O’Melveny Worldwide

O’Melveny Secures Historic Restructuring Plan for Puerto Rico

January 24, 2022


NEW YORK—January 24, 2022—O’Melveny’s five-year representation of the Commonwealth of Puerto Rico in its historic US$120 billion restructuring culminated last week when the United States District Court for the District of Puerto Rico entered an order formally confirming a long-sought restructuring plan. 

O’Melveny attorneys served as counsel to three Puerto Rico Governors and the Fiscal Agency and Financial Advisory Authority to achieve this milestone that will benefit the people of Puerto Rico for generations. It is the largest municipal restructuring in US history. 

O’Melveny has represented Puerto Rico during an unprecedented fiscal crisis—the Commonwealth was unable to repay more than US$70 billion of debt and US$50 billion in unfunded pension obligations. At the same time, its government faced a decade-long recession and substantial outmigration, the devastation caused by Hurricanes Irma and Maria in 2017 and earthquakes in 2019, a political crisis in 2018, and the upheaval of the pandemic since 2020. The restructuring plan aligns the Commonwealth’s interests with those of its creditors, retirees, and counterparties.

Throughout the process, the firm worked with the new Financial Oversight Board and Management Board for Puerto Rico, an unelected entity established by Congress to handle many budgeting and financial planning functions that used to belong to Puerto Rico’s elected government.

“Over the last five years, we have worked closely with our clients and the Oversight Board to right-size Puerto Rico’s debt and put the island on sound financial footing—and we’re proud of the results,” said John J. Rapisardi, Chair of O’Melveny’s Global Restructuring Practice. “With the plan confirmed, the government has successfully restructured nearly 90 percent of Puerto Rico’s US$70 billion debt load—reducing US$61 billion of debt to US$22.4 billion, an incredible result for the people of Puerto Rico. The government can now invest in economic development, infrastructure, and social programs, and take other measures to jump-start the economy.”

“The Commonwealth’s plan of adjustment also achieves an important public policy goal of the government: It preserves all accrued pension-benefit payments owed to public employees so that they can enjoy a dignified retirement,” adds Peter Friedman, partner in O’Melveny’s Global Restructuring Practice. “We vigorously pursued this key demand so that public pensioners would not be harmed by the terms of the deal, repeatedly overcoming proposals that would have placed an inordinate financial burden on them.”

In these proceedings, O’Melveny faced an unusual challenge in having to work with the new Financial Oversight Board and Management Board for Puerto Rico, which had been set up by the US Congress. By securing cooperation of the Board, a variety of bondholders groups, and monoline insurers, the firm helped its client achieve tremendous mutual benefits as Puerto Rico’s government enacted legislation that brought its restructuring to a close. 

The cross-department, cross-practice O’Melveny team representing the Governor of Puerto Rico and the Puerto Rico Fiscal Agency and Financial Advisory Authority throughout the five-year negotiation was led by Global Restructuring Chair John Rapisardi and partners Peter Friedman, Maria DiConza, Elizabeth McKeen, William Sushon, Madhu Pocha, and Joe Zujkowski. The transactions demanded the creativity of the firm’s restructuring, finance, capital markets, and tax groups, among others. And conflicts over the interpretation of important policy and Bankruptcy Code provisions were won by O’Melveny litigators in landmark decisions at the District Court, the First Circuit, and the US Supreme Court.

Significant work remains to restructure other public corporations and implement new economic efforts that will strengthen Puerto Rico’s economy, and O’Melveny will continue to assist its client in many of those matters.

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Christopher Rieck
O’Melveny & Myers LLP
+1 212 326 2218