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  • Writer's pictureThe San Juan Daily Star

US trustee opposes HIMA’s request to retain Ankura for restructuring

U.S. Trustee Mary Ida Townson

By The Star Staff

U.S. Trustee Mary Ida Townson objected Wednesday to requests from Grupo HIMA San Pablo seeking authorization to retain Ankura Consulting Group LLC and to designate Stephen Marotta as chief restructuring officer, Russell Perry as restructuring officer and Robert Weigel as assistant treasurer.

Grupo HIMA filed for bankruptcy on Aug. 15 to restructure more than $400 million in debts.

Townson said the motion discloses that Ankura and the Ankura professionals will be entitled to a “flat, weekly non-refundable fee” of $125,000 for each of the first four weeks and $100,000 for each of the remaining weeks. Additionally, Ankura will be entitled to reimbursement of expenses for “actual, reasonable, documented out-of-pocket and direct expenses incurred from time to time in connection with the services to be provided under an Engagement Letter dated August 11.”

Townson said the fees were unreasonable.

The U.S. trustee said that on Aug. 24, the court entered a cash collateral order, allowing debtors to use the secured creditors’ cash collateral on an interim basis, and for a limited purpose and time and not to pay the debtors’ professionals.

She also said she is not able to judge whether the fees are justifiable, as the debtors and Ankura have failed to disclose the terms of their prior arrangement.

“The Motion discloses that Ankura began providing financial advisory services to Debtors pursuant to a ‘2021 Engagement Letter’ which we understand was executed in November 2021. The fee compensation structure under this prior letter, however, has not been disclosed in the Motion,” Townson said. “Rather, the Motion states that, on August 13, 2023 -- two days before the petitions were filed -- the Debtors modified the engagement of Ankura and the Ankura Professionals to a weekly, fixed fee basis pursuant to the terms of the new Engagement Letter.”

Ninety days before the bankruptcy, Ankura was paid $575,000 in the aggregate for services performed for the debtors. The $575,000 figure would translate into an average weekly compensation of $44,712.29, or less than half of what is now being proposed, the U.S. trustee noted. The debtors’ motion also discloses that, as of the petition date, Ankura had estimated outstanding fees and expenses of some $700,000, she said.

The motion, Townson said, should be amended to include a copy of the 2021 engagement letter and the disclosure of the prior fee arrangement.

“Otherwise, the United States Trustee is concerned that the now seemingly higher weekly flat fee may be a veiled attempt by Ankura to collect on its otherwise unsecured prepetition fees,” she said.

The motion, she said, should also disclose what achievements, if any, Ankura has obtained for debtors in the almost two years it has been engaged.

“Although Ankura has claimed to specialize in ‘interim management, restructuring advisory, turnaround consulting, operational due diligence, creditor advisory services, and performance improvement,’ the fact remains that Debtors’ financial condition has deteriorated during their engagement, to the point where Debtors had to file the instant petitions,” the U.S. trustee said. “As a result, Debtors and Ankura should provide more convincing support for the substantial fees they are seeking.”

Townson also expressed concern that Ankura is not a disinterested party because some of its clients, such as the Puerto Rico Fiscal Agency and Financial Advisory Authority, may be impacted by HIMA’s bankruptcy. She said Ankura must disclose the nature of the work it did for its clients.

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