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Investment bank Lazard, which advised retiree negotiators during Detroit's bankruptcy, slashed about $3 million off its bill, the Detroit Free Press reported today. The firm's revelation is the first in what is expected to be a series of statements by law firms, financial advisers and consultants about how much they cut their fees in Detroit's historic restructuring. Bankruptcy Judge Steven Rhodes, who retains the power to decide whether the fees were reasonable, had invited bankruptcy professionals to consider revealing how much they reduced their fees before he makes a decision. Collectively, advisers to the city and the retiree committee charged about $170 million in the bankruptcy, which ended in December and will allow Detroit to slash $7 billion in liabilities and reinvest $1.7 billion over 10 years in services. Lazard — which helped negotiate a settlement on pension cuts and retiree health care benefits on behalf of the U.S. government-appointed Official Committee of Retirees — had accumulated a bill of $8.44 million for its work on the case. But it's only charging the city $5.56 million after agreeing to a 37% cut in mediation sessions overseen by U.S. District Chief Judge Gerald Rosen, the chief mediator in the bankruptcy. The city agreed at the beginning of the bankruptcy to pay the retiree committee's costs.

Lawyers and consultants have 10 days to justify fees charged during Detroit’s landmark bankruptcy case before Bankruptcy Judge Steven Rhodes decides if the bills are reasonable, the Detroit News reported today. Firms representing the city and retirees charged about $170 million and Judge Rhodes is in the process of determining the reasonableness of fees in the biggest and most expensive municipal bankruptcy in U.S. history. On Monday, Rhodes gave the various firms 10 days to defend amounts charged during the case but warned that the comments must be “civil” and “fact-based.”

Detroit's historic bankruptcy, which officially ended earlier this month, cost the city nearly $178 million in fees and expenses for teams of lawyers and consultants, according to a city court filing yesterday, Reuters reported. Jones Day, Detroit's lead law firm for the biggest-ever municipal bankruptcy which was filed by the city in July 2013, billed the most by far, at $57.9 million. The city, which exited bankruptcy on Dec. 10, paid a total of nearly $165 million out of its general fund budget for professional fees for itself and for a court-appointed committee representing Detroit retirees, as well as for a fee examiner, court mediators and experts hired by Bankruptcy Judge Steven Rhodes, the filing showed. That amount was $12 million under the $177 million Detroit had budgeted in its plan to adjust $18 billion of debt and obligations. The city also reported $1.04 million in fees paid out of an enterprise fund and almost $12 million in fees paid by its two pension funds.

Energy Future Holdings Corp. expected to be well on its way out of bankruptcy by now when it filed for chapter 11 protection in April hoping to implement a restructuring deal struck with some of its leading creditors, the Wall Street Journal reported today. Instead of preparing for a first quarter 2015 emergence from chapter 11, however, the Texas electricity seller is still hiring professionals for a bankruptcy proceeding in which the fate of $42 billion in debt is up in the air and the chapter 11 exit sign is barely in view. Energy Future scrapped its pre-packaged restructuring pact in favor of a strategy pinned to a sale of some assets, but the sale rules are being renegotiated after a judge faulted the corporate governance process behind it. Energy Future is back at the bargaining table, or in litigation, with creditors. A fee committee set up to review the bills from court-supervised professionals counts 30 legal and financial advisory firms hired, or in the process of being hired, to work for Energy Future or its affiliates or other official bodies in chapter 11. For the first four months of the case, from April 29 through the end of August, 14 Energy Future firms ran up a combined $66 million in bills, the fee committee reported in a filing Sunday. Some were approved Monday; the rest await review.

Some of the country’s top restructuring professionals who contributed to the final report of the ABI Commission to Study the Reform of Chapter 11 released earlier this month made it clear that, aside from strengthening tools for a bankrupt company, they want to make the process cheaper, according to a post yesterday on the Wall Street Journal Bankruptcy Beat blog. “Bankruptcy has always been expensive, and there has always been an effort to rein in excessive costs,” said Prof. Kenneth Klee, who helped engineer the 1978 overhaul and was a member of the Commission. The Commission’s recommendations propose to clarify rules on dozens of issues on which bankruptcy judges have disagreed, giving lawyers — in theory — less to fight about. Two proposals address a big reason why costs can spiral upward: Bankrupt companies have to pay the legal bill for others. Besides their own bankruptcy lawyers, investment bankers, financial advisers, accountants and public relations firms, bankrupt companies are legally obligated to pay the bills of the creditor committee that forms to advocate for vendors, employees and other unsecured creditors. (Subscription required.)
http://blogs.wsj.com/bankruptcy/2014/12/22/proposed-bankruptcy-fixes-wo…

To read a copy of the Commission’s final report and its recommended principles on professional compensation, please click here: http://commission.abi.org.

Bankruptcy Judge Steven Rhodes yesterday said that Detroit must reveal later this month the total cost of fees charged by lawyers and consultants as part of the city's bankruptcy case, Crain’s Detroit Business reported today. Judge Rhodes yesterday told the city's attorneys and advisers to submit final invoices within a week. He approved Detroit's historic reorganization in November, and state and city officials declared the bankruptcy over last Wednesday. Fees charged to the city exceed $140 million. Mediators last week reached agreements with all parties on fees, but the judge still needs to approve them. Mediators led by Detroit's chief federal judge, Gerald Rosen, say that their work appears to be over as they played a crucial role in striking deals between Detroit and its many creditors during the bankruptcy.

A U.S. Supreme Court case that could disrupt the professional fees earned in bankruptcy cases has become a cause of concern to federal government officials, former judges and lawyers from all corners of the industry, Dow Jones Daily Bankruptcy Brief reported today. In a batch of friend-of-the-court briefs filed this week, parties that often have opposing interests in bankruptcy cases uniformly urge the nation's high court to uphold the rights of bankruptcy judges to award adviser fees as they see fit. Specifically, the case — a dispute between the law firm Baker Botts LLP and its former client Asarco — threatens the ability of lawyers, financial advisers and others to be compensated for the time spent defending against objections to their own fee applications.

Energy Future Holdings Corp., the Texas power company that filed for bankruptcy in April, listed fees of $20.5 million and $1.25 million in expenses paid to Kirkland & Ellis LLP from April 29 to Aug. 31, Bloomberg News reported yesterday. Gibson, Dunn & Crutcher LLP, Energy Future’s special counsel for “certain corporate and litigation matters,” was paid about $630,000 during the same period, and Godfrey & Kahn SC, which is acting as counsel to the fee committee, got about $580,000 from Aug. 21 to Oct. 31. The largest-ever bankruptcy in the energy industry, which came seven years after the company set a record as the biggest leveraged buyout, will keep bankruptcy lawyers at firms such as Morrison & Foerster LLP and Richards, Layton & Finger PA busy in the coming months as the company aims for a relatively quick exit from chapter 11. The filing in federal bankruptcy court in Delaware didn’t show how many hours were spent in accruing those fees, nor did it explain whether a $6 million retainer paid in May was included in the total.

San Bernardino, Calif., has run up legal costs of more than $6 million since it declared bankruptcy in 2012, according to a senior city official, Reuters reported yesterday. San Bernardino, a city of 205,000 65 miles east of Los Angeles, declared bankruptcy in August 2012 with a $45 million budget deficit. Gary Saenz, the city’s attorney, told Reuters that so far the city has paid $6.16 million to its bankruptcy lawyers, the Santa Monica firm of Stradling, Yocca, Carlson & Rauth. The case has many more months to run, and experts believe the final legal fees could easily exceed $10 million. Last month, the judge overseeing the case set a May deadline for the city to produce a bankruptcy plan.

A Los Angeles hedge fund that had been trying to oust the management of Variant Holding Co. has pulled its request for a chapter 11 trustee to run the real estate firm, Dow Jones Daily Bankruptcy Review reported today. Hedge fund Beach Point Capital withdrew its request for a chapter 11 trustee to take control of the real estate firm, according to bankruptcy court papers filed on Tuesday. The withdrawal comes after Beach Point settled with the real estate firm and agreed to provide a $10 million bankruptcy loan to finance Variant's restructuring. Bankruptcy Judge Brendan L. Shannon of signed off on the settlement two weeks ago.