A key financial advisor in Detroit’s bankruptcy is gaining a central role in Puerto Rico’s bankruptcy.
Since Aug. 4 a team from Phoenix Management Services LLC has been serving as financial advisor to the mediators in Puerto Rico’s Title III bankruptcy case. The Puerto Rico Oversight Board has asked Title III judge Laura Taylor Swain to approve paying Phoenix retroactively to Aug. 4. The team is being led by Martha Kopacz, a Phoenix managing director.
Kopacz led a Phoenix team in reviewing Detroit’s bankruptcy plan.
In late October 2014 she told U.S. Bankruptcy Judge Steven Rhodes that the city’s plan was feasible but that the city could find itself “on the edge” when it came to servicing debt and managing operations. On Nov. 7, 2014 Rhodes accepted the bankruptcy plan and on Dec. 11, 2014 Detroit exited bankruptcy protection.
On May 3 of this year the board started the Title III process for Puerto Rico’s general obligation debt. On July 23 Swain ordered the appointment of a mediation team to facilitate confidential settlement negotiations.
According to papers filed Sunday in the Title III case, at the mediation group’s first meeting on July 12 the mediators asked if they should hire a financial adviser at the debtors’ expense.
“No creditor objected; in fact, many creditors affirmatively stated their desire that the mediation team have a financial advisor to assist it in the Title III cases,” according to the board’s lawyers.
After receiving several proposals and interviewing a few firms, the mediation team selected Phoenix as its financial advisor. The team “selected Phoenix because of its wealth of experience in providing financial advisory services in restructurings and reorganizations across the United States and because it has exemplary qualifications to perform the services … required by the mediation team.”
The board is asking the judge to pay Phoenix for its work retroactively to Aug. 4. The board says it wants the judge to approve the hiring of Phoenix on noon on Aug. 21.
The board lawyers say Phoenix will assist the mediators with: understanding the fiscal plan based on all available data, understanding the considerations that may be offered in adjustment plans, and identifying capital structures and debt restructuring techniques that may be useful in mediating plans of adjustment.
Additionally, the board’s lawyers want Phoenix to shed light on assumptions and methodologies, factual inconsistencies, and incomplete information and to share insights with the mediators and participants.
Title III cases for the Puerto Rico Sales Tax Financing Corp. (COFINA), Highways and Transportation Authority, and Employees Retirement System have since been filed. Swain is jointly administering them with the GO case. A separate Title III case has been filed for the Puerto Rico Electric Power Authority.
The board wants Phoenix to help the mediators in all these case.
The board is asking the court approve Phoenix’s request for the following hourly compensation: senior managing directors – $495-$695; senior advisors – $400-$650; managing directors – $395-$525; directors and senior directors – $320-$450; vice presidents, associates and analysts – $150-$350; and support staff – $75-$150.
For nonworking travel time Phoenix will charge at 50%.
“Phoenix is a 30-year-old boutique financial advisory firm, providing interim management, turnaround consulting, and investment banking services to a broad range of enterprises and their stakeholders completing over 1,300 engagements,” according the board’s lawyers.
The judges on the mediation team are serving at no cost to the debtors or the board. They are also using their clerks at no cost to the board. “Thus, the reasonable fees and expenses associated with Phoenix’s retention are the only costs currently expected to be borne by the debtors in connection with the mediation team’s services in the Title III cases,” the lawyers said.