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Puerto Rico’s federally created financial oversight board on Monday defended a new agreement with creditors, saying it will result in an affordable and sustainable debt level and allow the U.S. commonwealth to exit bankruptcy next year, WSJ Pro Bankruptcy reported. The board has come under fire by Puerto Rico’s government and some creditors over pension cuts or its disparate treatment of bondholders. On Sunday, the Financial Oversight and Management Board announced a deal that establishes terms for restructuring more than $18 billion of Puerto Rico’s general obligation (GO) and Public Buildings Authority (PBA) debt. A group of investment firms that signed on to the agreement, which calls for recoveries of about 64 percent for GO bonds and 73 percent for PBA debt, own about $3 billion of what the board calls “vintage” bonds that are not being challenged in court.

Puerto Rico’s federally created financial oversight board said on Sunday it has entered into an agreement with bondholders to provide “a framework for a plan of adjustment” to address $35 billion of claims against the bankrupt U.S. territory, Reuters reported. The agreement establishes terms for the restructuring of more than $18 billion of Puerto Rico’s General Obligation (GO) and Public Buildings Authority (PBA) debt, according to the Financial Oversight and Management Board, which filed a form of bankruptcy for the island in 2017 in an effort to restructure about $120 billion of debt and pension obligations. While the deal has the support of creditors holding about $3 billion in GO and PBA claims, it faces opposition from Puerto Rico’s government. The deal will be part of a debt-adjustment plan the oversight board said it expects to file in federal court within 30 days to address Puerto Rico’s pension and other core government debt. The board, which reached a deal with a retirees committee last week over a more than $50 billion of unfunded pension liability, said bondholders and other parties acknowledge that “Puerto Rico’s difficult financial situation requires a meaningful reduction in its debt burden to a sustainable level.”

Puerto Rico’s federal overseers have agreed to roll back some planned pension cuts under a proposed settlement with retirees, a key step toward wrapping up its more than two-year-old bankruptcy, the Wall Street Journal reported. The official retiree committee appointed in Puerto Rico’s court-supervised bankruptcy said the agreement would “substantially improve” the treatment of retirement benefits for 167,000 pensioners compared with a 30-year framework approved by the U.S. territory’s financial oversight board in May. The deal, which requires court approval, covers Puerto Rico’s $50 billion pension debt, the island’s largest single liability. It also brings Puerto Rico closer to lifting the central government out of the biggest municipal restructuring ever. But it could face opposition from investors worried that shifting additional revenue to pensioners would deepen losses on billions of dollars in bond debt. Government retirees who receive $1,200 a month or less in benefits would be shielded from any reduction under the settlement, up from a $600 threshold previously proposed by the board.

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, Caribbean Business reported. 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.

An electric utility contractor that turned Puerto Rico’s lights back on after Hurricane Maria now is ensnared in contract-steering probes as federal authorities scrutinize billions of dollars in public reconstruction spending across the U.S. territory, WSJ Pro Bankruptcy reported. The Federal Bureau of Investigation and the Department of Homeland Security’s Inspector General are looking into the work of a Mammoth Energy Services Inc. subsidiary in Puerto Rico, examining how the Oklahoma City-based company came to dominate the power-restoration efforts there since 2017. Inspector General investigators separately have probed the company’s rates for linemen, equipment and security under $1.85 billion in contracts with the Puerto Rico Electric Power Authority, the bankrupt public monopoly known as PREPA. Cobra was hired to repair Hurricane Maria’s damage to the power grid and gradually became PREPA’s primary general contractor.

The House yesterday passed a $19.1 billion disaster relief package, finally sending legislation to the White House that had been repeatedly blocked by conservatives over the Memorial Day recess, The Hill reported. The legislation was approved in a 354-58 vote. The House sought to move the bill three times by unanimous consent over the last week, but the vote was blocked by a different conservative Republican each time. GOP Reps. Chip Roy (Texas), Thomas Massie (Ky.) and John Rose (Tenn.) each blocked the unanimous consent vote, arguing that there should be a full debate on the measure. Roy, a former staffer to Sen. Ted Cruz (R-Texas), argued that the spending should be offset by other spending cuts and said he was concerned about adding to the national debt. The measure includes funding for communities hit by various natural disasters across the country. It also includes $900 million in aid to Puerto Rico, funding that was initially opposed by President Trump as being too much. The measure passed the Senate in an 85-8 vote in late May.

Puerto Rico’s financial supervisors plan to refer several municipalities and public corporations to federal law enforcement, accusing them of diverting money earmarked for employees’ retirement as pensioners near a deal on a broader package of benefit cuts, WSJ Pro Bankruptcy reported. The U.S. territory’s oversight board named 10 municipalities and three public corporations it said were holding on to money withheld from workers’ paychecks while failing to remit those funds to defined-contribution retirement accounts. The municipalities, which include the cities of Arecibo, Ponce and Yabucoa, along with three public transit corporations, have failed to remit nearly $4.5 million as of Wednesday, according to documents released by the board. The board also plans to refer the matter to Puerto Rico’s U.S. Attorney’s Office, citing potential violations of a criminal statute on theft and embezzlement from programs receiving taxpayer funding, a board spokesman said.

A high-ranking Federal Emergency Management Agency official who oversaw the reconstruction of Puerto Rico’s electrical grid is under investigation by a government watchdog over allegations she steered work to a utility contractor, WSJ Pro Bankruptcy reported. FEMA Deputy Regional Administrator Ahsha Tribble was relieved of her duties and placed on administrative leave last week amid a continuing probe by the Department of Homeland Security’s Office of Inspector General. Tribble deployed to Puerto Rico after Hurricane Maria struck the U.S. island territory in September 2017 and spent the next year there coordinating FEMA’s response to the storm-ravaged power system, according to her FEMA biography. The DHS Inspector General, which conducts investigations into FEMA, has probed her interactions with Cobra Acquisitions LLC, a grid-construction contractor hired by Puerto Rico’s public electric utility after the hurricane. The investigation has also focused on whether Cobra gained an improper advantage in the contracting process.

The Financial Oversight and Management Board for Puerto Rico filed Sunday claims against holders of Employees Retirement System (ERS) bonds to recover some $392 million in aggregate payments, but said that it would pursue those claims only if the bonds were declared illegal, Caribbean Business reported. The actions intend to recover interest and principal from bondholders who own at least $2.5 million worth of bonds that the board said the ERS was “never authorized” to issue to the public in 2008 because the issuance was not submitted to the island’s legislature. The panel said in a statement it does not intend to pursue litigation until the court determines the bonds are invalid. “The people of Puerto Rico should not have to pay for bonds that were issued illegally,” said David Skeel, a member of the board’s Special Claims Committee. “Nevertheless, no holders of smaller amounts of bonds will have to pay back any principal or interest.” The board also filed complaints against vendors to recover payments by ERS and the Highway & Transportation Authority (HTA) that were “in conflict with the United States Bankruptcy Code and Puerto Rico law,” according the board’s announcing release.