PG&E Stock Is Rising Because a New Wildfire Deal Makes a Bankruptcy Exit More Likely

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PG&E stock rallied sharply after it reached a $13.5 billion deal with the victims of deadly wildfires caused by its equipment. That means the company has cleared one of its biggest hurdles to a timely exit from bankruptcy court.

PG&E Stock Is Rising Because a New Wildfire Deal Makes a Bankruptcy Exit More Likely

PG&E stock rallied sharply after it reached a $13.5 billion deal with the victims of deadly wildfires caused by its equipment. That means the company has cleared one of its biggest hurdles to a timely exit from bankruptcy court.

https://www.wsj.com/articles/pg-e-fire-victim-settlement-threatens-elliott-plan-11575775107 https://www.barrons.com/articles/pg-e-stock-crashes-as-california-fires-keep-spreading-51572279141 https://www.barrons.com/articles/pg-e-jumps-more-than-60-because-someone-else-was-ruled-responsible-for-a-2017-fire-51548363006 https://www.barrons.com/articles/pg-e-stock-double-or-nothing-could-be-either-says-citigroup-51574766901 mailto:alexandra.scaggs@barrons.com PG&E Stock Is Rising Because a New Wildfire Deal Makes a Bankruptcy Exit More Likely By Alexandra Scaggs Bloomberg PG&E shares were up nearly 20% in early trading Monday after reaching a settlement with wildfire victims.

PG&E stock rallied sharply after it reached a $13.5 billion deal with the victims of deadly wildfires caused by its equipment. That means the company has cleared one of its biggest hurdles to a timely exit from bankruptcy court.

The costs from the 2017 and 2018 wildfire seasons—among the most destructive in California history—are what prompted the electric utility and its holding company PG&E (PCG) to file for chapter 11 bankruptcy in the first place.

PG&E initially estimated those costs would add up to at least $30 billion, and the total is now looking closer to $25 billion: It has agreed to pay $11 billion to wildfire insurance claim holders, $1 billion to local governments, and now $13.5 billion to wildfire victims to cover underinsured and uninsured losses, along with damages such as injuries and emotional distress.

Now the company has to update its bankruptcy-exit financing plans to reflect that deal. Judge Dennis Montali, who is overseeing the bankruptcy, and California regulators will need to approve any such restructuring plan. Judge Montali also still needs to decide whether to approve the $11 billion deal between the company and insurance claim holders.

If the company exits bankruptcy by the end of June, it will be able to cover future wildfire losses with a $21 billion state wildfire fund, financed half by Californians and half by the state’s three major electric utilities: PG&E, Edison International (EIX) and Sempra Energy (SRE).

The deal with the wildfire victims is a large step in that direction. Regulators and state officials have said repeatedly that their top priority is to ensure that victims of the wildfires are compensated to make up for their losses.

The $13.5 billion settlement is reportedly half in shares and half in cash, giving wildfire victims a stake in the company’s future financial success.

The agreement follows a protracted fight over the company’s future between its shareholders and a group of bondholders led by Pimco and activist hedge fund Elliott Management. The bondholder plan, if approved, would have rendered the company’s currently outstanding shares nearly worthless.

PG&E shares were up 18% at $11.40 at 8:46 a.m. in premarket action Monday morning. Dow Jones Industrial Average futures are off 33 points, or 0.1%.

Write to Alexandra Scaggs at alexandra.scaggs@barrons.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.