Northwest-Bankruptcy 02-29

No bonuses for financial consultants in Northwest Airlines bankruptcy; $4.3 million sought


AP Business Writer

MINNEAPOLIS — A bankruptcy judge on Friday rejected almost $4.3 million in "success fees" for consultants in the Northwest Airlines bankruptcy, saying they were paid well enough for their work without the bonuses.

The airline emerged from bankruptcy protection on May 31.


Lazard Freres & Co. and FTI Consulting, Inc. both worked as financial advisers to the Committee of Unsecured Creditors in Northwest’s case.

Lazard got $5.6 million in fees and expenses but wanted another $3.25 million as a "completion fee."

FTI got almost $7 million in fees and expenses and sought another $1 million completion fee (originally $1.5 million).

Objections to the completion fees came from a hedge fund, the bankruptcy trustee and the union that represents Northwest flight attendants, who took steep pay cuts in Northwest’s reorganization.

The trustee said FTI basic fees amounted to an overall rate of $727 per hour and Lazard’s to $876 per hour.

Lazard and FTI knew they could request a bonus and there was no guarantee it would be awarded, according to U.S. Bankruptcy Judge Cecelia G. Morris’s ruling.

"Lazard and FTI received exactly what they bargained for — the right to make a request," Morris wrote. "Both financial advisers are sophisticated parties who touted their experience in other Chapter 11 actions."

Morris said both firms knew — or should have — "that the ’right to deny’ a request is the companion to the ’right to make’ the same request."


U.S. Bankruptcy Judge Allan Gropper denied $4.2 million in bonuses for lawyers in the case in September, including $3.5 million sought by Northwest’s lead bankruptcy law firm, Cadwalader, Wickersham & Taft.

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