Hedge funds have billions on the line at PG&E’s bankruptcy hearing — and equity-holder Seth Klarman is pitted against bond-holder Paul Singer

Reuters/ Steve Marcus

The fight is between asset classes — bond-holders versus equity-holders. And the bond-holders are not lacking for star power.

Leading the fight for the bond-holders is Elliott Management, the $38 billion hedge fund founded by Paul Singer. The firm owns $1.4 billion in senior utility notes and is well-known for its prowess in the courtroom.

Other firms include mutual fund managers like PIMCO, which owns $2.1 billion in senior utility notes, and hedge funds like Dan Loeb’s Third Point, Ken Griffin’s Citadel, and Howard Marks’ Oaktree.

Citi, Deutsche, Capital Group, Apollo, Angelo Gordon, Farallon and many others are also a part of the high-powered bondholders group that is hoping to give $14 billion to victims and $11 billion to insurance agencies, and give bondholders a controlling stake in the company when it emerges from bankruptcy.

PG&E accused Elliott and the bondholders of “attempting to manipulate and profit from the chapter 11 process,” when the plan was laid out at the end of September.

“The Elliott proposal would enrich bondholders by paying them interest well in excess of what is required by law, resulting in billions in unnecessary costs being borne by PG&E customers,” PG&E’s statement reads.

The bondholders, though, have the most sympathetic group in the bankruptcy on their side: the wildfire victims. After supporting the equity-holders at first, a group representing the victims now supports the bondholders’ plan, which pays victims billions more than the equityholders’ plan.