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Puerto Rico and its main electric utility have spent more than $60 million in legal and advisory fees from firms such as Cleary Gottlieb Steen & Hamilton LLP and Millstein & Co. over the past two years as the governor and public finance officials have sought to restructure the island’s $72 billion debt burden, Bloomberg News reported today. Commonwealth officials plan to unveil a proposal next week expected by analysts to seek a reduction in debt payments that may lead to protracted negotiations with creditors. Unlike Detroit, Puerto Rico localities cannot file for chapter 9 bankruptcy protection, leaving the island without a clear legal framework to resolve its debt crisis. “It makes sense they would need to rely on consultants more than the average issuer in a similar situation,” said Matt Fabian, a partner at Concord, Mass.-based Municipal Market Analytics. “It’s an incredibly complex restructuring, with a lot of different investor groups, a lot of different securities and moving parts.” A Puerto Rico restructuring would be the largest ever in the $3.6 trillion municipal-bond market. 

The law firm leading the charge to recover the funds that Bernard Madoff stole from investors is seeking payment of $40.1 million for four months of work during which an army of lawyers struck deals to recover hundreds of millions of dollars, according to a report yesterday on Dow Jones Daily Bankruptcy Review. Liquidation trustee Irving Picard and his law firm, Baker & Hostetler LLP, on Wednesday filed papers asking a bankruptcy judge to authorize the fees as well as to release $12 million in previously approved fees that haven't yet been paid. Since Mr. Picard was tapped in December 2008 to oversee the liquidation of Mr. Madoff's investment firm — a complex case that has required litigation all over the world — his firm has sought compensation of about $700 million, according to court papers. The fees Baker & Hostetler is seeking cover 97,115.5 hours of work performed, for an average hourly rate of $413.30, between Dec. 1, 2014, and March 31. Mr. Picard and his team said that during that time, they settled 63 lawsuits, allowing them to recover $552.6 million in stolen funds that will be returned to victims of Mr. Madoff's Ponzi scheme. Such "significant results" warrant payment of the fees, Baker & Hostetler attorneys said in the filing. The U.S. Bankruptcy Court in Manhattan will review the request at an Aug. 20 hearing. Mr. Madoff was arrested in December 2008 on charges of running a Ponzi scheme, the biggest of all time. He pleaded guilty in May 2009 and was later sentenced to 150 years in prison. He is serving his sentence at the federal prison in Butner, N.C.

If you missed ABI’s media teleconference yesterday featuring experts discussing the Supreme Court's decision in Baker Botts, LLP v. ASARCO, LLC, you can listen to a replay of the program! Speakers on the teleconference included:

- Former Bankruptcy Judge Judith Fitzgerald (W.D. Pa.; Pittsburgh)(ret.), an attorney at Tucker Arensberg (Pittsburgh)

- Robert J. Keach, a shareholder at Bernstein, Shur, Sawyer & Nelson (Portland, Maine) and co-chair of ABI's Chapter 11 Reform Commission

- Prof. Lawrence Ponoroff, the Samuel M. Fegtly Chair in Commercial Law at, and former Dean of, the University of Arizona James E. Rogers College of Law (Tucson, Ariz.).

- Moderator Gregory W. Werkheiser, a partner in Morris, Nichols, Arsht & Tunnell LLP's Business Reorganization & Restructuring Group (Wilmington, Del.).

Click here to listen to the recording of the teleconference. 

The U.S. Supreme Court ruled yesterday in Baker Botts LLP v. ASARCO LLC, No. 14-103, that bankruptcy attorneys must bear the expense of defending their fees, Reuters reported yesterday. The 6-3 decision stemmed from the 2005 bankruptcy of ASARCO, a mining and smelting company, and a dispute over the fee awarded to its law firm, Baker Botts. Baker Botts was eventually awarded $117 million for its work, which was considered particularly successful because creditors were repaid in full. However, Baker Botts also wanted to be compensated for the $5.2 million it spent battling for the fee. In a 13-page opinion written by Justice Clarence Thomas, the work of Baker Botts was compared to that of a car mechanic. A car mechanic could charge for preparing an itemized bill but "it would be less natural to describe a subsequent court battle over the bill as part of the 'services rendered' to the customer," Thomas wrote. Therefore, Baker Botts, like the car mechanic, should have to pay to defend the bill, Thomas added.

Robert Keach, the court-appointed trustee winding down Montreal Maine & Atlantic Railway Ltd., is suing Wheeling & Lake Erie Railway Co. to claw back millions of dollars paid to a company insider, Dow Jones Daily Bankruptcy Review reported today. Keach is seeking $2.7 million plus interest that went to Wheeling from the 2011 sale of MM&A rail lines to the state of Maine for $21 million. In a suit filed in bankruptcy court on Tuesday, lawyers for Keach said that the $2.7 million went to Wheeling, whose chief executive was Larry R. Parsons. Parsons was also a director of MM&A and Wheeling was one of MM&A's biggest lenders.