A wildfire victim trust fund established during the Pacific Gas & Electric bankruptcy proceeding is more than $1 billion short of its intended value due to fluctuations in PG&E's stock price, the fund's trustee told fire victims.

In a Jan. 26 letter, trustee Justice John K. Trotter wrote fire victims informing them of the status of the fund, formed on July 1, 2020. The trust is a legal entity controlled by the bankruptcy plan and U.S. Bankruptcy Judge Dennis Montali (see CEM No. 1593).

"To date, with the stock at its present value, the trust is more than $1 billion short of its intended settlement value. That may change, unfortunately either up or down," Trotter said in the letter.

The fund, originally established at $13.5 billion, was halfway funded through PG&E stock and is designed to hold all the claims from the 2015 Butte Fire, the 2017 North Bay fires—nearly two dozen—and the 2018 Camp Fire. It also receives the proceeds of the settlement terms reached between PG&E and fire victims that were then represented by the tort claimants committee.

The trust was funded with $5.4 billion in cash, but because of "the unreasonably low interest rates," it earned only $3 million in interest in 2020, according to the letter. In January, it received an additional $758 million from PG&E, and another $592 million is expected from the company in January 2022, the letter says. The trust was also funded with about 400 million shares of PG&E stock.

The trust has developed a "careful" sell-down plan to be implemented with professional guidance, the letter says. It is anticipated that about 400,000 individual claims will eventually be submitted for evaluation and payment, according to the letter.

During the bankruptcy proceeding, representatives of fire victims expressed concern about receiving PG&E stock as compensation, saying the stock value could fluctuate. Insurance claim holders are better equipped to receive stock than victims because the insurance claim holders are experienced in managing large portfolios of various securities, victim representatives said (see CEM No. 1570). Holders of insurance claims—about 39 percent of which were held by Boston-based hedge fund Baupost Group—during the proceeding were awarded all cash for their claims, or about $11 billion. 

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