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Puerto Rico ended talks with power revenue bondholders without a negotiated deal on $9 billion in debt, leaving its bankrupt electric utility once again without a clear path out of court protection, WSJ Pro Bankruptcy reported. The mediated talks are expected to expire Friday, people familiar with the matter said. Puerto Rico’s financial oversight board, which steers its financial restructuring, has been in private negotiations with bondholders and other creditors of the Puerto Rico Electric Power Authority, known as Prepa. Puerto Rico has restructured most of its public debt, but the power utility remains in bankruptcy. Litigation between Prepa and its bondholders has been largely paused for months to allow for negotiations. Earlier restructuring agreements covering Prepa have also fallen through since 2017, when it followed other public agencies in Puerto Rico into bankruptcy. The latest round of talks came after Gov. Pedro Pierluisi in March canceled a prior deal covering Prepa and called for a renegotiation, reflecting the political sensitivity of raising electricity rates to repay bondholders. Prepa has turned over management of its energy grid to private operators but still owns a fleet of generators and has liability for bond and pension debts stemming from the decadelong recession that drove Puerto Rico to bankruptcy.

An international banker accused of bribing Puerto Rico’s then-governor to undermine an investigation into his institution turned himself in on Wednesday, almost a month after he was charged in federal court, the Associated Press reported. Julio Herrera Velutini, who is a citizen of Venezuela and Italy and who was thought to be living in the United Kingdom, pleaded not guilty hours after he was arrested in Puerto Rico and was ordered held on a $1 million secured bond. Herrera faces several charges, including bribery and honest services wire fraud — which implies a third party being harmed by the bribery or kickbacks. Federal authorities said the Puerto Rico-based Bancredito International Bank & Trust that Herrera owned came under scrutiny in 2019 when Puerto Rico’s Office of the Commissioner of Financial Institutions began probing suspicious transactions that the bank did not report. Officials alleged that Herrera and a former FBI agent who served as his consultant promised to financially support former Gov. Wanda Vázquez’s 2020 campaign for governor if she dismissed the commissioner and appointed a new one of Herrera’s choosing. Authorities said Vázquez accepted the bribe, demanded the commissioner’s resignation and appointed a former consultant for Herrera’s bank as the new commissioner in May 2020.

Persistent power outages and threats from Puerto Rico’s government prompted a company that operates the island’s transmission and distribution system to announce yesterday that it would dedicate more resources and crews to improve service, the Associated Press reported. The move came just hours after the U.S. territory’s Senate launched a hearing to analyze the government’s contract with Luma Energy — a consortium made up of Calgary, Alberta-based Atco and Quanta Services Inc. of Houston — amid calls to cancel it. Among the top officials demanding that the government revoke the contract is Puerto Rico’s Senate President José Luis Dalmau, of the main opposition party, and Jenniffer González, Puerto Rico’s representative in Congress and a member of the governor’s party, who said power outages have become “our daily bread.” Luma said yesterday that it would increase response brigades by 25% in the next month, remove vegetation covering 20 of the most critical transmission lines, increase inspections of substations — eight of which have caught on fire in the past year — and increase aerial inspections of remote transmission lines. Luma has stressed it is dealing with a power grid whose maintenance the local government neglected for decades and that was razed by Hurricane Maria in September 2017, with reconstruction efforts having started just months ago. Prior to Luma, Puerto Rico’s Electric Power Authority, which is more than $9 billion in debt, managed the grid’s transmission and distribution.

Puerto Rico’s Electric Power Authority and its creditors will keep negotiating through Sept. 9 to strike a potential deal to reduce $9 billion of debt, Bloomberg News reported. A mediation team that manages the debt talks said it needs more time beyond an Aug. 15 deadline for discussions, according to a court filing yesterday. “Based on recent developments, negotiations are continuing to make progress in the mediation process and the mediation team believes it is beneficial to continue the mediation process and extend the mediation termination date (and all related deadlines) to Sept. 9, 2022,” according to the court filing. Last month, U.S. District Court Judge Laura Taylor Swain gave the parties through Aug. 15 to submit a restructuring plan, a term sheet for a deal, a litigation schedule, or a memorandum of law showing why the court shouldn’t dismiss the power utility’s bankruptcy case. She also allowed the mediation team to extend — without court approval — that Aug. 15 deadline through Sept. 9, if it chooses. PREPA, as the utility is known, is the island’s main supplier of electricity and has been in bankruptcy since July 2017. It’s been negotiating with bondholders and insurance companies since 2014 on how to reduce its debt obligations.

Former Puerto Rico Gov. Wanda Vázquez Garced was arrested Thursday and charged with participating in a bribery scheme to finance her 2020 gubernatorial campaign, the Justice Department said, the Wall Street Journal reported. Ms. Vázquez Garced was sworn in as governor in August 2019, in the wake of a scandal involving the former governor and a constitutional crisis over who would succeed him. She had previously served as the territory’s justice secretary and was governor until the start of 2021. The alleged bribery scheme took place from December 2019 through June 2020 and involved bank executives, a former Federal Bureau of Investigation agent and a political consultant, according to the Justice Department. The executives, Julio Martin Herrera Velutini and Frances Diaz, are the owner and president of an international bank that operates in San Juan, the Justice Department said. The bank was the subject of an examination by Puerto Rico’s Office of the Commissioner of Financial Institutions starting in 2019, according to the DOJ. Herrera Velutini and his consultant Mark Rossini, a former FBI special agent, allegedly promised to fund Ms. Vázquez Garced’s campaign as long as she fired the commissioner of the financial regulator and allowed Herrera Velutini to pick the replacement. Vázquez Garced allegedly agreed to the scheme, and the men allegedly paid over $300,000 to political consultants to support her campaign, the Justice Department said. Vázquez Garced then took action to demand the commissioner’s resignation and to appoint a person “personally selected by Herrera Velutini,” according to the DOJ. When Vázquez Garced lost her primary bid in 2020, Herrera Velutini tried to bribe her successor using an intermediary to favorably end the audit of his bank, the Justice Department said. Mr. Herrera Velutini allegedly directed $25,000 to a political-action committee associated with her successor. But the scheme this time was part of an FBI operation, with the intermediary acting under the agency’s direction.

Fees and expenses related to the restructuring of Puerto Rico’s debt — exacerbated by natural disasters and the pandemic — are forecast to reach $1.6 billion by fiscal year 2026, cementing the island’s status as the most expensive municipal bankruptcy in U.S. history, Bloomberg News reported. “Uncertainty stemming from the series of recent natural disasters and the ongoing COVID-19 pandemic has resulted in an extended restructuring process contributing to the overall estimate,” the Puerto Rico Financial Oversight and Management Board, or FOMB, which is shepherding the island through bankruptcy, said in its annual report released late Sunday. Prior to Puerto Rico, Detroit held the title of the largest municipal bankruptcy. According to board figures, Detroit’s bankruptcy process took 17 months and cost $178 million, while Puerto Rico’s lasted nearly five years and was stalled by hurricanes, earthquakes and the global pandemic. While the US commonwealth emerged from bankruptcy earlier this year, litigation fees and costs related to implementing the deal continue, the board said. There’s also more debt to churn through. Puerto Rico’s Electric Power Authority is seeking to reduce $9 billion through its bankruptcy while its Highways and Transportation Authority is restructuring $4 billion. The FOMB’s forecast, which runs from fiscal year 2018 through fiscal year 2026, includes fees and expenses for the Unsecured Creditors’ Committee, the Retiree Committee, the government of Puerto Rico and the Oversight Board. Through July 2022 professional fees and expenses have tallied some $1.2 billion, the board said. Of that, some $660 million belongs to the board and special claims committees, and $373 million will go to the government of Puerto Rico.

A coalition of community groups is asking the judge overseeing Puerto Rico’s historic bankruptcy to withhold additional payments to McKinsey & Co. for its work on the island’s debt restructuring, alleging the management-consulting firm has conflicts of interest that it has failed to fully disclose, Bloomberg News reported. In a letter sent this week to U.S. District Court Judge Laura Taylor Swain, a group called Power 4 Puerto Rico said McKinsey’s final fee application should be denied, citing the court’s prerogative under the Puerto Rico Recovery Accuracy in Disclosures Act of 2021, or PRRADA. As a consultant to the federally appointed Financial Oversight and Management Board, or FOMB, McKinsey has run up a tab of $120 million helping the panel oversee the territory’s finances, according to a Wall Street Journal story last month. At the same time, the company helped the board review high-profile public contracts that ultimately went to McKinsey clients. Puerto Rico’s bankruptcy is the largest ever in the U.S. municipal bond market, and legal and professional fees alone total almost $1 billion. The oversight board “has allowed for the untransparent procurement of advisors and consultants for millions of dollars while alleging the need to cut payroll for public employees,” Power 4 Puerto Rico said in the letter dated July 28. “The least that should be done is to prevent Puerto Rico’s taxpayer dollars from filling the coffers of consultants that have not complied with PRRADA and their fiduciary responsibility as a consultant.”