PG&E's insurance claims payout plan hurting bankruptcy talks – WSJ

An $11B settlement of insurance claims tied to PG&E’s (PCG +4.7%) alleged responsibility for California wildfires is emerging as a barrier to a potentially broader deal to end the utility’s bankruptcy, as wildfire victims seek better treatment by PG&E, WSJ reports.

If approved by the court overseeing PG&E’s bankruptcy, the deal could tie up much of the free cash the company will have as it exits bankruptcy; some of the cash would go directly to insurance carriers, and some would go to hedge funds that bought insurers’ claims against PG&E at discounts.

Meanwhile, wildfire victims would be more likely to receive shares in the restructured company as compensation rather than cash.

According to the report, that prospect is not sitting well with lawyers for fire victims, who already are being pressured to take less than the $54B they believe their clients are owed.

Market participants also are said to question whether PG&E can afford to stick with the cash payout for claims when the utility may be swamped with yet more wildfire damages.