A recent Bloomberg Law story by Daniel Gill, “Proskauer Tops Firms Asking $105M in Puerto Rico Case,” reports that attorneys restructuring Puerto Rico‘s massive public debt have billed about $105.4 million, with Proskauer Rose and O’Melveny & Myers accounting for more than half the total. Proskauer Rose LLP has asked for $35.1 million in fees for its work representing the Financial Oversight & Management Board appointed to act for Puerto Rico and others in the largest municipal debt reorganization in U.S. history, while O’Melveny & Myers LLP has billed $28.3 million. O’Melveny represents the Puerto Rico Fiscal Agency and Financial Advisory Authority.
Other big firms that have billed Puerto Rico include Paul Hastings LLP ($24.9 million) for its work on behalf of unsecured creditors and Greenberg Traurig ($10.2 million) which represents the Puerto Rico Electric Power Authority. Jenner & Block ($6.1 million), represents retired public employees, and Munger, Tolles & Olson is special counsel for the Oversight Board ($800,000).
These are interim fee requests and do not include local counsel they employed or requests for expense reimbursements, which could be substantial given the territory’s remote location. “The amount of legal fees is not surprising given the unique procedural and substantive issues and level of complexity of the case, as well as the amount of money and number of parties involved,” said Howard Weg, a partner with Robins Kaplan LLP in Los Angeles specializing in bankruptcy and insolvency matters.
Although technically not a bankruptcy case—Puerto Rico filed for debt restructuring under a 2016 federal law known as PROMESA—it’s by far the largest municipal debt reorganization in U.S. history. Puerto Rico filed in May 2017 with around $74 billion in debt, plus another $49 billion in unfunded pension liabilities.
For contrast, the previous largest municipal bankruptcy—Detroit’s 2014 case—involved about $18 billion in debt. In that case, the attorneys and financial advisers earned about $178 million. Jones Day, Detroit’s lawyers praised by the judge in the case, billed about $57.9 million.
Professionals hired in the Puerto Rico case must seek court approval of their fees, as is the case with municipal Chapter 9 bankruptcies. Proskauer also represents the utility known as Prepa, the Highway and Transportation Authority, the Sales Tax Financing Corporation known as Cofina, and the Employees Retirement System. Whatever money is ultimately available to pay the island’s creditors will be reduced by the professional fees allowed in the case. So far that amount, including fees requested by financial advisers, is over $228 million.
Last week, a lawyer for the Oversight Board told the federal judge overseeing the cases that the Puerto Rico legislature was planning to tax the lawyers and financial advisers in the case. The lawyers suggested that such a move may necessitate raising billing rates.
The case is In re the Financial Oversight and Management Board for Puerto Rico, D.P.R., 17-03283.