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Counsel for creditors seeks $775 an hour, topping those in Conseco Inc. bankruptcy
By Chris O'Malley
IBJ Reporter
When it comes to legal fees in the ATA Holdings Corp. bankruptcy, Indianapolis lawyers look like flannel-suited, Moon-Pie-chomping rubes compared to the New York lawyers representing the unsecured creditors committee.
The proposed $775 an hour for Akin Gump Strauss Hauer & Feld partner Daniel H. Golden compares with the $425 max usually charged by ATA's Indianapolis law firm, Baker & Daniels, for its top guns.
Golden's take, if approved by U.S. District Bankruptcy Court in Indianapolis, is also $25 more an hour than lead attorney James Sprayregen of Kirkland & Ellis was eligible to earn in the much-larger Conseco Inc. bankruptcy reorganization.
And that case was filed in Kirkland's hometown of Chicago, where higher legal fees go with the territory.
"That's outrageously high, but it's consistent with what I've seen in cases in New York. I really wonder, [though], if the U.S. Trustee is going to say that amount is exorbitant,"' said Charles Greer, former head of the creditors' rights practice at Indianapolis law firm Ice Miller and now a consultant to struggling businesses.
A hearing is set for Nov. 30 in bankruptcy court on the proposed compensation of attorneys in the case. If no objections are filed before then, U.S. bankruptcy judge Basil Lorch may simply grant proposed pay for dozens of professionals representing ATA and creditors.
Or, "It's entirely possible that the court will challenge it," said Henry Efroymson, a veteran bankruptcy attorney at Ice Miller. Courts "are certainly not used to seeing that rate in Indianapolis."
Legal fees generally are deducted from the value of the debtor's estate--either from operating cash or proceeds from the liquidation of assets.
Diminished value of an estate from legal fees is always a concern. In ATA's case, hourly fees might not ultimately matter. ATA is one of the largest bankruptcies in Indiana history, with assets of $745.2 million and debt of $940.5 million, according to the Oct. 26 bankruptcy filing by the nation's 10th-largest airline.
"In larger cases, the hourly rate has less of an impact on ultimate distribution available to creditors," Efroymson said.
Even if ATA's legal counsel deemed creditors' legal fees unreasonable, it might be reluctant to protest because it needs the cooperation of a sufficient number of those creditors to go along with its reorganization plan, said Dennis Long, assistant dean for admissions at Indiana University School of Law in Bloomington.
"Why should one want to antagonize the committee? It's a negotiation and persuasion process," Long said.
Akin Gump was hired to look after the financial interests of unsecured creditors including Goodrich Corp., John Hancock Funds and Wells Fargo Bank.
They don't necessarily care if ATA survives; liquidation or sale of the entire airline might best fit their interests.
ATA founder and Chairman George Mikelsons publicly says he hopes his airline will emerge from bankruptcy smaller but profitable. Key to ATA's survival plan is selling its gate rights at Chicago Midway Airport, where ATA said it was losing $10 million a month prior to bankruptcy.
Orlando-based AirTran Airways plans to pay ATA nearly $90 million for Midway gates if other carriers don't top its bid. America West and Southwest Airlines have indicated they intend to bid on part or all of ATA. Bids are due by Dec. 10.
Lynn LoPucki, a law professor at UCLA who developed a formula for figuring analyzing fees in corporate bankruptcies, estimated the ATA case could generate $9 million in professional fees.
IU's Long said it's too early to try to pin a number on ATA's legal fees.
"That's really a very, very difficult estimate to make. There are just so many variables in a bankruptcy," he said. ATA and its experts "I'm sure are constantly figuring how the fees are going to impact how to get back on the road," yet, "if some sort of dispute arises, the feasibility of the reorganization can be threatened," he added.
The Conseco case generated $70 million in fees, while the Trans World Airlines bankruptcy ran up $22 million in fees.
Another factor in how big a bite legal fees take out of ATA depends partly on how long the company is in reorganization, and that's "awfully hard to tell,'' said ATA's top lawyer, James Carr, of Baker & Daniels.
Duration depends largely on what path ATA takes: selling Midway gates, or, selling or liquidating the entire airline. While ATA plans to sell Midway gates, it is working on a parallel plan to prepare ATA to solve its debt problems and emerge from Chapter 11.
"If it's an AirTran-type transaction, we have a pretty good idea of how long it will take to reorganize," Carr said.
Carr, whose client could be throttled financially by a drawn-out legal fight, declined to elaborate on the relatively pricey legal team for unsecured creditors. Unsecured creditors are at the "bottom of the totem pole," he said. "They, presumably, believe their legal counsel can generate value.''
Carr said it could be deceptive to draw conclusions based on hourly rates alone. The New York firm ultimately may be more efficient, he said.
Greer, the former Ice Miller lawyer, has a different take: "New York lawyers are just trying to charge New York prices. There are plenty of competent lawyers in Indianapolis that can handle it."--
http://www.ibj.com/topstories.asp?A=16958
By Chris O'Malley
IBJ Reporter
When it comes to legal fees in the ATA Holdings Corp. bankruptcy, Indianapolis lawyers look like flannel-suited, Moon-Pie-chomping rubes compared to the New York lawyers representing the unsecured creditors committee.
The proposed $775 an hour for Akin Gump Strauss Hauer & Feld partner Daniel H. Golden compares with the $425 max usually charged by ATA's Indianapolis law firm, Baker & Daniels, for its top guns.
Golden's take, if approved by U.S. District Bankruptcy Court in Indianapolis, is also $25 more an hour than lead attorney James Sprayregen of Kirkland & Ellis was eligible to earn in the much-larger Conseco Inc. bankruptcy reorganization.
And that case was filed in Kirkland's hometown of Chicago, where higher legal fees go with the territory.
"That's outrageously high, but it's consistent with what I've seen in cases in New York. I really wonder, [though], if the U.S. Trustee is going to say that amount is exorbitant,"' said Charles Greer, former head of the creditors' rights practice at Indianapolis law firm Ice Miller and now a consultant to struggling businesses.
A hearing is set for Nov. 30 in bankruptcy court on the proposed compensation of attorneys in the case. If no objections are filed before then, U.S. bankruptcy judge Basil Lorch may simply grant proposed pay for dozens of professionals representing ATA and creditors.
Or, "It's entirely possible that the court will challenge it," said Henry Efroymson, a veteran bankruptcy attorney at Ice Miller. Courts "are certainly not used to seeing that rate in Indianapolis."
Legal fees generally are deducted from the value of the debtor's estate--either from operating cash or proceeds from the liquidation of assets.
Diminished value of an estate from legal fees is always a concern. In ATA's case, hourly fees might not ultimately matter. ATA is one of the largest bankruptcies in Indiana history, with assets of $745.2 million and debt of $940.5 million, according to the Oct. 26 bankruptcy filing by the nation's 10th-largest airline.
"In larger cases, the hourly rate has less of an impact on ultimate distribution available to creditors," Efroymson said.
Even if ATA's legal counsel deemed creditors' legal fees unreasonable, it might be reluctant to protest because it needs the cooperation of a sufficient number of those creditors to go along with its reorganization plan, said Dennis Long, assistant dean for admissions at Indiana University School of Law in Bloomington.
"Why should one want to antagonize the committee? It's a negotiation and persuasion process," Long said.
Akin Gump was hired to look after the financial interests of unsecured creditors including Goodrich Corp., John Hancock Funds and Wells Fargo Bank.
They don't necessarily care if ATA survives; liquidation or sale of the entire airline might best fit their interests.
ATA founder and Chairman George Mikelsons publicly says he hopes his airline will emerge from bankruptcy smaller but profitable. Key to ATA's survival plan is selling its gate rights at Chicago Midway Airport, where ATA said it was losing $10 million a month prior to bankruptcy.
Orlando-based AirTran Airways plans to pay ATA nearly $90 million for Midway gates if other carriers don't top its bid. America West and Southwest Airlines have indicated they intend to bid on part or all of ATA. Bids are due by Dec. 10.
Lynn LoPucki, a law professor at UCLA who developed a formula for figuring analyzing fees in corporate bankruptcies, estimated the ATA case could generate $9 million in professional fees.
IU's Long said it's too early to try to pin a number on ATA's legal fees.
"That's really a very, very difficult estimate to make. There are just so many variables in a bankruptcy," he said. ATA and its experts "I'm sure are constantly figuring how the fees are going to impact how to get back on the road," yet, "if some sort of dispute arises, the feasibility of the reorganization can be threatened," he added.
The Conseco case generated $70 million in fees, while the Trans World Airlines bankruptcy ran up $22 million in fees.
Another factor in how big a bite legal fees take out of ATA depends partly on how long the company is in reorganization, and that's "awfully hard to tell,'' said ATA's top lawyer, James Carr, of Baker & Daniels.
Duration depends largely on what path ATA takes: selling Midway gates, or, selling or liquidating the entire airline. While ATA plans to sell Midway gates, it is working on a parallel plan to prepare ATA to solve its debt problems and emerge from Chapter 11.
"If it's an AirTran-type transaction, we have a pretty good idea of how long it will take to reorganize," Carr said.
Carr, whose client could be throttled financially by a drawn-out legal fight, declined to elaborate on the relatively pricey legal team for unsecured creditors. Unsecured creditors are at the "bottom of the totem pole," he said. "They, presumably, believe their legal counsel can generate value.''
Carr said it could be deceptive to draw conclusions based on hourly rates alone. The New York firm ultimately may be more efficient, he said.
Greer, the former Ice Miller lawyer, has a different take: "New York lawyers are just trying to charge New York prices. There are plenty of competent lawyers in Indianapolis that can handle it."--
http://www.ibj.com/topstories.asp?A=16958
TC
