Reply #26: Trustee slams ‘unreasonably rich’ GM fees

[Demeter]

http://www.ft.com/cms/s/0/fd564878-6046-11de-a09b-00144...

By Bernard Simon in Toronto and Nicole Bullock in New York

Published: June 23 2009 23:52 | Last updated: June 23 2009 23:52

General Motors’ two key restructuring advisers are seeking to charge the carmaker exorbitant fees, the US trustee, the Justice Department agency that oversees administration of bankruptcy cases, has claimed.

In a court filing on Tuesday, the trustee described the fees proposed by AlixPartners and Evercore Group as “unreasonably rich”. A committee of unsecured creditors has lodged a similar complaint.

The trustee estimates the firms would receive at least $130m if GM’s court-supervised restructuring goes through, as is likely within the next month or so.

The trustee is especially critical of “success fees” that would be paid on completion of the restructuring. Alix would receive $13m as well as a “discretionary bonus”. Evercore’s success fees would total $17.9m.

“Neither Alix nor Evercore had any success at finding either a purchaser or funder for ,” the trustee said. “In light of all these circumstances, the Alix application clearly exceeds the bounds of reasonableness.”

Alix and Evercore declined to comment.

GM named Al Koch, a senior Alix executive, as its chief restructuring officer, when it filed for bankruptcy protection on June 1. It has proposed paying Mr Koch $835 an hour, as well as hiring up to 68 people to assist him at rates of up to $1,000 an hour each.

Evercore, which has received $46.6m from GM over the past year, would be paid a flat fee of $400,000 a month until the completion of the carmaker’s restructuring, probably in July or August. Complaints about legal and advisory fees are not uncommon in bankruptcy cases. However, GM’s case is especially sensitive because its fees are being subsidised by US taxpayers.

According to the creditors’ objection, “the high level of involvement of the US Treasury in the orchestration of the GM bankruptcy and proposed ‘sale’ transaction must also be considered in evaluating an appropriate Evercore fee structure”.

The trustee has not objected so far to the fees charged by the law firm leading GM’s case, Weil Gotshal. The firm charges between $850 and $950 an hour for senior counsel.

The bankruptcy court will consider the objections on Thursday.