AMR's payments to bankruptcy firms top $77 million over four months
BY D.R. STEWART World Staff Writer
Wednesday, October 10, 2012
10/10/12 at 8:14 AM
See previous stories about American Airlines and its Tulsa operations.
Related story: Spinoff up in air: AA still may separate Eagle after bankruptcy.
AMR Corp., the bankrupt parent of American Airlines, is paying nearly $20 million a month in fees and expenses to 34 law firms, consultants and advisers, recently filed bankruptcy documents show.
AMR's legal and consulting fees total $77,676,873 for the period April 1 through July 31, say documents filed in U.S. Bankruptcy Court for the Southern District of New York.
The company's size as well as the complexity of its business - American and regional airline affiliate American Eagle Airlines operate in 250 cities in 40 countries - have made AMR's 11-month bankruptcy restructuring expensive, court documents show.
AMR's consultants include four bankruptcy law firms (Weil Gotshal & Manges LLP, Dewey & LeBoeuf LLP, Harris Finley & Bogle PC and Yetter Coleman LLP), four law firms specializing in labor and bankruptcy law (Ford & Harrison LLP, Groom Law Group, Morgan Lewis & Bockius LLP and Mullin Richter & Hampton LLP), and three aircraft restructuring consultants (AvAirPros, Debevoise & Plimpton LLP and SkyWorks Capital LLC).
AMR also employs two financial advisers (Deloitte Financial Advisory Services LLP and Rothschild Inc.), three management consultants (McKinsey Recovery & Transformation Services U.S. LLC, McKinsey & Co. Inc. United States and McKinsey & Co. Inc. Japan) and a strategic consultant (Boston Consulting Group).
Weil Gotshal & Manges LLP, the New York law firm serving as AMR's lead bankruptcy attorneys, collected $18,387,010 in fees and expenses between April 1 and July 31, court filings show.
Among the services Weil Gotshal provided AMR are strategy sessions and negotiations with the Transport Workers Union, Allied Pilots Association and the Association of Professional Flight Attendants; negotiations with the Pension Benefit Guarantee Corp. and the Labor Subcommittee of the Official Committee of Unsecured Creditors; defending, on behalf of American, antitrust, monopoly, conspiracy and related claims involving global distribution systems in Texas state courts and federal district court; and assisting American in reviewing strategic alternatives to its business plan, court documents show.
"The professional services performed by Weil on behalf of American during the second compensation period required an aggregate expenditure of 30,612.35 recorded hours by Weil's partners, counsel, associates and paraprofessionals," Weil said in its second interim fee application.
Five Weil Gotshal attorneys - Harvey R. Miller, Thomas A. Roberts, Steven A. Newborn, Stephen Karotkin and Stuart J. Goldring - are billing AMR at $1,075 per hour, while two of the firm's lawyers are charging $1,050 an hour, another two are billing at $1,025 per hour and three more at $1,000 an hour, court records say.
But the AMR bill is small change for Weil Gotshal & Manges, which also served as the primary law firm for Lehman Brothers' 2008 bankruptcy, the largest in U.S. history.
The law firm rang up more than $383 billion in legal fees through January for its work on the 3 1/2-year, $639 billion Chapter 11 case of the Wall Street investment bank.
"It was an extremely difficult and enormously time-consuming case," Miller, lead attorney in the Lehman case, told Reuters. "I had to increase my high blood pressure pills."
Miller, also AMR's lead attorney, is not finding much relief in the bankruptcy of the nation's third largest airline.
While small in comparison to Lehman Brothers, AMR's case has been time-consuming as well, Weil Gotshal attorneys said in court documents last month.
"Indeed, during the second compensation period (April 1 through July 31), Weil was required to prepare, review or respond to more than 1,000 motions, notices, applications, objections, briefs, orders and other pleadings in these Chapter 11 cases," the law firm said in its second interim fee application. "As of the (bankruptcy) commencement date, American has approximately 43,000 creditors and equity security holders and were parties to more than 28,000 executory contracts."
Weil has 86 lawyers working on AMR's case, billing the company from $450 to $1,075 per hour. In addition, 47 paralegals, clerks, library staff and other non-legal staff are costing AMR from $80 to $320 per hour for their work on the case, court filings show.
Weil's expenses during the four-month period include about $55,687 per month for travel and transportation, $52,344 a month for court reporting fees, $32,704 per month for copying and duplication expenses, and $10,310 a month for telephone and teleconferencing calls.
"Because of the global scope of American's business, frequent long-distance and international telephone calls were required," Weil said in its fee application.
Washington, D.C.-based law firm Paul Hastings LLP was AMR's second-most-costly consultant - at $8,859,960 - in the April-through-July period, court filings show.
Paul Hastings provided AMR with litigation and antitrust advice in the state and federal cases involving global distribution systems Sabre and Travelport and online travel agency Orbitz, court documents show.
The Washington firm also litigated American's motion to reject its nine collective bargaining agreements with the TWU, the APA and the APFA.
"During the compensation period, Paul Hastings attorneys (also) provided antitrust counseling to American related to its ongoing business operations, including advice related to pricing and distribution issues, joint business arrangements, and advice in connection with potential agreements with third parties," Paul Hastings said in its second interim fee application.
"In addition, Paul Hastings provided advice to American with respect to the antitrust implications of potential mergers or acquisitions."
The New York law firm Debevoise & Plimpton LLP is AMR's aircraft restructuring adviser and the third-most expensive consultant in the case.
Debevoise's $8,457,971 bill for April through July reflects its extensive negotiations related to aircraft financing issues, aircraft leases and mortgage restructuring term sheets on more than 440 aircraft, court filings show.
Eight Debevoise & Plimpton attorneys billed AMR at $1,075 per hour for their services, court documents say.
Top 10 billings
AMR Corp.'s top 10 billings from bankruptcy law firms, consultants and advisers, April 1 through July 31
$18,387,010: Weil Gotshal & Manges LLP, lead bankruptcy attorneys
$8,859,960: Paul Hastings LLP, special labor counsel
$8,457,971: Debevoise & Plimpton LLP, special aircraft attorneys
$7,850,000: Boston Consulting Group, strategic consultants
$5,583,502: Skadden Arps Slate Meagher & Flom LLP, counsel to the Official Committee of Unsecured Creditors
$4,352,327: Deloitte Financial Advisory Services LLP, financial consultants
$2,833,421: Mesirow Financial Consulting LLC, financial advisers to the Official Committee of Unsecured Creditors
$2,651,442: McKinsey Recovery & Transformation Services U.S. LLC, McKinsey & Co. Inc. United States, and McKinsey & Co. Inc. Japan, management consultants
$1,993,904: Groom Law Group, special employee benefits counsel1
$1,842,558: SkyWorks Capital LLC, aircraft restructuring adviser
Source: U.S. Bankruptcy Court for the Southern District of New York
1 Fees from April 1-Aug. 3
AMR consultants' fees
AMR Corp., parent of company of American Airlines, is paying approximately $20 million a month in fees associated with its bankruptcy. Here is a look at consultants' fees, from April 1 to July 31 unless otherwise noted:
|Weil Gotshal & Manges LLP
|Paul Hastings LLP
|Debevoise & Plimpton LLP
|Boston Consulting Group
|Skadden Arps Slate Meagher & Flom LLP
|Deloitte Financial Advisory Services LLP
|Mesirow Financial Consulting LLC
|McKinsey Recovery & Transformation Services U.S. LLC, et al
|1Groom Law Group
|SkyWorks Capital LLC
|Ernst & Young
|Yetter Coleman LLP
|Morgan Lewis & Bockius LLP
|Kelly Hart & Hallman LLP
|2Ford Harrison LLP
|Shepard Mullin Richter & Hampton LLC
|Moelis & Co. LLC
|Togut Segal & Segal LLP
|Haynes and Boone LLP
|Brinks Hofer Gilson & Lione
|Felsberg Pedretti & Mannrich
|5Jenner & Block LLP
|3Bernstein Shur Sawyer & Nelson
|Harris Finley & Bogle PC
|Committee of Unsecured Creditors
|Epiq Bankruptcy Solutions LLC
Source: U.S. Bankruptcy Court for the Southern District of New York
(1) April 1-Aug. 31 | (2) Nov. 29-July 31 | (3) May 1-July 31 | (4) Jan. 23-July 31 | (5) June 8-July 31
Original Print Headline: Payments to firms adding up for AMR
D.R. Stewart 918-581-8451
A portion of the American Airlines maintenance facility is seen at Tulsa International Airport. TOM GILBERT/Tulsa World file