PG&E settlement fund $1 billion short for California wildfire victims, trust’s leader warns
The trust established by PG&E Corp. to pay California wildfire victims is “more than $1 billion short” of what’s needed to pay anticipated claims, the trust’s overseer said.
In a letter to victims filed Tuesday in U.S. Bankruptcy Court, the head of the Fire Victim Trust said the shortfall is the result of a downturn in PG&E’s stock price, which makes up about half of the settlement fund.
“To date, with the stock at its present value, the Trust is more than $1 billion short of its intended settlement value,” wrote retired appeals court Justice John Trotter, the fund’s trustee.
Trotter’s warning doesn’t mean the estimated 80,000 victims won’t get all the money they were promised by PG&E, which exited bankruptcy last June. The trust plans to sell off its 477 million shares of PG&E stock deliberately with the intent of maximizing returns and avoiding any shortfalls.
“We have developed a careful ‘sell-down plan,’” Trotter wrote.
The possibility of stock-price fluctuations undermining the fire victims’ payout has loomed over the PG&E case for months. Under a carefully negotiated plan about that was wrapped up about a year ago, lawyers for fire victims agreed to a $13.5 billion settlement with victims of the Camp Fire, the 2017 wine-country fires and other disasters blamed on PG&E.
Although victims will ultimately be paid completely in cash, they’re receiving their payment from a trust that was funded with $6.75 billion in cash and $6.75 billion in PG&E stock.
The COVID-19 pandemic sent PG&E stock tumbling, however. At one point last spring, wildfire victims’ lawyers sought some sort of protection against stock fluctuations.
“The victims should not bear the economic risk,” victims’ lawyers wrote in a court filing last April. The plan “is not fair, equitable or in good faith.”
Ultimately, the victims agreed to take their chances with the PG&E stock and approved the company’s bankruptcy settlement. At the closing stock price Friday of $11.43 a share, the victims’ stock was worth about $5.5 billion.
That puts the total fund level at about $12.3 billion, or $1.2 billion less than what’s needed to pay the promised $13.5 billion.
Fire victims said they were dismayed to hear of the potential shortfall. “I’m concerned with how this plays out for victims,” said Will Abrams, who lost his Santa Rosa home in the 2017 Tubbs Fire and has been an outspoken critic of the PG&E settlement.
But he added that the trust’s leaders are “good people looking to do good for the victims. I have to, of course, rely on that.”
Cathy Yanni, the trust’s claims administrator, said Friday: “We’re going to work as hard as we possibly can to pay every claimant who has a claim.”
Since November the trust has paid out more than $40 million in “preliminary payments” to victims. Ultimately it will take years to finish the settlement.
This story was originally published January 29, 2021 at 4:18 PM with the headline "PG&E settlement fund $1 billion short for California wildfire victims, trust’s leader warns."