Bankruptcy Judge Steven Rhodes today agreed that the nearly $178 million the city of Detroit paid its attorneys, financial analysts and other consultants was a reasonable charge. In a 48-page opinion released today, Rhodes wrote the city had met its requirement to show “all amounts to be paid by the debtor or by any person for services or expenses in the case or incident to the plan have been fully disclosed and are reasonable.”
Among the fees charged:
- Jones Day law firm, representing the city, $57.9 million
- Miller Buckfire, an investment banking firm, $22.8 million
- Ernst & Young, financial analysts, $20.2 million
- Conway MacKenzie, restructuring experts, $17.3 million
The city also paid about $26 million in expenses for the Official Committee of Retirees, which represented pensioners. The Committee’s law firm, Denton’s, billed $15.4 million.
In his opinion, Rhodes noted the state of Michigan picked up about $5.3 million of the city’s total legal costs, making the total bill about $183.2 million. He also wrote that seven of the professional firms paid by the city filed briefs that supported the reasonableness of fees. Just one individual filed an objection to them.
As he did when he approved the city’s Plan of Adjustment, Rhodes in his decision on the fees again praised the attorneys and other professionals, crediting their work in the case:
It is perhaps too easy now to fast-forward through the play-back that is necessary to comprehend the magnitude of the accomplishments of the professionals in this case. But now is the time to appreciate and credit that accomplishment and all of the effort and skill of those professionals in achieving it. The City is now on a path to success precisely because of the expertise, skill, commitment, endurance, personal sacrifice, civility and proficiency of all of the professionals in the case, including most certainly those whose fees are subject to review in this opinion.
We wanted to see what Detroit Bankruptcy Judge Steven Rhodes’s commencement speech at Walsh College on Saturday looked like in a Word Cloud — a snappy feature to see what words are most prominent in a text.
The full text and audio is here.
Here it is:in WDET
The media room at the Theodore Levin U.S. Courthouse in Detroit was crowded Wednesday as Bankruptcy Judge Steven Rhodes heard arguments about whether the city may treat its unlimited-tax, general obligation bonds as unsecured during the bankruptcy process. At issues is hundreds of millions of dollars the city could use for services for residents instead of paying interest to bond financiers, to put it simply. But wiping away the debt, if that occurs, would send shockwaves through the $4 trillion municipal bond market.
During the nearly six hours of testimony, six attorneys for the bond insurers argued Michigan law dictates that funds raised from voter-approved bonds should be considered something of a “lien” and used only to pay off debt service for the bonds. Detroit’s attorneys, from the Jones Day law firm, argued federal bankruptcy law prescribes the funds are unsecured and that the bond issuers are like any other creditor.
Judge Rhodes, who said he would have a decision within two or three weeks, ended the day by urging continued mediation. “A decision here is most likely all or nothing,” he said. “One side is going to win and the other side is going to lose.”
Before the hearing, city attorneys told Judge Rhodes they had reached a deal with two global banks UBS and Bank of America Merrill Lynch for a “swaps settlement” on debt from pension funding. Rhodes has twice rejected previous deals, calling them too generous for the banks. City attorneys said they submit details to the court within three or four days.
The Detroit Free Press’s Nathan Bomey published this article, which is a comprehensive update of where bankruptcy dealings are to date.
And here are various other articles and stories published and broadcast about the day in court.
From The Bond Buyer: Detroit judge hears challenge to ULTGO treatment
From The Detroit News: Judge expects to rule on bondholder payments in a few weeks, urges negotiations