U.S. Trustee Tracy Hope Davis protested the most recent interim fees and expenses requested. The compensation requests, which total $7.1 million, come from Kasowitz and 12 other firms, including auditors, real estate advisers, tax advisers and the company's corporate counsel, Baker & McKenzie LLP.
In her objection, Davis said professionals may only be paid fees and expenses that wouldn't harm the debtors' ability to pay creditors. Because Borders has yet to file a disclosure statement and reorganization plan, there is no way of knowing whether the payment of these multimillion-dollar fees would hurt creditors, Davis said.
“The ultimate benefit to the estates for the services rendered by the professionals simply cannot be assessed at this time,” she said.
Davis asked the court for an unspecified holdback, or percent fee reduction, before the fees are paid. No payment that has been objected to by the trustee can be paid without a court order, according to a previous order in the case, she said.
In its interim application for compensation, Kasowitz asked for $1.9 million in fees and $46,500 in expenses. Baker requested $230,000 in fees and expenses.
BDO USA LLP, financial advisers for the committee of unsecured creditors, asked for $1.2 million in fees and $32,000 in expenses. The committee's counsel, Lowenstein Sandler PC, asked for a total of $853,000.
Davis has objected twice before to professional fees filed in the case. In April, she objected to the first monthly fee statements because Borders hadn't filed an operating report showing whether it even had the means to pay the requested fees. In May, she objected to the second monthly fee statements of Mercer Inc., Borders' compensation consultant, and Jefferies & Co. Inc., its financial adviser.
She also announced agreements with other firms, including Kasowitz, to reduce requested fees.
In this third objection, she again singled out Mercer, which asked for $115,000 in fees and expenses. Davis said Mercer's request for $16,000 in legal fees was baseless, because Borders retained the firm not for legal counsel but for compensation consulting. The legal fees, she said, amounted to overhead for Mercer and should not be paid by Borders.
Lawyers for Borders could not be immediately reached for comment.
Borders, the second-largest bookstore chain in the U.S., filed for Chapter 11 protection in February, saying it had suffered from dramatic shifts in the print media market toward digital media. It closed 226 of its 642 stores upon declaring bankruptcy.
The company had planned to sell off dozens more stores to meet loan obligations, but said in court filings last week that it planned to sell itself to a bidder who could keep the business running. Borders said it would announce its stalking horse bidder July 1.
Borders is represented by Kasowitz Benson Torres & Friedman LLP.
The case is In re Borders Group Inc., case number 1:11-bk-10614, in the U.S. Bankruptcy Court for the Southern District of New York.
--Additional reporting by Roxanne Palmer and Ian Thoms. Editing by Anne Urda and John Williams.