Can You Afford to Go Bankrupt?

Claims from those who helped Delta fly out of Chapter 11, while lower than those for United, show that you can't go broke on the cheap.
Stephen TaubJune 28, 2007

Chapter 11 may provide companies with protection from demanding creditors. But as the case of Delta Air Lines Inc. illustrates, it is still quite costly.

The Associated Press, citing an analysis of final fee and expense applications now on file, calculates that Delta may have shelled out $168.6 million to lawyers, consultants, and advisers during its 19 1/2 months in bankruptcy.

While that would equate to about half of what rival UAL Corp.’s United Airlines spent on lawyers and consultants during its time in Chapter 11, United spend twice as long as Delta in its bankruptcy.

Over the past two week, 28 firms, groups, and individuals filed papers in U.S. Bankruptcy Court seeking payment for work provided for Delta, and asking final approval for their bills, according to AP. A hearing on the requests is scheduled for Aug. 20.

Delta, which emerged from bankruptcy on April 30, has already paid most of the money. However, it still owes a $10.5 million “restructuring fee” to financial adviser Blackstone Advisory Services LP and a $2.52 million “success fee” to financial adviser Babcock & Brown LP., according to the report.

Holding the distinction of having submitted the largest bill is Davis Polk & Wardwell, the airline’s chief bankruptcy firm, which claimed it was owed $40.6 million, according to AP.

While Delta was in bankruptcy, the lawyers, consultants and advisers helped the airline cut billions of dollars in costs and restructure the carrier’s operations, suggesting the money spent in bankruptcy was a bargain.

AP also pointed out that Delta is still searching for a new chief executive officer to replace outgoing CEO Gerald Grinstein.

Among the top internal candidates: CFO Ed Bastian.