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PG&E Judge Demands Details on FEMA Fight With Fire Victims

PG&E Judge Demands Details on Potential Wildfire Payout Conflict

(Bloomberg) -- PG&E Corp. needs to explain how it will keep a promise to pay fire victims $13.5 billion in the face of a demand from the Federal Emergency Management Agency for a cut of that money, a bankruptcy judge said Wednesday.

PG&E Judge Demands Details on FEMA Fight With Fire Victims

By pushing PG&E for more information, U.S. Bankruptcy Judge Dennis Montali is wading into a potential fight for cash between government agencies demanding compensation for their fire recovery efforts, and California residents who say PG&E caused the fires that killed their loved ones and burned their homes.

“It should not go unnoticed that January 29, 2020 will mark exactly one year since these Chapter 11 cases were filed,” Montali wrote in his memorandum. It’s a reminder, he said, that a crucial June 30 deadline is less than six months away. If a settlement and the company’s reorganization plan aren’t in place by then, PG&E won’t be eligible for a state insurance fund that would shield it from future catastrophic wildfire losses.

The committee representing wildfire victims has pledged to back PG&E’s bankruptcy-exit proposal in return for $13.5 billion in cash and stock. But federal and state agencies including FEMA have filed billions of dollars worth of claims that may compete for that sum.

Montali ordered PG&E to detail the inner workings of two proposed trust funds designed to compensate victims. Those people need to understand how the company will honor its commitments to them while fulfilling two multibillion-dollar bankruptcy deals with creditors, and still comply with state law, Montali said in a court filing.

The demand for detail comes as PG&E is close to ending its conflict with holders of more than $11 billion of unsecured bonds. Should that settlement materialize, it would mark a major step forward in the bankruptcy case, leaving California Governor Gavin Newsom as the only major player who hasn’t signed onto the company’s reorganization proposal.

More Time

Montali gave PG&E until Friday to tell him if it needs more time to complete a noteholder deal. PG&E asked California utility regulators on Thursday for a two-week delay in filing its bankruptcy testimony as it is engaged in talks with bondholders and the governor’s office that will result in material changes in its reorganization plan.

The company didn’t immediately respond to a request for comment on the judge’s order. The utility previously said it opposes fire claims filed by FEMA.

In his memorandum, which was filed in federal court in San Francisco, Montali said he will not put off a status conference in which the company is supposed to help him set deadlines for the process of approving the bankruptcy plan. That hearing must take place on either Jan. 21, or Jan. 29, Montali wrote.

“The court is unwilling to continue the confirmation status conference beyond January 29, 2020, even if the parties and their counsel need further time to deal with the possible resolution of various disputes,” Montali said.

--With assistance from Mark Chediak.

To contact the reporter on this story: Steven Church in Wilmington, Delaware at schurch3@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Dawn McCarty

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