Weil Gotshal May Get $230 Million If GM Goes Bankrupt
By Linda Sandler, Christopher Scinta and Lindsay Fortado
April 7 (Bloomberg) -- Weil Gotshal & Manges LLP may earn an estimated $230 million in legal fees should General Motors Corp. file for bankruptcy protection -- more than the record the firm is likely to take in advising Lehman Brothers Holdings Inc. on the largest bankruptcy in U.S. history.
GM may pay the lead bankruptcy counsel that much, topping the estimated $209 million Weil will charge Lehman, said Lynn LoPucki, who teaches bankruptcy law at the University of California, Los Angeles. Weil, a longtime GM counsel now advising the company on restructuring, hopes to take charge of the bankruptcy case if the carmaker’s out-of-court restructuring effort fails, said a person familiar with the 1,300-lawyer firm.
A bankruptcy for GM, the biggest U.S. automaker, might yield $1.2 billion for bankers, accountants and lawyers, surpassing estimated judge-approved charges of $906 million for Lehman, said LoPucki, who maintains a database to calculate fees. Energy trader Enron Corp.’s three years of bankruptcy cost $757 million, including $149.4 million paid to Weil, he said.
More than 500 Weil lawyers worked on Enron, the energy trader that collapsed in 2001, according to court papers.
“If GM wanted to get out of bankruptcy inside of a year the number of lawyers needed could easily exceed the figure from Enron,” said Stephen Lubben, a professor at Seton Hall University School of Law in Newark, New Jersey. “That would be a very aggressive timeline for any large corporation.”
GM spokeswoman Renee Rashid-Merem declined to comment, as did Weil partner Harvey Miller, lead lawyer in the Lehman case.
Ready for Bankruptcy
GM Chief Executive Officer Fritz Henderson has said the carmaker prefers to become viable out of court while being prepared to file for bankruptcy if that is necessary to cut costs. GM is speeding up preparations for a bankruptcy even as it seeks to avoid it, people familiar with its plans said. The U.S. government ordered GM to devise a restructuring plan by June 1 to justify $13.4 billion in taxpayer aid.
Weil’s record-setting fees would come as law-firm business slumps. Weil is paying newly hired junior lawyers to delay their arrival by as much as a year and a half, according to an internal memo posted online by the blog Above the Law. Weil spokesman Mike Ford didn’t respond to an e-mailed request for comment.
Knock Fees Down
The U.S. Treasury would have the power to knock fees down if it was lending money to help GM reorganize in court, or guaranteeing the loans. The government could shave costs by limiting the number of lawyers GM brought to court, and putting a lid on the number of committees of stakeholders recognized by the court, which GM would have to pay for, said James Shein, a professor at Northwestern University Kellogg School of Management and turnaround consultant.
Jenni Engebretsen, a spokeswoman for the U.S. Treasury, declined to comment.
Lehman filed for bankruptcy protection Sept. 15 with $639 billion in assets. As he has in that case, Miller would have a major role in any GM filing if Weil is hired. A local law firm might be lead counsel should the carmaker choose to file in a federal court in Michigan instead of in debtor-friendly Delaware, where GM is incorporated, or New York, where Lehman and Enron filed, said a GM adviser who declined to be named.
GM Assets Smaller
At $91 billion as of Dec. 31, GM’s assets are smaller than Lehman’s. A bankruptcy still might be more complex because of disputes with workers, creditors and suppliers, lawyers said.
Before making a filing, company executives and their attorneys are likely to analyze decisions of bankruptcy judges and appeals courts in various districts, lawyers said. As GM’s hometown court, the Eastern District of Michigan is an option, said Shein, the Northwestern professor.
“When you go to a venue where the jobs are, you see far more willingness to try to restructure a company rather than liquidate,” he said.
GM already is throwing off fees to lawyers, bankers and turnaround experts. Advising the company on restructuring and a possible bankruptcy is Miller’s onetime co-partner Martin Bienenstock, now with New York-based Dewey & LeBoeuf LLP. Also advising are investment bankers and restructuring experts at Morgan Stanley, Blackstone Group LP and Evercore Partners Inc.
Fees Disclosed
The fees, which companies rarely report, are usually disclosed in bankruptcy court, where they must be approved. Weil said its rates were $650 to $950 an hour for partners and other senior lawyers in the Lehman case. Chicago-based Kirkland & Ellis LLP, another longtime GM outside counsel, said in a January filing related to Tronox Inc.’s bankruptcy that its top rate is $1,110 an hour.
Companies must file bankruptcy where they’re based or incorporated, or where they have subsidiaries. GM has some assets in New York that might justify a filing in that city instead of its base or incorporation state, lawyers said.
Detroit’s bankruptcy court changed a key rule in December, making itself more attractive to potential filers such as GM or Chrysler LLC. While bankruptcy judges in New York are randomly assigned, an administrative order allows the Detroit court to assign a judge to the main case, taking experience into account.
To contact the reporters on this story: Linda Sandler in New York at lsandler@bloomberg.net; Christopher Scinta in New York bankruptcy court at cscinta@bloomberg.net; Lindsay Fortado in New York at lfortado@bloomberg.net.
Last Updated: April 7, 2009 15:56 EDT |
