Borders Group Inc's Chapter 11 bankruptcy appears to be off to a tumultuous start. On April 29, the Justice Department filed an objection with the court suggesting that Borders should not be allowed to pay certain costs without a showing that it has the financial wherewithal to handle such obligations, especially the quarterly fee to the U.S. Trustee for administering the case.
Specifically, the Trustee's Office argues that Borders must file a quarterly operating report that details its income and expenses before taking on additional obligations for professional fees. Pursuant to court order, several accounting firms, consultants and law firms representing Borders submitted monthly statements for compensation and reimbursement of fees. The fee statements totaled $3.34 million, highlighted by Borders' primary counsel seeking more than $1 million in compensation for professional services.
Among the various objections, the Trustee alleges that the fees submitted by Kasowitz Benson Torres & Friedman are too vague and insufficient to make a fair evaluation of the firm's work. It is asking the court to disallow $72,146 in legal fees, $37,696 for court attendance, $679.41 for transportation, $2,369.33 for meals and $6,154 for photocopies.
Among other objections, the Trustee objected to $13,512.52 in fees and $8,565.30 in expenses sought by Mercer Inc., $17,917.47 in fees submitted by Dickinson Wright as well as $47,500 and $46,454 by Deloitte Tax and Deloitte Consulting, respectively.
What began as Borders Book Shop on Ann Arbor's State Street in 1971 is now struggling for survival. The entity now known as Borders Group Inc. filed for Chapter 11 bankruptcy protection in February after substantial losses between 2006 and 2010 nearly collapsed the company. During that time, the company lost nearly $800 million as it struggled to implement Internet sales, responded slowly to include e-books and endured constant executive turnover. At the time of its filing, Borders reported having $1.275 billion in assets and $1.293 billion in debts. It plans to close nearly a third of its stores nationwide.
The latest objections come after the court approved Borders' revised plan for executive compensation on April 22. Should the court sustain the Trustee's objections, Borders would have to pay the quarterly fees and submit their financials before any of the professional firms assisting them may be compensated.
