Collins & Aikman U.S. Trustee requests appointment of examiner to investigate professionals' fees

By Caroline Salls

Pittsburgh, Feb. 23 - Collins & Aikman Corp.'s U.S. Trustee requested court approval to appoint an examiner for the company's Chapter 11 case to investigate the company and its professionals' administration of the case and whether compensation requested by the professionals is justified, according to a Friday filing with the U.S. Bankruptcy Court for the Eastern District of Michigan.

According to the motion, after the company abandoned its original reorganization strategy in favor of liquidation, its largest creditor Third Avenue Trust questioned whether it was appropriate to grant the compensation requests of the professionals who had been involved in the failed reorganization strategy.

The motion said Third Avenue questioned compensation for services that seemed to anticipate a reorganization "even after it became apparent, or should have been apparent, that a reorganization was not feasible."

The U.S. Trustee said the allegations made by Third Avenue raise serious questions that require answers before professionals are awarded final compensation.

The court previously ruled that Third Avenue's allegations alone did not justify denial of the professionals' interim fee applications, but that the court would entertain a motion to appoint an examiner to look into the professionals fees, according to the motion.

The U.S. Trustee said in the motion that 13 firms have rendered professional services in Collins & Aikman's case, and, as of Aug. 31, fee charges amounted to $78.19 million.

In addition, professional services rendered between Aug. 31 and when any confirmed plan becomes effective are expected to add tens of millions of dollars to the total.

"The extent of professional fees and expenses is therefore significant when compared to the $165.5 [million] to $230 million value the debtors ascribe to the estates," the U.S. Trustee said in the motion.

Collins & Aikman, a Troy, Mich.-based automotive company, filed for Chapter 11 on May 17, 2005. Its case number is 05-55927.

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