Big checks for Delphi's lawyers
Bankruptcy judge approves $145 million in payments for law firms, advisers involved in restructuring
By Vinnee Tong
AP Business Writer
NEW YORK — A federal bankruptcy judge Thursday approved $145 million in fees to lawyers and financial advisers for the first year of the restructuring of auto parts supplier Delphi.
Troy-Mich.-based Delphi Corp., an ex-subsidiary of General Motors Corp. until 1999, has incurred nearly $135 million in professional fees and $10 million in expenses for the period from its voluntary bankruptcy protection filing on Oct. 8, 2005, through the end of September 2006.
U.S. Bankruptcy Judge Robert Drain of the Southern District of New York approved the payment applications filed by about 30 law firms, bankers and others.
As part of its bankruptcy case, Delphi has cut labor costs by offering voluntary buyout and early retirement deals to tens of thousands of union workers represented by the United Auto Workers and the International Union of Electronic Workers-Communications Workers of America, the company's biggest and second-biggest unions.
Delphi has made reducing labor and retirement benefit costs one of the highest priorities in its reorganization.
Delphi's plant in Limestone County currently employs about 1,300 workers. Delphi has announced that Platinum Equity LLC of Beverly Hills, Calif., is its favored bidder to buy its steering and halfshaft division, which includes the Limestone plant.
Among Delphi's advisers, the biggest bill comes from the law firm Skadden, Arps, Slate, Meagher & Flom LLP, which recorded fees and expenses of $32.79 million for the year.
Skadden's hourly rates range from $585 to $835 for partners, $560 to $640 for counsel and special counsel, $295 to $540 for associates and $90 to $230 for legal assistants.
The various firms have received most of the fees already, as they are paid monthly, aside from so-called "holdbacks." Drain approved orders on Thursday covering three separate periods. His approval means the firms will receive the 5 percent or 10 percent that has been held back. Because of the size of the case, the court had established a special fee committee to create guidelines for how the firms should be paid.
The judge must also approve the fees at the conclusion of the case.
Delphi expects to emerge from bankruptcy protection in the first half of this year. It is now negotiating with its unions over collective bargaining agreements and General Motors over legacy retirement costs.
Those agreements are needed if Delphi wants to move forward on a proposed plan that has private equity investors making a cash infusion as the company exits bankruptcy.
Three private equity investors — Appaloosa Management LP, Cerberus Capital Management LP and Harbinger Capital Partners Master Fund I — along with Merrill Lynch & Co. and UBS Securities LLC have agreed to invest $1.4 billion to $3.4 billion in a restructured Delphi, a tentative deal approved by Drain last month.
The investors and Delphi seek to resolve the issues with GM and the unions ahead of a Feb. 28 deadline, after which the two parties will give up the right to withdraw from the tentative agreement.
Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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