By Tom Hals
WILMINGTON, Del (Reuters) – California wildfire victims and utility PG&E Corp have agreed to waive a Tuesday deadline for securing approval from the state’s governor for the power company’s reorganization plan that contains a $13.5 billion settlement for the victims.
Last week, Governor Gavin Newsom rejected the PG&E reorganization plan and said he expected a new board of directors and stronger finances so it could invest in safer equipment.
Gavin’s decision sent the PG&E’s share price tumbling on Monday.
The embattled company said in a late Monday filing with the San Francisco Bankruptcy Court that victims of wildfires linked to PG&E equipment agreed to remove the deadline from a $13.5 billion settlement, which if missed could have ended the deal.
The company did not say if a new deadline had been set for getting the governor’s approval, although the company needs approval to exit bankruptcy by June 30 to participate in a recently enacted wildfire fund, known as AB 1054.
The settlement agreement with wildfire victims forms the cornerstone of PG&E’s plan to exit bankruptcy. The company entered Chapter 11 protection from creditors in January in the face of more than $30 billion in fire claims.
Newsom has accused the company of putting profits ahead of maintenance of its power lines and of poorly managing the widespread blackouts PG&E used to avoid sparking wildfires during high winds.
PG&E’s stock recovered on Tuesday morning in New York, rising about 4% to $10.08 per share.
Later on Tuesday, the company will ask U.S. Bankruptcy Judge Dennis Montali to approve its agreement with wildfire victims, which will compensate them with cash and stock in the reorganized company.
However, the agreement also binds the wildfire victims to support the company’s reorganization plan. Newsom and the official creditors committee said in filings with the court that Montali should approve the $13.5 billion settlement, but allow the wildfire victims to support a competing plan.
Bondholders have been pushing a reorganization plan that they say is more favorable to wildfire victims. The competing plan would cede control of the company to bondholders and essentially wipe out the investment of current shareholders.
Morningstar analysts said in a Monday note they doubted the bondholder plan would prevail.
“We think Newsom’s objections are mostly political window dressing with little valuation impact, and we continue to believe current shareholders will retain about 20%ownership in PG&E,” the Morningstar analysts wrote.
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