As it was dealing with the Public Safety Power Shutoffs, PG&E suffered a huge setback in bankruptcy court today. Federal Bankruptcy Court Judge Dennis Montali ruled that PG&E no longer had the sole right to shape the terms of its reorganization, opening a path in court for backers of a rival proposal.

Losing the exclusive right to put forward restructuring terms could be a massive hit to PG&E’s management and its largest shareholders, which also include hedge funds. The ruling, issued after regular market hours, sent the company’s stock down nearly 30 percent in extended trading.

The creditors’ plan, drawn up by a group of PG&E bondholders that include Elliott Management Corporation (Elliot), would leave the current shareholders with a very small stake in PG&E once it emerges from bankruptcy.

In making his decision, Judge Montali seemed to be encouraging an accord between the parties.

“A dual-track plan course going forward may facilitate negotiations for a global resolution and narrow the issues which are in legitimate dispute.”

Sympathy for the wildfire victims also seemed to play a role in the decision. Montali wrote that, “the parties most deserving of consideration,” had spoken through the group representing the wildfire claimants.

PG&E opposes the bondholders’ plan because, in its view, it allows them to acquire a large stake in the company on the cheap. In a statement, PG&E said:

“We are disappointed that the bankruptcy court has opened the door to consideration of a plan designed to unjustly enrich Elliot and the other ad hoc bondholders, and seize control of PG&E at a substantial discount. PG&E continues to work toward a fair resolution of all remaining individual wildfire claims.”

PG&E’s plan would pay $8.4 billion to wildfire victims, while the bondholders are offering up to $14.5 billion.

The final number, in part, depends on what is found in other courts. A federal district judge will estimate potential wildfire damages, and is set to hear testimony from expert witnesses in January. In addition, a California Superior Court judge has scheduled a January trial to determine whether PG&E’s equipment caused a 2017 blaze in the wine country, known as the Tubbs Fire.

PG&E has said it will pay all claims approved by the court.

Critical in this process is that the bankruptcy must be completed by June of 2020 in order for PG&E to qualify for the state fund being set up to help pay for the catastrophic costs of future wildfires (AB 1054).

As recently as August, Montali had allowed PG&E to retain the exclusive right to plan its exit from bankruptcy. Following that, however, the group representing those with wildfire liability claims formally told the court it backed the terms of the bondholders’ plan and their request to end PG&E’s sole right to propose a reorganization.

Montali wrote yesterday that wildfire claimants had, “…changed their position from the last time the court considered terminating exclusivity, and spoken loudly and clearly that they want their and the senior noteholders’ proposed plan to be considered.”

Under their plan, the bondholders would put $29.2 billion into PG&E and get a 59 percent stake in the company. Nearly 41 percent of the stock in the reorganized PG&E would be put into trusts to help pay insurance claims and the damages submitted by the wildfire victims.