By Luis Valentin Ortiz
SAN JUAN (Reuters) - Puerto Rico will not obtain a clear picture of how soon it will finish restructuring the bulk of its public debt until the spring, a lawyer for the U.S. commonwealth’s federally appointed fiscal oversight board told a judge on Wednesday.
It is also possible an adjustment plan could be imposed on creditors, a process known as a cramdown, the lawyer said.
Martin Bienenstock, who represents the board tasked with overseeing the island's finances and debt restructuring, said more details on a plan of adjustment for the central government's debt would be known by a "March-April time frame."
Puerto Rico has been in federal court since May 2017 trying to restructure roughly $120 billion in public debt and unfunded pension liabilities under a form of bankruptcy.
So far only about $4 billion of Government Development Bank debt has been restructured through a consensual deal with creditors. Deals are in the works for the island's Sales Tax Financing Corporation, known as COFINA, and the Puerto Rico Electric Power Authority (PREPA).
Bienenstock told U.S. District Court Judge Laura Taylor Swain, who is hearing Puerto Rico's bankruptcy case, that mediation efforts between the island and creditors will resume early next year. The objective is to reach consensus over a plan of adjustment for roughly $13 billion of general obligation debt and almost $50 billion in unfunded pension obligations, he added.
If there is not enough support from creditors, Puerto Rico will have no other option but to cram down its own plan, Bienenstock warned.
Meanwhile, lawyer and consultant fees related to the bankruptcy keep piling up. Professional billing was discussed during Wednesday’s court hearing amid concerns raised by the court-appointed fee examiner such as duplicative work and automatic rate increases.
“I’m concerned with the inflationary component of" rate increases, said Swain, who called for a 2 percent ceiling on automatic rate hikes, similar to one applied in the New York metro area. “There is sacrifice necessary all around.”
To date, the court has approved more than $160 million in fees invoiced during the first year of Puerto Rico’s bankruptcy process.
Next up is a Jan. 16 confirmation hearing on a proposed plan of adjustment for COFINA's roughly $17 billion of debt. Despite opposition from some sectors on the island to the plan, no formal objection has been filed in court to date.