STOCK MARKET WATCH -- Wednesday, 31 December 2014

[Demeter]

28. And this is AFTER some of the vultures--I mean, lawyers--forgave part of the bill

Officials: Bankruptcy bills mostly paid; mediation unlikely to reduce balance

http://www.crainsdetroit.com/article/20141123/NEWS/311239963/officials-bankruptcy-bills-mostly-paid-mediation-unlikely-to-reduce

About 80 percent of the $146 million in professional services fees that a Detroit bankruptcy court mediator will review next week are already paid, and officials said odds are long that mediation will reduce the balance very much.

Detroit Mayor Mike Duggan has voiced concern that legal and other professional fees since the city filed for bankruptcy have climbed by millions in recent months and could climb tens of millions more. But other officials and attorneys said that is unlikely, since most major disputes are resolved.

The tally did climb another $18 million earlier this month with a new, but expected, charge from investment banking consultant Miller Buckfire & Co. for a restructuring fee negotiated into an amended contract the firm signed with the city in June.

Miller Buckfire, which aided Detroit on financial restructuring matters, including lining up exit financing from Barclays plc and bonds to refinance some previous debt, has received just over $6 million on $24.4 billion billed to date. That puts its total fees second only to the $51.8 million that Jones Day has billed as lead counsel in the case, according to records from the office of Detroit Emergency Manager Kevyn Orr.

Miller Buckfire is unusual in having a mostly unpaid balance. The remaining more than 25 law firms, restructuring advisers, mediators and other professional services firms have about $13 million unpaid before mediation with Chief U.S. District Judge Gerald Rosen.

Kenneth Buckfire, president and managing partner of New York City-based Miller Buckfire, declined to comment last week about his fees, citing the mediation. Alexis Wiley, chief of staff for Duggan, also said the mayor's office would not discuss the Miller Buckfire fee or any other specific charges before the mediation Dec. 3-4.

"The mayor has expressed his deep concern over the significant increase (in recent months) in the amount of fees that have been charged to the city. He wants to be sure the city is being charged a fair rate," director of communications John Roach said in a statement. "Every dollar spent on a consultant is one that can't be used for a city service."

Experts familiar with the Detroit case told Crain's that professional services firms rarely if ever have to return fees already paid to them in the course of bankruptcy, but U.S. Bankruptcy Judge Steven Rhodes has the authority to order that if any firm's fees prove unreasonable or excessive.

About $115 million in fees have been paid to various firms since Detroit filed for bankruptcy in July 2013, including $111.7 million to firms that are subject to a quarterly review by fee examiner Shaw Fishman Glantz & Towbin LLC. The last such review, submitted Nov. 5, covers the quarter ending June 30.

Fee examiner Robert Fishman has been reviewing those fees in quarterly reports since a court order last fall put more than 15 firms' fees under review and subject to a 15 percent holdback.

Those holdback funds are released for payment after the examiner review unless any balances are disputed, so the unpaid balances today are either bills so recent they haven't received even a partial payment yet, or holdbacks for the months since June that Fishman isn't finished reviewing.

Orr spokesman Bill Nowling said any adjustment to professional fees in mediation would likely come in those two areas, rather than by refunding past payments the companies have already receivved.

"Those are probably the two factors of what you can go back to and try to adjust down," he said. "These are all professionals, who follow procedures not just for this case but in all bankruptcies.

"The holdback is under an assumption that, if a discrepancy comes up, it isn't going to fall in the order of 80 percent, it's going to be modest. This mechanism was created so you don't get $4 million of legitimate bills held up over a (single) $50,000 questionable one."

After Miller Buckfire's $18.7 million, the largest unpaid balance as of mid-November was $5.7 million still owed on Jones Day's $51.8 million in legal bills to date. Then came $1.9 million to Ernst & Young LLP, followed by $1.6 million owed to Kurtzman Carson Consultants and $1.3 million out of $15.3 million in legal bills for Dentons, the law firm representing the committee of retired city employees.

Lazard Ltd., the investment banking consultant to the retiree committee, also had an unpaid balance of about $230,000 of $2.4 million, but it was not immediately clear if the firm has submitted its own final restructuring fee as Miller Buckfire has done...