United pays outside advisers millions

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United pays outside advisers millions
By Marilyn Adams, USA TODAY

As United Airlines' pilots brace for 29% pay cuts, their company is poised=
=20
to spend millions for legal and financial services from 11 firms helping=20
chart its recovery. UAL, United's parent company, has retained five law=20
firms and six other firms whose specialties include investment banking,=20
corporate turnarounds, accounting and public relations. A bankruptcy judge=
=20
approved the hiring of most of UAL's advisers last week, but two firms'=20
proposed fees =97 which alone run into millions of dollars =97 are being=20
challenged by unsecured creditors. A hearing is set for Jan. 15. Company=20
officials say the advisers' help is critical. Lenders threaten to withhold=
=20
financing needed to keep UAL flying unless it meets specific cash-flow=20
targets starting in February. UAL is seeking $2.4 billion a year in labor=20
savings and billions more from suppliers and creditors. United's pilots=20
union said Tuesday that the pay cut, approved by 92% of those voting, saves=
=20
UAL $40 million a month immediately.

"We're working with bankruptcy experts outside the company to assure United=
=20
emerges successfully as a strong competitor," says Chief Financial Officer=
=20
Jake Brace. Court records show that advice doesn't come cheap:
=95 Management consultant McKinsey & Co., tapped to help devise a turnaround=
=20
plan, is seeking $1 million a month plus expenses.
=95 Restructuring expert Rothschild expects a $15 million fee =97 in=
 addition=20
to a $225,000 monthly fee =97 to help UAL complete a reorganization plan.
=95 Huron Consulting Group, another restructuring specialist, received a=20
$500,000 retainer.
McKinsey's "flat fee of $1 million a month &ellipsis; may not be=20
justified," the creditors say in a filing. They want to know whether it's=20
duplicating work by United's management or other advisers. McKinsey=20
declined comment.

The creditors call Rothschild's $15 million fee "a guaranteed flat fee=20
payment unrelated to any benefits Rothschild actually confers." Rothschild=
=20
declined comment. It's not unusual for large companies in Chapter 11 to=20
hire high-priced advisers. Kmart reports professional fees paid or accrued=
=20
in its case totaled almost $85 million from January through Nov. 27.=20
Bankruptcy experts say UAL needs the best advice available. "They want the=
=20
best and the brightest to drop everything and concentrate on this," says=20
Boston corporate bankruptcy lawyer Jon Schneider. "If it really works, $50=
=20
million to $100 million in professional fees is worth it." Some employees=20
being pressed for sacrifices disagree. "It's ludicrous for United to ask=20
for so much from workers when they are willing to pay excessive rates to=20
outside consultants," says George Gulliford, a furloughed United mechanic.


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