Fee examiner in Puerto Rico debt restructuring warns of rising litigation costs

Some 50 firms have submitted over $400 million for review

SAN JUAN — Fee examiner Brady Williamson has submitted for U.S. District Court approval in Puerto Rico’s bankruptcy-like process up to $52.3 million in legal and service fees for 13 entities from October to January, along with a warning about increasing litigation costs.

The fee examiner also called on the court to approve certain presumptive standards that would help curb the increasing spending on litigation related to the commonwealth’s debt restructuring proceedings. For instance, he said professionals seeking fees or expenses through the Title III fee process under the Puerto Rico Oversight, Management and Economic Stability Act (Promesa) should not be able to submit reimbursement requests for any other firm’s professional firms.

Williamson also said hourly rate increases on fees will continue to be identified as will evaluations of such increases for reasonableness.

The number of professionals subject to review has grown to 50 firms and the total fees and expenses submitted for review has grown beyond $400 million. Puerto Rico has five bankruptcy processes under Title III and must also deal with hundreds of adversary proceedings.

“The professional fee burden on the Commonwealth increases dramatically as litigation proliferates. In addition, the pending Rule 9019 motion to approve the Prepa [Puerto Rico Electric Power Authority] restructuring support agreement, and similar agreements expected from other debtors, raises the potential for significant additional obligations for the professional fees sought by plan supporters,” Williamson wrote in his June 5 motion.

The document contained additional requests for approval of fees, which were deferred to a later date.

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