Commonwealth’s legal fees for bankruptcy process surpass $800 million
By The Star Staff
Puerto Rico’s legal fees for its bankruptcy proceedings under the federal Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) surpassed the $800 million mark as of Oct. 21, Fee Examiner Brady Williamson informed the court in a report this week.
The billing for legal fees has continued to grow even though the island government is negotiating new debt agreements for the central government and for the Puerto Rico Electric Power Authority (PREPA) that take into account the impact of the COVID-19 pandemic on their finances. The Financial Oversight and Management Board months ago requested an adjournment of the evaluation of the debt deals that have been negotiated so far. However, the entire amount is not outstanding as the government has already made payments.
“Notwithstanding the disruption wrought by the continuing pandemic, natural disasters, and political change, these proceedings have continued, and professionals have continued to file fee applications and the Fee Examiner has continued the review and reporting process without interruption,” Williamson said. “The quantitative effects of COVID-19 on professional compensation remain difficult to assess.”
The full brunt of the pandemic -- both on the island and on the mainland -- was felt neither uniformly nor universally during the first part of the compensation period, he said. Ongoing controversy surrounding PREPA and its transformation also continues to occupy a central role in the commonwealth’s overall reorganization.
“The Court’s stay orders and the mediation process affected some professional firms more than others,” Williamson said. “For some firms, moreover, the pandemic and other challenges visited on the island have meant even more effort and time in trying to respond to dramatic economic changes, changing fiscal plans and projections, and federal support. Many professionals working on these cases, both on and off the island, including professionals for the Fee Examiner and the Fee Examiner, continue to work from home. In several instances, this has caused delays in the submission of data or other supporting documentation. To that extent, the Fee Examiner recommends the deferral of a number of applications to December 9, 2020 or a subsequent omnibus hearing date.”
Williamson made his remarks in a report addressing compensation applications for the period from Feb. 1, 2020 through May 31, 2020 and prior interim fee periods. He recommended the court’s approval of 34 negotiated, adjusted, and uncontested applications for professional compensation pursuant to PROMESA.
“Professionals have requested about $808 million in fees and expenses through the Title III compensation process as of October 21, 2020,” he said.
However, not all of the amount is outstanding.
A number of flat fee financial professionals continue to submit applications, including McKinsey & Co., which continues in its role as strategic consultant to the oversight board, Williamson said.
The report recommended for court approval a series of McKinsey’s interim fee applications for services performed in the last three periods from June 1, 2019 to May 31, 2020, totaling $28.8 million of the some $42.7 million in total fees recommended for court approval in the document. Notably, McKinsey has begun providing modest discounts to its fees, apparently at the request of the oversight board, Williamson said.