Billionaire David Tepper, founder of Appaloosa Management, led a group of hedge funds that raised at least $ 2 billion by quickly shedding the PG&E Corp. stock that helped the utility out of bankruptcy last year. last, according to a report from KQED and California Newsroom.
Appaloosa, Anchorage Capital Group, and Silver Point Capital were among a group of hedge funds that a Northern California bankruptcy court was granted a “capital endorsement” PG&E shares
as part of the energy giant’s July 2020 exit from Chapter 11.
But rather than providing endorsement for PG & E’s actions, or helping ensure that victims of wildfires set by PG & E’s team see the total payment of $ 6.75 billion As promised in its restructuring plan, KQED found that hedge funds were largely cashed out over 12 months.
KQED public securities records tracked for nearly a dozen hedge funds to reach their estimates of the number of PG&E shares they sold over about a year. The report also said that many of the hedge funds ended up paying nothing for their shares as part of the restructuring.
A call and email to Tepper at Appaloosa were not immediately returned. Anchorage did not immediately respond and Silver Point could not be immediately reached.
PG&E shares have been volatile in the year since its debt shakeup, hitting a low of $ 8.29 for the year in August, after rising to $ 12.82 in November 2020. The shares closed Tuesday at $ 10.25, according to FactSet.
The fortunes of Wall Street hedge funds have not been the only ones related to PG & E’s stock price. PG & E’s estimated $ 13.5 billion Fire Victims Trust trustee, which covers more than 70,000 people injured by 24 different fires, in a September letter he warned that the fund could end up with a deficit of $ 2.5 billion, in part due to downward pressure on the utility’s share price.
PG&E filed for bankruptcy in 2019 after its power lines sparked several mega fires, including the Camp Fire, which killed 84 people in Northern California and destroyed the town of Paradise.
As part of its plan to get out of Chapter 11, the largest bankruptcy ever filed for a U.S. utility company, the court took the unusual step of allowing wildfire victims’ compensation to be partially reimbursed in stocks. . That limited damage payments to PG & E’s financial success, a potentially precarious arrangement given the frequency and severity of California’s wildfire threat from severe drought and climate change.
A report from The Wall Street Journal in August He detailed how most victims owed payments under the PG&E fund had yet to receive any compensation, underscoring persistent concerns that actions could be further affected if PG&E sparked more wildfires.
PG&E said it has funded the Fire Victim Trust as specified in the reorganization plan and settlement agreed with the torts committee and plaintiffs’ attorneys who represent an overwhelming majority of individual fire victims.
“We identify with the ongoing hardships many victims face and stand firm in our commitment to making it safe for our clients and communities. To fulfill this commitment, we are strengthening our system, incorporating new technologies and taking other aggressive actions to increase the security of the system, ”PG&E said in a statement to MarketWatch.
In September, the victims of the huge dixie fire it sued the utility company, whose equipment is suspected of starting the fire, the second largest by area on record in California.
The new legal challenge comes after the energy giant’s restructuring left the roughly 116-year-old utility in the unusual position of coming out of Chapter 11 with more debt than before, in part to pay off billions of past fire-related claims.