Blockbuster lawyers may not get paid
Bankrupt video store chain Blockbuster Inc. has so little remaining value its lawyers and advisers should not be paid their outstanding fees and expenses at this time, the U.S. trustee overseeing the bankruptcy said in a court filing.
The trustee also questioned whether the law firm Weil, Gotshal & Manges could be compensated nearly $70,000 for work related to the company’s plan of reorganization, which ultimately collapsed.
Blockbuster filed for bankruptcy last year, initially with a plan to reorganize as a scaled-back movie rental chain owned by its main secured creditors: billionaire investor Carl Icahn and several hedge funds.
However, after poor year-end holiday sales, the chain was put up for sale. It was purchased in an auction by Dish Network Corp. for $320 million, less than half the total owed to secured creditors.
The trustee, a Department of Justice official, said the lawyers, financial advisers and auditors had already received 80 per cent of their requested fees. She said the balance should be deferred because paying it could prevent other so-called administrative claims from being paid. It is very rare that lawyers and advisers are not paid in large bankruptcies.