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Law firm Kaye Scholer and financial adviser Capstone admitted on Monday to making "mistakes" during the bankruptcy of investment management firm GSC Group Inc., but said that they should not have to forfeit more than $10 million in fees earned from their work, Reuters reported yesterday. The U.S. Trustee Program is seeking to void the firms' fees because of their mischaracterization of Robert Manzo, a Capstone contractor who was presented to the bankruptcy court as a direct employee. Kaye Scholer served as legal counsel to GSC in bankruptcy, while Capstone was the company's financial adviser. In court papers filed earlier this month, the U.S. Trustee said that the firms covered up Manzo's contractor status and fee-sharing arrangement with Capstone, which may have served to inflate their fees.

Advisers working on the Dewey & LeBoeuf bankruptcy endured a round of criticism yesterday from the judge overseeing the defunct firm's chapter 11 case, who expressed qualms over what he considered excessive fees and expenses billed to the cash-strapped estate, the American Law Daily reported today. Taxi rides around New York, pricey hotel stays, and vague time entries all got cut Bankruptcy Judge Martin Glenn approved preliminary fee requests from a dozen law firms, accounting shops, and other advisory outfits. In total, $14.1 million in bills have been submitted for time spent working on the bankruptcy from its inception in late May through the end of October, according to our past reports. Even those advisers that received Glenn's preliminary approval won't be fully paid any time soon; firms can only receive what was allocated months ago in a budget set by lead lender JPMorgan Chase, and the few firms that did not go over budget can only get 80 percent for now.

To date, more than two dozen separate law firms, accounting firms and other outfits associated with Kodak's bankruptcy have submitted billing statements totaling nearly $125 million, according to a Rochester (N.Y.) Democrat and Chronicle analysis yesterday. Kodak has said it expects to emerge from bankruptcy in the first half of 2013, meaning there could be several more months of multimillion-dollar billing statements. Nearly 20 percent of the professional bills to date, or roughly $22 million, come from New York City firm Sullivan & Cromwell LLP, the primary law firm representing Kodak in the bankruptcy. The committees representing creditors' and retirees' interests also racked up sizable bills — expenses that have to be borne by Kodak.

Lehman Brothers Holdings Inc., which aims to pay creditors $65 billion by 2016 or so, enters the 2013 with statistics to match the biggest-ever bankruptcy it filed more than four years ago, Bloomberg News reported on Saturday. The defunct investment bank added 10,000 filings to its court docket in 2012, bringing the total toward 33,000, as it slashed 67,000 payment demands for $1.2 trillion by almost 70 percent to $370 billion. It paid advisers $600 million in its last year of bankruptcy, or a total of $1.8 billion since 2008.

Barclays Capital's job advising Asarco LLC during its restructuring may have ended three years ago when the copper mining company exited chapter 11, but the investment banker can't drive off into the sunset just yet, Dow Jones Daily Bankruptcy Review reported yesterday. Its request for a $2 million success fee has been sent back to bankruptcy court after an appeals court declined to rule on the request. Barclays stepped in to advise Asarco after its previous investment banker and financial adviser, Lehman Brothers, filed its own bankruptcy case in September 2008. A bankruptcy court granted Barclays a $975,000 fee enhancement but declined its request for a $2 million success and $6 million auction fee, which a district court upheld. Barclays appealed, focusing on the $2 million success fee, as did Asarco, which opposed the $975,000 bonus. The case was sent to the U.S. Court of Appeals for the Fifth Circuit, which filed its ruling Tuesday.

Members of ABI's Chapter 11 Reform Commission said yesterday pointed to labor and benefits being key issues likely to surface during a host of public hearings beginning early next year, Reuters reported. "We'll be hearing from both labor and management about the way the bankruptcy code treats collective bargaining agreements, pension issues and the like," said Commission Co-Chair Robert Keach Bernstein Shur Sawyer & Nelson on an ABI media teleconference. In the handful of hearings so far, the commission has heard largely from lenders, many of whom have expressed concern that the commission would look to limit the use of secured credit. Commission members have said they are not looking to curb the use of secured credit so much as improve its transparency. The commission will also consider changes to rules that exempt derivatives contracts from certain bankruptcy rules and the effects on bankrupt retailers of a 2005 law that changed rules on treatment of leases in bankruptcy. About six or seven hearings will be held throughout the country next year. Read more: http://www.reuters.com/article/2012/12/03/bankruptcy-commission-idUSL1E…

To listen to the ABI media teleconference, please click here:
http://news.abi.org/educatonal-brief/teleconference-to-look-at-chapter-…

Professional fees and expenses have topped $200 million in the bankruptcy case of American Airlines Inc., parent AMR Corp. and various affiliates, the Dallas Morning News reported yesterday. Through Tuesday’s filings in the case, the law firms, financial advisers and other professionals involved in the airline reorganization have billed $191.4 million in fees and $9.2 million for expenses for a total of $200.6 million. AMR, American and the other companies filed chapter 11 petitions on Nov. 29, 2011.

Bankruptcy Judge James Peck yesterday approved nearly $158 million in lawyers' and other fees in Lehman Brothers' liquidation, Reuters reported yesterday. Yesterday's hearing covered $157.86 million split between 25 law firms and other professionals. That included about $80 million to Alvarez & Marsal, which managed Lehman's assets during bankruptcy, and about $40 million to Houlihan Lokey, financial adviser to Lehman's creditors' committee. Total fees in the case, the largest-ever chapter 11 bankruptcy, are about $1.8 billion, though only about another $985 million is subject to court approval.

The primary industry group for the corporate loan market warned that any attempt to limit the rights of secured creditors in the event of a bankruptcy could have a broader impact on companies' access to and cost of capital, the Wall Street Journal's CFO Journal reported today. The comments by the Loan Syndications and Trading Association (LSTA) were aimed at the American Bankruptcy Institute's Chapter 11 Commission, which is currently studying the 1978 bankruptcy code for areas in need of updating. The LSTA's general counsel Elliot Ganz announced the formation of a working group on the ABI's review that any attempt to limit secured creditors' rights could limit companies' access to capital both before and after bankruptcy, because lenders will feel less protected. Robert Keach, co-chair of the ABI Chapter 11 Commission, said that the Commission has so far only identified the role of secured debt in bankruptcies as an area of study and hasn’t taken any position on the issue. "The ABI commission is certainly not looking at the prevalence of secured debt that’s occurred over the last 30 years as a problem to be solved," he said. "We mentioned it in the mission statement because there have been changes that have occurred over time that have made the current Code somewhat obsolete."

The next hearing of ABI's Chapter 11 Commission will be on Thursday, Nov. 15, at the CFA Annual Convention in Phoenix. For more information on the public hearing schedule and the work of the Commission, please click here: http://commission.abi.org/

The U.S. Trustee Program has announced that its proposals requiring extensive disclosure related to law firm fee requests would apply only to very large chapter 11 bankruptcies, the New York Law Journal reported today. In narrowing the scope of cases to which the proposals would apply­—to those with $50 million or more in assets and $50 million or more in liabilities as opposed to cases with a combined $50 million in assets and liabilities—the agency was responding to intense criticism from firms calling "burdensome" and "ethically unacceptable" the agency's new recommendations for attorneys' fee applications. The trustee program has modified proposals for disclosure of rates in non-bankruptcy practices, and said that it would continue to seek budgets and staffing plans, either by consent of the parties or court order. Unchanged from the originally proposed guidelines, firms would still have to submit in their fee applications the number of rate increases since the inception of the case and disclose the effect of any rate increases on the total compensation a firm is seeking.