Disclosing Bankruptcy's Dirty Little Secret

With many companies operating in bankruptcy, and every breath they take studied under a microscope by every single hedge fund (somehow everyone now is a distressed specialist), every fund manager tries to get a step up in the "informational asymmetry" race. Yet if you have been blacklisted by Goldman Sachs and are unable to get that market moving data 24 hours ahead of everyone else what do you do? This is especially relevant in cases such as General Growth Properties, where the development of the case is supposed to determine the future of not only substantive consolidation in BRE case law but the fate of CRE in general. We present one of the more secret tricks in the bankruptcy book.

Every several months advisory companies (i.e., banks and law firms) which receive compensation by a bankrupt debtor are supposed to file their fee statements in order to get their exorbitant fee demand approved by the bankruptcy court. Usually the bulk of these documents are filled with the exquisite detail of bankers, consultants and lawyers trying to justify billing 18 hour days, while somehow fitting in expensed lunches and dinners, and also 3-5 hour airplane trips, all in the same day (yes Mr. Trustee, feel free to double check some of these, oh wait, you already did in GGP and found a whopping $11,047.28 in "recommended expense adjustments" for Alix Partners- great work). And speaking of Alix Partners, for some hilarious examples of just this behavior we refer readers to the billing and expense detail of one Clayton Gring of AlixPartners, consultants in the GGP bankruptcy case.

Yet the real meat is found usually in comparable documents filed by debtor and creditor legal teams, in which ever-scrupulous lawyers provide magnificent detail of how they spend each and every hour. Many times, the information provided is way beyond what can be found anywhere in the public register. Lawyers, however, will give this detail because the Trustee and the Judge need to see some justification for awarding bargain-basement $1,000/hour rates. Which is why we were very surprised when we found quite a few tidbits of information that had not been disclosed anywhere previously from merely scouring the some of the most recent Akin Gump fee applications.

As we do not want to get in trouble for pointing out what we have uncovered (somehow GGP may be considered a national interest, now that Bernanke and Geithner have made the case that they will rather see America explode than let real estate - both residential and commercial - be priced fairly, and any uncouth information dissemination may promptly lead to a one-way ticket to Guantanamo), we will merely provide readers with a link and a copy of the filing, and let them do their own work.

Here are several very much relevant Akin Gump filings: First App, July, August, and September. For other such examples we refer readers to comparable fountains of information-cum-monthly fee applications by Kirkland, Miller Buckfire, and Weil Gotshal.

Akin Gump fee app example (and goldmine for keyword searches).