Legal fees & spending related to restructuring projected at $1.6 billion by 2026
By The Star Staff
Commonwealth restructuring-related expenditures and legal fees paid are projected to be $1.6 billion by 2026, the Financial Oversight and Management Board said in its annual report this week.
The legal fees are projected to be $620 million for the period between fiscal year (FY) 2022 to FY 2025, and comprise all professional fees, including those of the Unsecured Creditors’ Committee, the Retiree Committee, the government, mostly the Puerto Rico Fiscal Agency and Financial Advisory Authority, and the oversight board.
Restructuring-related costs have continued following the Commonwealth Plan of Adjustment’s effective date to support potential litigation and other Title III implementation costs.
“Fees for the period FY2022 to FY2025 were benchmarked against comparable restructurings, which yielded an average professional-fee-to-funded- debt ratio of 2.08% and median ratio of 2.33%, as compared to 2.48% projected for the Commonwealth,” the report said. “In total, for the period from FY2018 to FY2026, the restructuring-related expenditures are projected to be approximately $1.6 billion.”
Uncertainty stemming from the series of recent natural disasters and ongoing COVID-19 pandemic has resulted in an extended restructuring process contributing to the overall estimate, the oversight board said. For some perspective, the City of Detroit’s restructuring (the largest municipal restructuring prior to the commonwealth of Puerto Rico) took 17 months (July 2013 to December 2014), compared to the nearly five years for the commonwealth restructuring, which was extended by extraordinary natural disasters, including two major hurricanes, earthquakes, and the COVID-19 pandemic.
“Throughout, the Oversight Board and its partners in the Commonwealth Government persevered toward the goals of restructuring the Commonwealth’s debts, returning the Commonwealth to fiscal responsibility, and restoring the Commonwealth’s access to the capital markets,” the oversight board said. “Professionals for the Oversight Board, the Government, the Unsecured Creditors’ Committee, the Retiree Committee, and the mediation team have requested approximately $1.21 billion in fees and expenses through the Title III compensation process through July 20, 2022.”
The $1.21 billion figure includes: Oversight board: $660,406,273 (including the Special Claims Committee firms); government: $373,191,545.18; COR/UCC: $160,280,544. The total of those first three categories is $1,193,878,362. To that is added fees for COFINA agent and professionals: $20,700,188.03; and mediation team: $3,038,816.