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December 21, 2010 9:30 PM

The Bankruptcy Files: $45 Million More in Holiday Lehman Fees

Posted by Brian Baxter

While talk of the end of the bankruptcy boom is fast spreading, every month seems like holiday season in the Lehman Brothers bankruptcy, the largest in U.S. history. The tab for outside legal advisers and other professionals broke the $1.1 billion barrier by early December.

The latest monthly operating report filed by Lehman states that the bankrupt investment bank incurred $45 million in additional fees through the month of November. Lead debtor's counsel Weil, Gotshal & Manges and creditors' counsel Milbank, Tweed, Hadley & McCloy earned the bulk of that on the legal side, taking in $8.7 million and $7.9 million, respectively. That brings the total amount earned by Weil to $255 million and by Milbank to $83.5 million.

Other big billers in November included Jones Day, special litigation counsel to Lehman. The firm billed $2.5 million that month; its total fees billed on the matter come to $43.3 million. Lehman is paying the firm $11.6 million in fees for four months of litigation between June 1 and September 30, according to Bloomberg.

Also seeking an additional $22.8 million in fees for work done between February 1 and May 31 as trustee for Lehman's broker-dealer unit is Hughes Hubbard & Reed, Bloomberg reports. The firm previously disclosed in court filings that it has been paid for $107.8 million through September 30 for its services.

Below are a handful of recent Chapter 11 filings that crossed our desks, and the legal advisers working on the cases.

MMFX TECHNOLOGIES

The Riverside, Calif.-based steel producer filed for bankruptcy in Santa Ana, Calif., on December 14 after failing to resolve a dispute with lenders. Bloomberg reports that in July MMFX's steel mill in Welland, Ontario, was taken over by lender Fourth Third LLC, which is being represented in the company's bankruptcy case by Winston & Strawn restructuring partners John Fredericks and Justin Rawlins.

Sheppard, Mullin, Richter & Hampton finance and bankruptcy partner Ori Katz is representing MMFX and its affiliates, including metal distributor Fasteel, in their bankruptcy case. The firm has not yet submitted billing statements with the bankruptcy court.

INSIGHT HEALTH SERVICES

Lake Forest, Calif.-based Insight Health Services, which emerged from bankruptcy three years ago, is back in Chapter 11. Bloomberg reports the diagnostic imaging services provider listed assets of more than $140 million against debts of nearly $320 million in its bankruptcy filing in New York.

Kirkland & Ellis restructuring partners James Sprayregen, Ryan Bennett, and Edward Sassower are advising Insight on the Chapter 11 case. Bankruptcy court records reveal that Kirkland was retained in October and that partners from the firm are billing between $550 and $995 per hour. Counsel are billing between $500 and $965 per hour, while associate billing rates range from $320 to $660.

Court filings indicate that Kirkland has invoiced Insight for more than $1.2 million in fees since October. An initial retainer of $184,484 was steadily increased during the last two months and stood at $839,142 in early December. At the time of Insight's bankruptcy filing on December 10, the retainer balance was $56,948.

According to a list of Insight's 50 largest unsecured creditors, the company owes $25,000 each to Davis Wright Tremaine and Drinker Biddle & Reath in Los Angeles.

MOLECULAR INSIGHT PHARMACEUTICALS

Cambridge, Mass.-based cancer treatment developer Molecular Insight Pharmaceuticals filed for bankruptcy in Boston on December 9 after the company's bondholders rejected a $45 million rescue package, Reuters reports.

Kramer Levin Naftalis & Frankel corporate restructuring cochair Kenneth Eckstein and bankruptcy partner Bradley O'Neill are representing Molecular Insight in its bankruptcy case. According to bankruptcy court records, Kramer Levin partners are billing between $645 and $975 per hour, counsel between $685 and $1,025, and associates are billed at rates ranging from $390 to $710.

Kramer Levin has represented Molecular Insight since 2008. A $1 million retainer to serve as bankruptcy counsel was reduced to $765,850 by the debtor, according to court records. The firm was paid $360,191 from Molecular Insight in the 90 days prior to the company's Chapter 11 filing.

Alan Braunstein, a senior partner with Boston's Riemer & Braunstein, is serving as local counsel to the company. Court filings reveal that Braunstein and bankruptcy partners Guy Moss, Jeffrey Ganz, Arthur Cormier, and Kristin McDonough are billing between $375 and $725 per hour, while associate billing rates range between $255 and $425. The firm has been paid a $90,000 retainer and received approximately $80,714 from the debtor in the 90 days prior to its bankruptcy filing.

Foley & Lardner life sciences cochair Gabor Garai is leading a team from the firm serving as special counsel to the debtor. Court records show that the firm, which has represented Molecular Insight on various matters in recent years, has been paid a $575,000 retainer and received $980,849 in the 90 days prior to the company's bankruptcy filing. Partners from the firm are billing between $580 and $830 per hour, special counsel between $500 and $630, and associates at hourly rates ranging from $300 to $455.

Bankruptcy court filings state that the firm has agreed to discount its fees by $52,500 between October and this coming January, agreed to a monthly fee cap of $165,000 between November and March 31 of next year, and slash its fees by 10 percent between next April and December 2011. But there's one important caveat: those fee provisions terminate should an equity investor abandon its own investment agreement with the debtor.

PALM HARBOR HOMES

One of the country’s largest producers of manufactured and prefabricated housing, Addison, Texas-based Palm Harbor Homes filed for bankruptcy in Delaware on November 29. The Dallas Morning News reports that the company and five of its subsidiaries sought Chapter 11 protection to protect assets in anticipation of a sale to Phoenix-based Cavco Industries and Woodland, Calif.-based Fleetwood Homes, which are being advised by Snell & Wilmer and Delaware's Ashby & Geddes.

David Wirt, chair of the bankruptcy and restructuring group at Locke Lord Bissell & Liddell, is advising Palm Harbor along with bankruptcy partner Aaron Smith. Christopher Ward, the managing partner of Polsinelli Shughart’s Wilmington office, is serving as Delaware cocounsel to the debtor.

Bankruptcy court filings by Locke Lord reveal that partners at the firm are billing between $405 and $900 per hour, while associates are cashing in at an hourly clip ranging from $200 to $590. The firm has received $975,000 in payments from Palm Harbor since October 14, when it was paid an initial retainer of $250,000. Polsinelli has been paid a $50,000 retainer for its services, court records show, and partners at the firm are billing between $250 and $475 an hour, while associates are at rates ranging from $175 to $295.

Laura Davis Jones, name partner and Wilmington office managing partner of national bankruptcy boutique Pachulski Stang Ziehl & Jones, is serving as counsel to Palm Harbor’s official committee of unsecured creditors, along with partners Alan Kornfeld, Bradford Sandler, James O’Neill, and Robert Feinstein. A list of Palm Harbor’s 30 largest unsecured creditors shows that the company owes $137,335 to Dallas-based litigation boutique Craddock Davis & Krause.

RHI ENTERTAINMENT

After teetering on the brink of bankruptcy for several months, television producer and distributor RHI Entertainment has finally succumbed to Chapter 11. Bloomberg reports that the company, which owns distribution rights to about 1,000 television titles, listed assets of $524.7 million against liabilities of $824.1 million in its bankruptcy filing in Manhattan earlier this month.

D.J. "Jan" Baker, global insolvency chair at Latham & Watkins, is advising RHI in its bankruptcy case along with insolvency partners Keith Simon and Rosalie Gray and finance counsel Adam Ravin. The firm has previously handled litigation for RHI and represented several members of the company's board of directors.

Bankruptcy court records show that partners from the firm are billing between $675 and $1,090 an hour, counsel between $650 and $930, and associates between $295 and $780. According to a declaration submitted to the court by Baker, since Latham was retained by RHI a year ago, the firm has received nearly $11.3 million in fees from the debtor, not including a retainer of $750,000.

TOWNSENDS INC.

Chicken and egg farm operator Townsends filed for bankruptcy in Delaware on Sunday, listing assets of $131 million against liabilities of $127 million. Townsends claims that an increase in the cost of corn feed coupled with a drop in poultry prices caused it to seek Chapter 11, according to Bloomberg. Rival Pilgrim's Pride filed for bankruptcy two years ago before emerging last year in an $800 million deal that saw three firms snag advisory roles.

Bankruptcy partner Derek Abbott with Delaware firm Morris, Nichols, Arsht & Tunnell is representing Townsends in its Chapter 11 case. McKenna Long & Aldridge is serving as special counsel to the Georgetown, Del.-based poultry processor. Both firms have not yet submitted billing statements to the bankruptcy court.

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What's interesting is that the companies that are filing are from nearly every type of industry. During the first part of the boom, it seemed like mostly realtors and construction companies comprised the bulk of filings. Now it is stretching into all markets and like you said, it doesn't seem to be slowing at all.

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