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McKinsey & Co. is in the spotlight as the consulting giant faces a deadline to disclose potential conflicts of interest in advising Puerto Rico’s $120 billion restructuring, Bloomberg Law reported. A new law signed by President Biden on Jan. 20 — the Puerto Rico Recovery Accuracy in Disclosures Act (PRRADA) — requires certain key professionals who worked on the island’s bankruptcy-like case to disclose if they have any previously hidden investments or business connections that could be considered a conflict of interest. The May 16 deadline was set by a federal judge who also recently batted down efforts to limit the scope of disclosure requirements. McKinsey, a market leader in bankruptcy consulting, in particular faces scrutiny as one of the case’s top billers with over $100 million in fees. Revelations that a McKinsey subsidiary held millions in Puerto Rico bonds provided the impetus to Congress’ push to enact PRRADA — a process in which McKinsey also engaged as a lobbyist to shape certain technicalities in the legislation. The events highlight McKinsey’s penchant for confidentiality and multiyear fight against accusations that it intentionally conceals conflicts of interest from federal overseers. Congress and the people of Puerto Rico now wait to see whether the law actually reveals any troubling relationships among the island’s restructuring advisers and some of Wall Street’s biggest names.

A federal appeals court has upheld modifications to teachers’ pensions under Puerto Rico’s debt adjustment plan despite arguments from teachers’ associations that the changes violate commonwealth law, Reuters reported. The U.S. Court of Appeals for the First Circuit on Tuesday said that the federal law that authorized the commonwealth's debt restructuring allowed a federally appointed oversight board to modify the pension obligations. The changes were part of the board's wide-ranging restructuring for Puerto Rico, which was approved by a lower court in January after nearly five years in a bankruptcy-like process known as Title III. The Title III cases were filed to address the commonwealth’s $135 billion in liabilities, which included $55 billion in underfunded pension obligations. An attorney for the teachers associations, Jessica Méndez Colberg of Bufete Emmanuelli, called the decision "unfortunate." "The case reinforces the powers of the oversight board over the government of Puerto Rico and the people of Puerto Rico and highlights, yet again, the consequences of Puerto Rico being a colony of the Unites States," she said. Under the plan, which went into effect in March, government retirees’ existing pension benefits that had already accrued remain intact. But teachers’ associations in Puerto Rico opposed the plan on the grounds that it freezes defined-benefit retirement programs that cover active teachers and judges and replaces them with defined-contribution plans and enrollment in social security. The teachers’ associations appealed Chief U.S. District Judge Laura Taylor Swain’s approval of the plan in February, arguing that the modifications to pension benefits violated existing Puerto Rico laws that created the defined-benefit plans years ago. They asserted that the laws entitling them to pension benefits have not been revoked by the legislature and are still in effect.

Authorities in Puerto Rico said Tuesday that an electronic toll collection system was the target of a cyberattack over the weekend, the latest such incident in recent years, the Associated Press reported. The system, known as AutoExpreso, is run by a private operator called Professional Account Management. It wasn’t immediately clear when the system would be back online and whether any confidential information was stolen. Officials said they would soon provide more details. The incident reported Saturday comes three months after an attack crippled the internet provider, phone system and official online page of Puerto Rico’s Senate. Previously, in 2021, a cyberattack hit the website of a private company that took over the transmission and distribution of electricity in the U.S. territory. Meanwhile, in 2020, an online scam tried to steal more than $4 million from Puerto Rican government agencies, forcing authorities to freeze nearly $3 million. That same year, hackers targeted the database of Puerto Rico’s fire department and demanded $600,000 in an alleged extortion act.

Puerto Rico was slowly recovering from one of the largest power outages in years, after a fire near the Costa Sur power plant late Wednesday knocked out electricity to the entire island, Bloomberg News reported. As of about noon local time Thursday, electricity had been restored to 120,000 of the island’s 1.4 million clients, according to Luma Energy, the private company that manages the power grid. In a press conference, Luma’s Chief Operating Officer Wayne Stensby confirmed the blackout had started at about 8:45 p.m. Wednesday when a high-power circuit breaker near the 230 KW Costa Sur plant caught fire, causing a cascading series of generator shut-offs. But he said it would likely take “weeks” to discover the root cause of the problem. The outage forced island officials to cancel school, shut government offices and suspend some public transportation. While Stensby said crews were scrambling to bring power plants back online and reestablish the bulk transmission system, the company has warned that some customers might be without power until Friday. The outage comes as some politicians have been agitating to rescind the contract with Luma, which took over grid operations from the Puerto Rico Electric Power Authority, or Prepa, in June.

Puerto Rican lawmakers yesterday said that they will ask local regulatory bodies to cancel a landmark deal that put the island’s ailing energy grid into private hands, Bloomberg News reported. Luis Raul Torres, the head of the Puerto Rico House Economic Development and Planning Committee, said that he will be asking agencies to cancel the long-term contract with Luma Energy, saying that the private company is running over budget and failing to deliver promised improvements.

Puerto Rico will formally end its bankruptcy on Tuesday as the federally appointed financial oversight board implements key provisions of the commonwealth’s debt adjustment plan, including the establishment of a pension reserve trust and the exchange of existing bonds for new debt, Reuters reported. An emergence from bankruptcy has been a long time coming for Puerto Rico, which has been in Title III since May 2017. In January, U.S. District Judge Laura Taylor Swain approved a $135 billion debt-adjustment plan. On Tuesday, the financial transactions outlined in that plan, including approximately $10 billion in settlements with creditors, will go into effect, the oversight board said on Monday. That amount includes $7.2 billion for general obligation bondholders, $1.4 billion for public employees' retirement accounts, and $200 million for general unsecured creditors, according to the board. The plan reduces $33 billion in bond debt to $7 billion and cuts overall debt by around 75%. It includes protections that limit how much debt Puerto Rico can take on in the future. The plan also slashes the commonwealth’s annual debt service to around $1.5 billion from $3.9 billion previously. Puerto Rico had not made a payment on its general obligation bond debt since early 2016. But that plan only addresses the commonwealth’s own debt. The case is In re Puerto Rico Electric Power Authority, U.S. District Court, District of Puerto Rico, No. 17-04780.

The federally appointed board overseeing the bankruptcy of Puerto Rico’s electric power authority must submit a new debt adjustment plan quickly after an existing agreement to restructure more than $8 billion in debt was axed by the island’s governor on Tuesday, Reuters reported. U.S. District Judge Laura Taylor Swain instructed the oversight board on Tuesday to develop a plan, or a detailed plan outline, by May 2. Swain indicated that she may consider dismissing the power authority’s entire court-supervised bankruptcy-like process, known as Title III, as well, for failing to show that a feasible plan can be put together in a timely fashion. The power authority, known as PREPA, filed for Title III protection in 2017 alongside the commonwealth itself. Swain approved the commonwealth's separate $135 billion restructuring plan in January. In 2019, PREPA and the board cinched a restructuring deal with a group of PREPA bondholders, including BlackRock Financial Management, that would reduce the utility’s debt by up to 32.5%. It would have required new legislation to issue new bonds that would be backed by new charges to PREPA customers. Governor Pedro Pierluisi's decision to back out of the agreement on Tuesday followed longstanding opposition to such legislation by lawmakers. Pierluisi said on Tuesday that he hopes to work toward a new agreement that, among other things, does not impose charges on private power generation. After the governor terminated the deal, Swain issued an order instructing the board, the government, the bondholders and other interested parties to discuss the possibility of entering mediation. She also stated that if the board is not able to develop a plan or detailed outline of a plan by May 2, it must either submit a detailed schedule to litigate outstanding issues or explain why she shouldn’t dismiss the case outright. The termination of PREPA's restructuring deal "presents the risk of a major setback in progress toward readjustment of PREPA's liabilities," Judge Swain said.

Puerto Rico’s governor axed an $8.3 billion debt-restructuring agreement for the U.S. territory’s bankrupt public power utility, reflecting a lack of political support for raising electricity rates to pay off bondholders, WSJ Pro Bankruptcy reported. Gov. Pedro Pierluisi said yesterday that he would terminate a debt-cutting agreement backed by BlackRock Financial Management Inc., Nuveen Asset Management LLC and other creditors of the bankrupt utility, further delaying a restructuring process that began in 2014. Puerto Rico has restructured most of its public debt, but the power utility remains mired in bankruptcy despite coming to terms with most creditors in 2019. The proposed settlement required approval from the legislature to issue new bonds backed by a customer surcharge, an unpopular proposition in Puerto Rico where power costs far more than in the mainland U.S. Top lawmakers have privately rejected such legislation and sought a renegotiation with bondholders. The oversight board supervising Puerto Rico’s finances supports the governor’s decision to terminate the debt agreement, a board spokesman said Tuesday. Bondholders have been pushing for mediated talks to develop an alternative path forward in the event that legislation stalled.