Such claims would be entitled for repayment under a bankruptcy proceeding and could work as a hedge that could offset losses in PG&E’s equity. The claims could also grant the hedge fund a say in how the company ultimately reorganizes itself.
Baupost paid as much as 35 cents on the dollar to purchase $1 billion in claims associated with the 2017 fires, people familiar with the situation told Bloomberg News. The hedge fund has long been a force in the opaque subrogation claims market, where insurers sell the right to file suit to collect damages suffered by policyholders. Insurers are hard-pressed to sell such claims because they take a discount on their face value in exchange for the certainty of being paid upfront.
Other leading hedge funds with a stake in PG&E — including BlueMountain Capital, Orbis Investment Management, Hound Partners (originally founded with a seed investment from Tiger Management), Viking Global, SouthPoint Capital, Citadel and Millennium Management — all declined to comment for this story.
The Journal reported that Viking exited its position at a loss before the drop in the stock intensified this week on bankruptcy concerns. It’s possible others did as well. There’s just no way of knowing until the new filings come out next month.
The crisis at PG&E did not appear any better on Tuesday, when the company announced in a government filing that longtime director Roger Kimmel resigned from the board. The company provided official 15-day advance notice on Monday that it and its wholly owned subsidiary, Pacific Gas and Electric, intend to file petitions to reorganize under Chapter 11 of the U.S. bankruptcy code on or about Jan. 29.
The company has 16 million customers across a 70,000-square-mile service area in Northern and Central California.