Skadden Arps Slate Meagher & Flom is stoking the fires of controversy after revealing a $58.4m (£34.9m) bill for its role as lead counsel to Kmart on the largest Chapter 11 bankruptcy in retail history.
The firm has notched up the largest receipt out of a long list of advisers, which overall is charging fees of $138m (£82.4m) for the reorganisation. It was completed in May this year.
Skadden’s Chicago office was instructed to head up the reorganisation under the guidance of partner John Butler. It officially started in January last year when Kmart filed for Chapter 11 bankruptcy protection.
Usually in the US, a debtor will retain new counsel as opposed to its normal law firm in the event of a restructure. In this case, Skadden had already acted for the retailer for a number of years.
Also in line for lucrative payouts are law firms Jones Day, which as the adviser to Kmart’s financial creditor could earn $4.1m (£2.4m), and Winston & Strawn, which after acting for Kmart’s trade creditors has submitted a bill for $1.3m (£776,600).
Kmart is just one of a number of high-profile – and expensive – reorganisations where question marks have been raised over the level of professional fees. At the last count, both legal and financial advisory bills for Enron were running at more than $300m (£179.2m).
On Global Crossing, where the debtor is being represented by Weil Gotshal & Manges, law firm bills had reached $13m (£7.8m) by July, over a third of which was for the New York firm’s services.
Kirkland & Ellis, another winner in the recent spate of disintegrating corporations, has been clawing in fees from the likes of United Airlines, where for seven weeks’ work the firm billed $5m (£3m).
It is understood that, at this stage, the $138m (£82.4m) in advisory fees for Kmart have been submitted for consideration by the US Bankruptcy Court in Chicago. Judge Susan Pierson Sonderby is heading up the hearings.
However, since the Chapter 11 filing was made in early 2002, Skadden has periodically been making submissions to the court for payment.