U.S. Trustee In Hostess Case: $8.89M In Fees Sought Are ‘Unreasonable’

by Tara Arick on March 11, 2013 · 0 comments

in Bankruptcy

- From LexisNexis® Mealey’s™ Daily Legal News.

The U.S. trustee in the Chapter 11 bankruptcy of Hostess Brands Inc. on March 6 filed a brief arguing that the attorneys and professionals seeking more than $ 8.89 million in fees and expenses should receive only a percentage of that money because it is unclear at this stage if there will be enough funds in the bankruptcy estate to pay all the claims (In Re: Hostess Brands Inc., No. 12-22052, Chapter 11, S.D. N.Y. Bkcy.).

Hostess filed for Chapter 11 bankruptcy on Jan. 11, 2012.

Assets

On Nov. 30, the Bankruptcy Court authorized Hostess to wind down its business by selling substantially all of its assets.

The U.S. trustee argues that Hostess currently has stalking horse bids for their major assets in an aggregate amount of $ 856.3 million. This amount does not include potential sale proceeds from the sale of myriad of remaining assets, the trustee adds.

The stalking horse bids alone, however, are less than what Hostess estimates to be its $ 1.03 billion liability on secured debt, the U.S. trustee contends. Accordingly, it is unclear if there will be sufficient funds in this estate to pay all, or part, of the administrative and priority claims asserted against Hostess, the U.S. trustee says.

Compensation Sought

The ultimate benefit to the estate for the services rendered by the professionals who seek compensation simply cannot be assessed at this time, the U.S. trustee says; therefore, the imposition of a percentage interim hold back is appropriate.

The firms seeking reimbursement – the total of which is $ 8,899,153.67 – are Jones Day, acting as bankruptcy counsel to Hostess; Perella Weinberg Partners, acting as Hostess’ investment banker; Stinson Morrison Hecker, corporate counsel for Hostess; KPMG, auditors and tax advisors for Hostess; Venable LLP, employee benefits counsel for Hostess; Kramer Levin Naftalis & Frankel, counsel for the Official Creditors’ Committee; Curtis Mallet-Prevost Colt & Mosle, conflicts counsel for the committee; and Blackstone Advisory Partners, financial advisers to the committee.

Reimbursement

Jones Day seeks the most reimbursement of all parties, contending that it is entitled to $ 5,746,878.07. KPMG seeks the next largest reimbursement, with $ 1,098,518 in fees and expenses.

The other parties seek the following amounts: Perella Weinberg Partners, $ 702,065.36; Stinson Morrison Hecker, $ 137,952.38; Venable, $ 68,326.53; Kramer Levin Naftalis & Frankel, $ 698,114.69; Curtis Mallet-Prevost Colt & Mosle, $ 117,722.99; and Blackstone Advisory Partners, $ 329,575.65.

Fees ‘Unreasonable’

The U.S. trustee contends that the fees sought by KPMG are for nine individuals who each worked less than one hour on this case in a capacity known as “transitory timekeepers” who add “little or no value to the work.”

Regarding Venable and Kramer and Curtis Mallet, the U.S. trustee maintains that much of the fees sought are for preparing bills and fee applications and the amounts are “unreasonable.”

As for the fees and expenses sought by Jones Day, Perella Weinberg, Stinson Morrison Hecker and Blackstone the U.S. trustee says that she has no objection as long as she is able to conduct a final review of the fees and expenses requested.

The U.S. trustee, Tracey Hope Davis, is represented by Paul K. Schwartzberg of New York.

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