contemplated that the Ad Hoc Subrogation Group members’ claims would be resolved for $15.8 

billion. The Debtors opposed the Ad Hoc Subrogation Group’s motion, and the Court denied it on 

August 16, 2019 (see Dkt. No. 3568). 

12. The Ad Hoc Subrogation Group and the Debtors continued their on-again, 

off-again discussions through the remainder of July and August, and into September. During this 

period, the Ad Hoc Subrogation Group provided the Debtors with updated information concerning 

the amount of its members’ subrogation claims, broken out by wildfire and claim status. On July 

30, 2019, the Ad Hoc Subrogation Group provided the Debtors with an updated analysis 

demonstrating that (as of that date) the Ad Hoc Subrogation Group’s members held a total of over 

$19.5 billion in subrogation claims against the Debtors and that this total increased to over $22 

billion once related claims for interest and attorneys’ fees were included. These updated numbers 

reflected additional Paid Claims, as well as the insurers’ revised estimates on Reserve Claims. The 

Reserve Claims are a GAAP metric, which require a best estimate. Attached hereto as Exhibit B is 

a true and correct copy of an e-mail from Thomas McCarthy of Rothschild & Co to the Debtors’ 

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professionals and others, dated July 30, 2019 (AHSG_PGE-00000394-95), attaching the analysis 

prepared by the Ad Hoc Subrogation Group. 

13. The analysis set forth in Exhibit B demonstrated that (as of July 30, 2019): 

• the Ad Hoc Subrogation Group’s members held a total of over $3 billion in 

subrogation claims arising from the North Bay Fires (other than the Tubbs 

Fire), comprised of approximately $2.411 billion in Paid Claims, $464 million 

in Reserve Claims, and $144 million in IBNR claims; 

• the Ad Hoc Subrogation Group’s members held a total of over $8 billion in 

subrogation claims arising from the Tubbs Fire, comprised of approximately 

$6.555 billion in Paid Claims, $1.129 billion in Reserve Claims, and $384 

million in IBNR claims; and 

• the Ad Hoc Subrogation Group’s members held a total of nearly $8.5 billion 

in subrogation claims arising from the Camp Fire, comprised of 

approximately $5.890 billion in Paid Claims, $1.824 billion in Reserve 

Claims, and $771 million in IBNR claims. 

14. In September 2019, as the Ad Hoc Subrogation Group and the Debtors were 

finalizing the Subrogation Settlement, the Ad Hoc Subrogation Group provided the Debtors with 

detailed information concerning the Ad Hoc Subrogation Group’s members’ subrogation claims. 

15. For example, the Ad Hoc Subrogation Group provided the Debtors with a 

spreadsheet itemizing the Ad Hoc Subrogation Group’s members’ Paid and Reserve Claims, and a 

memorandum aggregating all of the Ad Hoc Subrogation Group’s members’ Paid Claims, Reserve 

Claims, and IBNR claims accompanied the spreadsheet. These materials provided the Debtors with 

detailed quantitative and qualitative data concerning Paid Claims and Reserve Claims broken out by 

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individual fire. They also demonstrate that the Ad Hoc Subrogation Group members’ damages 

claims against the Debtors (including Claims, Reserve Claims, and IBNR claims, but excluding 

interest or attorneys’ fees) total approximately $20.679 billion. 

16. In addition to providing the Debtors with this memorandum, the Ad Hoc 

Subrogation Group provided the Debtors with a representative sample of 120 complete insurance 

claims files to enable the Debtors to conduct due diligence of the Ad Hoc Subrogation Group 

members’ claims. 

17. In view of the total value of the Ad Hoc Subrogation Group’s subrogation 

claims as detailed above in this Declaration, I believe the $11 billion Subrogation Settlement 

represents a significant compromise by the Ad Hoc Subrogation Group. 

Dated: October 21, 2019 

 /s/ Homer Parkhill 

Homer Parkhill 

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Exhibit A 

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Exhibit B 

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