Exco Resources, which filed its proposed restructuring plan last week, is paying its legal and financial advisors $4 million a month to help guide the company through bankruptcy.
In the 18 months since the Dallas oil and gas operation filed for Chapter 11 protection under the U.S. Bankruptcy Code, Exco has paid the lawyers and other restructuring experts $61.6 million, according to research by The Texas Lawbook.
Because some of the advisors are a few months behind in filing their compensation applications with the bankruptcy court and because the case is likely to continue for at least a few more months, the final bill will likely be north of $75 million – and that’s if Exco’s proposed exit plan goes smoothly.
Bankruptcy court records show that law firms involved in the Exco bankruptcy have charged $39 million so far for their services. The biggest winners are Kirkland & Ellis, Brown Rudnick, Jackson Walker, Morgan Lewis and Arcadi Jackson.
Alvarez & Marsal and FTI Consulting are the leading financial advisory firms.
Exco Resources, according to bankruptcy documents, has employed more than 30 different law firms and financial advisory and consulting companies since it filed to restructure under Chapter 11 in January 2018.
Fifteen of those firms have been paid $1 million or more for their services.
Court documents show that the 30 firms have had more than 130 different professionals working on the Exco bankruptcy and restructuring.
Nearly three-dozen of those individuals – namely, law firm partners and financial managing directors – are charging Exco more than $1,000 an hour.
“It has gotten so expensive that companies cannot afford to go into bankruptcy anymore,” former American Airlines General Counsel Gary Kennedy, who guided the world’s largest airline through Chapter 11 five years ago, said in a recent interview.
While the $61.6 million price tag is hefty, it pales in comparison to the $700 million in fees Energy Future Holdings paid its legal and financial advisors in its four-year bankruptcy odyssey, which ended last year. The fees paid to the lawyers and consultants in the Enron Corp. bankruptcy also topped $700 million. American Airlines paid its advisors more than $200 million during its restructuring.
The Exco and EFH restructurings have one significant common denominator: Kirkland & Ellis was the lead legal counsel for the debtors in both cases. Representing the debtors in complex corporate restructurings is far and away the most lucrative assignment.
Exco Resources General Counsel Heather Summerfield hired Kirkland, which is widely considered to be one of the premier corporate bankruptcy law firms in the world – and one of the most expensive – to lead the exploration and production business through the maze of creditors and restructuring.
Exco paid Kirkland a $3.88 million retainer, according to court records. Between January 2018 and April 2019, Kirkland has billed its client $19.56 million in legal fees and expenses.
Kirkland, which has offices in Dallas and Houston, also represented EFH and pocketed more than $200 million in that restructuring.
Bankruptcy records show that Kirkland has had 40 different lawyers work on various parts or elements of Exco’s restructuring – some for as little as two hours and others for hundreds of hours – and none of them are cheap.
Sixteen of the Kirkland lawyers charge $1,000 or more per hour. The two lead Kirkland lawyers for Exco are Christopher Greco, a bankruptcy partner in Kirkland’s New York office, and Patrick Nash, a bankruptcy partner for Kirkland in Chicago. Nash bills $1,565 an hour, while Greco charges $1,295 an hour.
The most expensive lawyer representing Exco is Kirkland tax partner Todd Maynes, who has an hourly billing rate of $1,725. Fortunately for Exco, he’s only worked on the case for a handful of hours, according to court records.
Twenty-three Kirkland lawyers working on the Exco restructuring are based in the firm’s Texas offices. Kirkland litigation partner Anna Rotman ($1,235 an hour) and corporate partner Andy Veit ($1,225 an hour) are based in Houston and have spent a considerable amount of time working on the Exco bankruptcy.
Kenneth Young, a litigation associate in Kirkland’s Houston outpost and only six years out of law school, has worked about 100 hours on the Exco case and charges $950 an hour.
The Houston office of Jackson Walker and New York-based Brown Rudnick are lead counsel for the unsecured creditors, and their bills are also paid by Exco.
Brown Rudnick, which has four partners charging $1,000 or more, has charged $7.74 million for its work on behalf of the creditors. Jackson Walker has billed Exco Resources $2.6 million.
Exco hired Alvarez & Marsal to lead is corporate restructuring process. As of April 30, Alvarez has charged $7 million for its efforts. The Alvarez team is being led by managing director John Stuart, who charges $975 an hour, and senior director Peter Mosley, who bills at $800 an hour. Both are based in Dallas.
FTI Consulting, which is the lead financial advisor for the creditors committee, has charged Exco $4.2 million.