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The hedge funds that left wildfire victims holding the bag on PG&E stock

Billionaire David Tepper, founding father of Appaloosa Administration, led a gaggle of hedge funds that netted at the least $2 billion by shortly dumping PG&E Corp. inventory that helped the embattled utility final yr emerge from chapter, in response to a KQED and the California Newsroom report.

Appaloosa, Anchorage Capital Group and Silver Level Capital had been amongst a gaggle of hedge funds {that a} Northern California chapter court docket awarded “equity backstop” shares of PG&E
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as a part of the ability large’s July 2020 exit from Chapter 11.

However as an alternative of offering a backstop for PG&E shares, or serving to guarantee victims of wildfires sparked by PG&E gear would see the full $6.75 billion payout as promised underneath its turnaround plan, KQED discovered that hedge funds largely cashed out over 12 months.

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KQED tracked public securities filings for almost a dozen hedge funds to achieve its estimates of how a lot PG&E inventory they offered over roughly a yr. The report additionally mentioned that most of the hedge funds ended up paying nothing in any respect for his or her shares as a part of the restructuring.

A name and electronic mail to Tepper at Appaloosa was not instantly returned. Anchorage didn’t instantly reply, and Silver Level couldn’t instantly be reached.

Shares of PG&E have been unstable within the yr since its debt reorganization, hitting a low of $8.29 for the yr in August, after climbing as excessive as $12.82 in November 2020. Shares closed Tuesday at $10.25, in response to FactSet.

The fortunes of Wall Road hedge funds haven’t been the one ones tied up with PG&E’s inventory value. The trustee of PG&E’s estimated $13.5 billion Hearth Sufferer Belief, which covers greater than 70,000 individuals injured by 24 totally different fires, in a September letter warned that the fund may find yourself $2.5 billion brief, partially attributable to downward stress on the utility’s inventory value.

PG&E filed for chapter safety in 2019 after its energy traces sparked a number of mega fires, together with the Camp Hearth, which killed 84 individuals in Northern California and destroyed the city of Paradise.

As a part of its plan to exit Chapter 11, the largest chapter ever for a U.S. utility, the court docket took the weird step of permitting wildfire victims’ compensation to be partially repaid in inventory. That tethered payouts from hurt to PG&E monetary success, a probably precarious association given the frequency and severity of California’s wildfire menace attributable to extreme drought and local weather change.

A report from The Wall Street Journal in August detailed how most victims due funds underneath the PG&E fund had but to obtain any compensation, underscoring lingering considerations that shares might be additional battered if PG&E sparked extra wildfires.

PG&E mentioned it has funded the Hearth Sufferer Belief as specified within the plan of reorganization and settlement agreed to with the tort claimants committee and plaintiffs’ attorneys representing an amazing majority of the person fireplace victims.

“We empathize with the continued hardships many victims face, and stay steadfast in our dedication to make it protected for our prospects and communities. To ship on this dedication, we’re hardening our system, incorporating new applied sciences, and taking different aggressive motion to extend system security,” PG&E mentioned in a press release to MarketWatch.

In September, victims of this yr’s enormous Dixie Fire sued the utility, whose gear has been suspected of beginning the blaze, the second-largest by acreage on report in California.

The recent authorized problem comes after the ability large’s restructuring left the roughly 116-year-old utility within the uncommon place of exiting Chapter 11 with more debt than it had earlier than, partially to pay billions’ price of earlier fire-related claims.

See: PG&E raises fresh debt as it works toward bankruptcy exit

https://www.marketwatch.com/story/the-hedge-funds-that-left-wildfire-victims-holding-the-bag-on-pg-e-stock-11634076168?rss=1&siteid=rss | The hedge funds that left wildfire victims holding the bag on PG&E inventory

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