PG&E Victims Faced With Holding Stock for Years, Attorney Says

(Bloomberg) -- Victims of wildfires sparked by PG&E Corp. equipment could be forced to hold their stock compensation for as long as six years, according to an attorney for the victims in the California power company's bankruptcy.

The victims would be restricted on how quickly a $13.5 billion compensation trust could dispose of $6.75 billion in shares under federal securities rules unless a deal can be reached with the utility, Robert Julian, an attorney for the official fire victims committee, said Friday.

Julian said the committee had been restricted from telling the judge about the issue because the group is in mediation over the issue with PG&E. Those talks are expected to continue into next week, he said.

The fire victims committee supports PG&E's reorganization plan as long as victims are granted the same right to sell shares as institutional investors who plan to purchase stock in the reorganized company, Julian said.

The prospect of victims holdings shares for many years while hedge funds having the right to cash out quickly would be “unfair” and “immoral,” Julian said.

PG&E attorney Stephen Karotkin said that the company is hopeful the issue can be resolved through the mediation. Karotkin told U.S. Bankruptcy Judge Dennis Montali that the company will need the victims committee to consent to its plan if it's to execute the financing required for a Chapter 11 exit.

PG&E filed for bankruptcy more than a year ago after its equipment was blamed on deadly wildfires that resulted in $30 billion in liabilities. The company will likely wrap up its confirmation hearing on Monday and asked for Montali to sign off on its plan by next Friday.