Given the evident delay in a new restructuring plan for the Puerto Rico Electric Power Authority, which led to a recent order from Judge Taylor Swain requiring the Fiscal Oversight and Management Board to issue a report on the delayed fiscal plan and a timeline for presenting the amended adjustment plan for PREPA before February 28, 2025, Espacios Abiertos (EA) has undertaken the task of updating its report Your Advisors, Your Money: Lack of Access to the Data That Has Informed the restructuring in Puerto Rico to make transparent the expenditures that the people of Puerto Rico continue to pay for the restructuring of the public debt and other associated costs.
In the previous report, EA quantified the total expenditure on consultants and legal representation for restructuring at just over $1.5 billion, based on reports from the Board’s annual and monthly statements, publications from the federal court, and expenses reported by the Fee Examiner. Currently, this total cost has increased to $2,021,957,705. This increase is observed across all spending categories: from $297,774,055 to $308,111,005 for consultants and legal representation hired outside the Title III process; from $9,780,502.15 to $11,329,555.08 for the Fee Examiner; and from $1,006,718,638 to $1,702,517,144 for consultants hired within the Title III processes in the federal court. This represents an increase of 34.77% from June 18, 2024. Finally, it is worth remembering that in 2016, the Congressional Budget Office estimated that Puerto Rico would not exceed $370 million in legal and financial advisory costs over 10 years.
Distribution of Consulting Expenses Between 2017 and 2024
Evolution of Consulting Expenses in Puerto Rico’s Debt Restructuring Process (2017-2024)
Data obtained from the federal court provides insight into the total expenditures disbursed for litigation related to PROMESA. Among the top five lawsuits, payments to consultants, financial advisors, mediators, and attorneys are identified and distributed as follows: the Government of Puerto Rico’s lawsuit tops the list with $1,109,013,249, followed by the Puerto Rico Electric Power Authority with $438,803,487, COFINA with $62,816,103, the Highways and Transportation Authority with $51,165,166, the Retirement System with $39,758,739, and $960,400 in the case of the Public Buildings Authority. Additionally, $308,111,005 has been disbursed to consultants hired outside the Title III process. These consultants, hired outside the Title III process, are directly contracted by the Fiscal Oversight Board and are paid directly from the Board’s annual budget.
Government Central consulting expenses increased from $870,449,697 to $1,109,013,249, reflecting a 27.41% increase. The Puerto Rico Electric Power Authority (PREPA) saw the highest relative increase, rising from $181,100,752 to $438,803,487, a 142.30% increase. The Highways and Transportation Authority also experienced a rise, going from $41,004,842 to $51,165,166, a 24.78% increase. The Retirement System increased from $36,658,795 to $39,758,739, growing by 8.46%. Meanwhile, COFINA and the Public Buildings Authority have shown minimal variations since those lawsuits concluded.
Distribution of Expenditures in Major Lawsuits Under PROMESA
We also observe changes in the primary consultants during this process. Proskauer Rose LLP tops the list with $355,826,874, McKinsey & Company with $307,318,840, and Ankura Consulting Group, LLC with $180,947,374. Other notable firms include Ernst & Young LLP ($179,445,657), CITI Group Global Markets Inc. ($126,565,344), O’Melveny & Myers ($115,828,094), PJT Partners LP ($115,000,000), Paul Hastings LLP ($86,841,542), Deloitte ($55,497,713), and Alvarez & Marsal North America, LLC ($35,727,382). Compared to the previous report, the firms that reported the largest increase in payments in the most recent period are Ankura Consulting Group, LLC, with an increase of $137.59 million, representing a 317.38% increase in 14 months, followed by Proskauer Rose LLP, which received an additional $131.32 million, reflecting a 58.50% growth in the same period. Other notable increases include CITI Group Global Markets Inc., which rose by $46.50 million (58.08%), Ernst & Young LLP, with $45.62 million (34.09%), and PJT Partners LP, which doubled its payments with an increase of $57.50 million, representing a 100% increase in 14 months.