Case 12-36187 Document 830 Filed in TXSB on 11/13/12 Page ... · by Duff & Phelps) to credit a substantial portion of the monthly fee against the proposed transaction or deferred

IN THE UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

In re:

ATP Oil & Gas Corporation,

Debtor.

Chapter 11

Case No.: 12-36187

Hon. Marvin Isgur

DEBTOR’S LIMITED OBJECTION TO APPLICATION OF OFFICIAL COMMITTEE OF UNSECURED CREDITORS FOR ORDER PURSUANT TO 11 U.S.C. §§ 1103 AND

328 FOR AUTHORIZATION TO EMPLOY DUFF & PHELPS SECURITIES, LLC, AS FINANCIAL ADVISORS TO COMMITTEE

ATP Oil & Gas Corporation (“ATP” or the “Debtor”) hereby objects to the Application

of Official Committee of Unsecured Creditors for Order Pursuant to 11 U.S.C. §§ 1103 and 328

for Authorization to Employ and Retain Duff & Phelps Securities, LLC (“Duff & Phelps”) as

Financial Advisors to Committee (Dkt. No. 599) (the “Application”). In support of its

Objection, the Debtor respectfully states as follows:

1. The Debtor does not oppose the retention of a financial advisor by the Unsecured

Creditors Committee and does not question the qualifications of Duff & Phelps to act as the

Committee’s financial advisor. However, the Debtor has a number of economic and structural

concerns with the proposed compensation and order authorizing Duff & Phelps’ retention that

have compelled the Debtor to file this limited objection.

2. In broad terms, the proposed compensation of $150,000 a month in fixed fees,

reimbursement of all expenses and a $1.5 million “Deferred Restructuring Fee” that is unrelated

to any actual recovery by unsecured creditors or results actually achieved for the benefit of Duff

& Phelps’ constituents, the Committee and unsecured creditors, much less the estate is simply

too high. The Court should not impose such a burden on the Debtor’s estate and its other

stakeholders. In attempting to evaluate the reasonableness and market for Duff & Phelps’

Case 12-36187 Document 830 Filed in TXSB on 11/13/12 Page 1 of 13

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financial advisory services, the Debtor also notes the fees proposed by Duff & Phelps in this case

is well above the market generally and materially exceeds what Duff & Phelps has agreed to

accept in other chapter 11 cases under similar circumstances.1 Duff & Phelps cites to a dozen

other Chapter 11 cases in which it has been retained to act as the creditor committee’s financial

advisor. See Declaration of John P. Madden in Support of Committee’s Application to Retain

Duff Phelps, (Docket No. 599-1) (the “Madden Declaration”) at ¶ 3, pp. 2-3 (citing prior Duff

& Phelps Chapter 11 engagements). Yet in all but two of those 12 engagements, Duff & Phelps

agreed to receive substantially less compensation than it is seeking here, with the average

compensation being much closer to around $100,000 per month in fees and a $500,000

transactional fee. Attached hereto as Exhibit B is a summary of the terms of compensation in

those prior Duff & Phelps engagements.2 Further, the two prior engagements in which Duff &

Phelps secured similar compensation as requested here (i.e. the Visteon and Dura Automotive

cases) involved readily distinguishable circumstances. In both those cases, Duff & Phelps were

retained to provide investment banker services, whereas here the Committee excludes such

services from being included in the compensation requested in the Application. Further, the

unsecured creditor constituency in those two cases represented a substantially larger stakeholder

1 Indeed, this is precisely the concern raised by this Court when it informed counsel for the Committee at the hearing on November 1, 2012, that “I was concerned that the alignment of the interests of your proposed advisor was – that the compensation wasn’t aligned with the interest of the Committee. And I wanted to be certain that if there was to be some sort of performance payment, that it be aligned with the interest of the Committee.” 11/1/12 Tr. at 16 (attached hereto as Exhibit A).

2 Interestingly, a similar recent engagement not cited in the Madden Declaration was Duff & Phelps retention as the financial advisor to the unsecured creditors committee in the Seahawk Drilling, Inc., et al. Chapter 11 cases that were commenced in 2011 in the Southern District of Texas (Corpus Christi division), Case No. 11-20089-RSS (the “Seahawk Case”). There, Duff & Phelps agreed to a $100,000 fixed monthly fee and a transaction fee of $500,000, with a built-in mechanism to apply 50% of the monthly fee as a credited against the transaction fee starting five months after Duff & Phelps’ retention in that case. (Seahawk Case, Dkt. No. 561).


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than here, where unsecured claims comprise approximately 6% of the estate’s outstanding

liabilities.

3. Further, while Duff & Phelps may want to be paid like an investment banker in

this case, the fact of the matter is it is not engaged to provide such services at this point, and,

more importantly, it is unwilling to provide investment banking services even under the

compensation it has proposed. As its engagement letter agreement with the Committee and

Application make clear, should Duff & Phelps actually be “asked to assist in raising new capital

for the Debtor . . . the Committee will file an application . . . to compensate Duff & Phelps for its

active role in raising such capital.” See Application at ¶ 12, p.6

4. The Committee offers no evidence to support its wholly conclusory statement that

“the terms and conditions of Duff & Phelps’ retention . . . are competitive, reasonable and

appropriate given . . . the facts and circumstances of the Chapter 11 case.” See Application at ¶

8, p.4. Perhaps most troubling, Duff & Phelps seeks payment of a $1.5 million “Deferred

Restructuring Fee” upon the occurrence of any number of potential events that may occur during

the course of this Chapter 11 case – no matter how trivial or relevant they may be to any

recovery by unsecured creditors or benefit to the Debtor’s estate. Duff & Phelps does not

propose to reduce that fee in any manner whatsoever, no matter how much money it may

accumulate from payment of its proposed fixed monthly fee of $150,000. Specifically, as

proposed, Duff & Phelps’ right to allowance and payment of its $1,500,000 fee arises in the

event of “any . . . restructuring . . . of the Company’s liabilities (including . . . lease

obligations . . .), however such result is achieved, including, without limitation . . . either directly

or indirectly . . . through [inter alia] a . . . settlement or forgiveness of debt . . . or sale or other

transfer, directly or indirectly of equity, control, assets or other interests of the Company


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whatsoever, whether in one or a series of transactions, acquisitions, mergers or other business

combinations; or other similar transaction or series of transactions.” See Application, Exhibit B,

section 3(d) therein. By its definition, Duff & Phelps’ compensation is tied to the overall

restructuring, services the Debtor’s professionals already are providing, and is not focused on the

implications of any such transactions on the Committee or unsecured creditors.

5. Labels aside, this is not a restructuring fee—by its terms the $1.5 million fee

could become payable in the event the Debtor is compelled to any of its assets and even if such

sale occurs over the objections of the Debtor or Committee. Nor is it a “success fee” (though it

should be more fairly characterized as such) as it bears no connection to the interests of the

Committee or the creditors it is supposed to be serving. This fee theoretically vests upon

something as de minimis as a restructuring of the Debtor’s office lease, and, in any event,

becomes payable whether or not the transaction upon which it is based is of any benefit to or

supported by the Debtor, unsecured creditors or other stakeholders in this case.

6. Nor is the Deferred Restructuring Fee really a reasonable form of deferred

compensation. The $150,000 fixed, monthly fee for which Duff & Phelps seeks payment under

Section 328(a) of the Bankruptcy Code is substantial, and Duff & Phelps’ argument that the $1.5

million fee is a form of “deferred” compensation is particularly absurd given the absence of any

mechanism (as is commonplace in other Chapter 11 cases and in many other prior engagements

by Duff & Phelps) to credit a substantial portion of the monthly fee against the proposed

transaction or deferred restructuring fee.

7. No, what the Deferred Restructuring Fee really is in its present form is a windfall

for Duff & Phelps and a tax -- an impermissible, unjustified and wholly unreasonable tax on the

cost to be imposed on the Debtor’s estate and its stakeholders as a consequence of ATP having


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filed for Chapter 11 protection. In the absence of substantial revisions to the terms, conditions

and amount to which any such fee would be paid to Duff & Phelps, the application to retain Duff

& Phelps should be denied.

8. While this is the Debtor’s primary objection to the terms of Duff & Phelps’

retention, as discussed below, the Debtor also objects to (a) imposition of an 18-month tail of

liability on the estate to pay any fees to Duff & Phelps following its termination by the

Committee as such obligation is unfairly imposed on the estate; (b) reimbursement of any

expenses incurred by Duff & Phelps that are not made subject to review under Sections 330 and

331 of the Bankruptcy Code; (c) approval of indemnification rights for Duff & Phelps that are

inconsistent with the indemnification rights provided to other retained professionals in this

Chapter 11 case; and (d) payment of any sort of restructuring fee to Duff & Phelps that is not

conditioned upon a restructuring or disposition of substantially all of the Debtor’s assets, linked

to approval by the Committee constituency in a way that confirms a benefit is actually received

by such constituency from services rendered by Duff & Phelps and payable only at the

conclusion of this Chapter 11 proceeding.

9. The Debtor diligently attempted, through its chief restructuring officer, James

Latimer, to negotiate acceptable terms of compensation for Duff & Phelps. However, to date the

Mr. Latimer and the Debtor have been unsuccessful in resolving the issues that the Debtor has

with Duff & Phelps’ proposed compensation.3 For this reason, the Debtor has determined that it

is necessary to file this objection.

3 By prior agreement of the parties, the Debtor was given until midday Tuesday, November 13, 2012, to file any objection to the Committee’s Application.


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FACTUAL BACKGROUND

10. On August 17, 2012 (the “Petition Date”), the Debtor commenced this voluntary

case under Title 11 of the United States Code (the “Bankruptcy Code”) and continues to

operate its business as debtor-in-possession pursuant to Sections 1107(a) and 1108 of the

Bankruptcy Code.

11. On August 24, 2012, the U.S. Trustee appointed an official committee of

unsecured creditors (the “Committee”) in this case. The Committee seeks to employ Duff &

Phelps as its financial advisors pursuant to an engagement letter by and between the Committee

and Duff & Phelps, dated October 3, 2012 (the “Engagement Letter”) (attached as Exhibit B to

the Application).

12. Since filing the Application in October, the Debtor, the U.S. Trustee and others

engaged in discussions with the Committee, its counsel, Duff & Phelps and its counsel in an

effort to try to resolve the issues raised by Duff & Phelps’ terms of engagement. Those efforts

failed to yield a consensual retention order. On November 9, 2012, the U.S. Trustee filed a

Limited Objection to the Application of the Official Committee of Unsecured Creditors for

Authorization to Employ Duff & Phelps Securities LLC, as Financial Advisors Pursuant to 11

U.S.C. §§ 1103 and 328 (Dkt. No. 811) (the “U.S. Trustee Objection”). Specifically, the U.S.

Trustee objects to the Application “because it removes the [U.S. Trustee’s] and the Court’s

ability to review [Duff & Phelps’] requests for compensation under 11 U.S.C. § 330 regarding

whether expenses and services were actual, necessary, provided meaningful services to the UCC,

furthered the reorganization of the Estate, and were reasonably billed in light of the complexity,

importance, and nature of the problem, issue or task addressed.” (U.S. Trustee Objection at 2).

On November 12, the ad hoc committee (the “Ad Hoc Committee”) of holders of 11.875%


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Senior Second Lien Notes due 2015 (the “Second Lien Holders”) filed its limited objection to

the Committee’s application to retain Duff & Phelps (Dkt No. 827) (the “Ad Hoc Committee

Objection” and together with the U.S. Trustee Objection, the “Other Objections”). The Debtor

concurs with and joins in the Other Objections made by the U.S. Trustee and the Ad Hoc

Committee and submits the following additional objection.

OBJECTION

13. A professional seeking compensation for services rendered to a debtor’s estate

must provide services that result “in an identifiable, tangible, and material benefit to the

bankruptcy estate,” in order to justify that compensation. In re Pro-Snax Distributors, Inc., 157

F. 3d 414, 426 (5th Cir. 1998). As the party filing the Application, the Committee has the

burden of proving that Duff & Phelps should be retained and retained under the proposed terms.

In re Bigler, 422 B.R. 638, 643 (Bankr. S.D. Tex. 2010). Duff & Phelps seeks retention not

under §330, which allows for later review of the reasonableness of a professional’s

compensation, but under §328, which this Circuit has interpreted to limit a bankruptcy court’s

review power and to require up-front approval of fees. In re Tex. Secs., Inc., 218 F.3d 443, 445

(5th Cir. 2000) (quoting In re Nat’l Gypsum Co., 123 F. 3d 861, 862-63 (5th Cir. 1997)) (“We

have interpreted § 328 to limit the power of the bankruptcy court to alter the compensation of

professionals: “[t]he court must therefore set the compensation and award either according to §

328 or § 330. If prior approval is given to a certain compensation, § 328 controls and the court

starts with that approved compensation, modifying it only for developments unforeseen when

originally approved.”).

14. When faced with a request for retention pursuant to § 328, courts in this district

have adopted a non-exclusive list of factors for determining whether the terms of a professional’s


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employment are reasonable, including whether (i) the terms of an engagement agreement reflect

normal business terms in the marketplace, (ii) there is creditor opposition to the retention, and

(iii) the proposed retention is in the best interests of the estate. In re Energy Partners, Ltd., 409

B.R. 211, 226 (Bankr. S.D. Tex. 2009) (citing In re High Voltage Eng’g Corp., 311 B.R. 320,

333 (Bankr. D. Mass. 2004)). The Debtor submits that these factors weigh against approval of

Duff & Phelps’ requested compensation.

15. As noted above, Duff & Phelps’ proposed compensation here is unreasonably

high, even when compared with its own previous engagements as financial advisors to a

committee. See In re Northwest Airlines, 400 B.R. 393, 399 (Bankr. S.D.N.Y. 2009) (denying

payment of a success fee to Lazard Fréres & Co., LLC, in part because “the terms of Lazard’s

retention are not comparable to the cases it cites”). As the terms of Duff & Phelps’ retention

approved in the Seahawk Drilling case other cases cited by Duff & Phelps in the Madden

Declaration make clear, the overall amount of compensation Duff & Phelps seeks to be paid is

too high. See Summary of Terms of Other Duff & Phelps Engagements attached hereto as

Exhibit B.

16. Moreover, unlike the Debtor’s investment banker, Jefferies & Company, Inc.

(“Jefferies”), whose entire compensation is set forth in the terms of engagement that have been

approved by the Court, Duff & Phelps is reserving the right to seek additional compensation

above and beyond the $150,000 monthly and $1.5 million fee Duff & Phelps currently seeks,

should Duff & Phelps provide any actual investment banking type services like raising capital.

Duff & Phelps cannot justify its reservation to, in effect, double charge the estate.

17. Moreover, while Duff & Phelps maintains that it requires retention under § 328

because its personnel do not maintain their time records on a “project category” basis and asserts


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that such practice is “the general practice of financial advisory and investment banking firms.”

(Application at 6), the Debtor’s other financial advisor in this case, Opportune LLP

(“Opportune”), provides substantially similar services to the Debtor’s estate on an hourly basis

and subject to § 330 review. It is entirely legitimate to ask why Duff & Phelps is unwilling to

work under the same or similar terms as Opportune, particularly when it reserves the right to

seek additional fees for investment banking services. See In re Energy Partners, Ltd., 409 B.R.

at 227 (finding committees’ proposed financial advisors’ requested compensation terms

unreasonable when the debtor’s financial advisor “has performed substantially similar services at

a fraction of the rate demanded by” the committees’ proposed financial advisors). In short, Duff

& Phelps’ proposed terms do not reflect normal business terms in the marketplace.

18. The second factor to be considered – opposition by other creditors – also weighs

against allowance of Duff & Phelps’ proposed terms of compensation. In particular, the Ad Hoc

Committee, representing the largest creditor constituency by dollar amount in this case, objects

to the fees and other compensation sought by Duff & Phelps.

19. Finally, it is clear that the proposed terms of compensation to be paid to Duff &

Phelps do not benefit the Debtor’s estate. When a professional seeks compensation pursuant to §

328, “the Court must predict whether, and to what extent, a professional will be able to provide a

tangible, identifiable, and material benefit to the estate” in order to determine whether the fee

structure is reasonable. In re Energy Partners, Ltd., 409 B.R. at 229-30. The Committee and

Duff & Phelps have made no such showing here.4 Instead, Duff & Phelps seeks a monthly

4 Quite the opposite: due to the 18-month tail period in the Engagement Letter, Duff &Phelps’ retention is presumptively unreasonable. In re Bigler, 422 B.R. at 643 (“there is a presumption of unreasonableness in any proposed retention by a professional who requires a tail period in addition to the other requested categories of compensation—such as, for example, a monthly fee in a fixed amount”). Unlike the debtor in Bigler, ATP submits that the overall


10

guarantee of $150,000 with a $1,500,000 kicker in the event of a “Restructuring Transaction,”

regardless of what role—if any—Duff & Phelps plays (if any) in consummating that transaction.

By divorcing the Deferred Restructuring Fee from any concurrent benefit to the estate, Duff &

Phelps’ proposed compensation structure is fatally flawed and should not be approved.

20. As currently structured, Duff & Phelps would receive the Deferred Restructuring

Fee by virtue of its position as the Committee’s financial advisors when a Restructuring

Transaction occurs regardless of any benefit conferred on unsecured creditors (or the estate); it

simply becomes a cost of any “Restructuring Transaction” that happens. For example, if the

Debtor were compelled by its DIP lenders to market and sell substantially all its assets, Duff &

Phelps could theoretically receive a $1.5 million fee for performing no services – and even if the

Committee unsuccessfully opposes such transaction, unsecured creditors end up with no

recovery and Second Lien Holders recover less than 100% of their $1.5 billion of claims.

Indeed, the Deferred Restructuring Fee is defined so broadly that it essentially guarantees a fee

unless this Chapter 11 case converts to a case under Chapter 7 and Duff & Phelps is terminated

by the Committee (and, even then the proposed Engagement Letter appears to impermissibly

attempt to saddle the estate with an 18-month tail). Coupled with the request for retention under

§ 328, this is absurd, unnecessary and an unjustified burden on the Debtor’s estate.

21. The Debtor submits that any transaction or restructuring fee to be paid to Duff &

Phelps apart from its fixed Monthly Fee of $150,000 should be earned and, thus, should be tied

to some measure of success for Duff & Phelps’ constituency. One mechanism to effect this

result would be to require that the success fee be paid out of any recovery to unsecured creditors

so that they can “bear the costs and/or efficiencies of the bargain[] they have negotiated.” In re

engagement with Duff & Phelps, even excluding the tail period, is unreasonable. Id. at 642. And the 18-month tail period here is particularly onerous.


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Farmland Indus. Inc., 286 B.R. 895, 898. In re Farmland involved an unsecured creditors’

committee’s request to retain and employ a financial advisor on terms very similar to those at

issue here: a $125,000 monthly fee and a success fee of one percent of the amount distributed to

unsecured creditors. Id. at 898-99. There the court held that the success fee for the committee’s

financial advisor should be paid out of the distribution made “to the general unsecured creditor

constituency, and not out of the general funds of the bankruptcy estate.” Id. at 900.

Significantly, the court noted that if it were to allow the success fee to be paid out of the general

funds of the estate, then “bondholders would be shouldering approximately 75 percent of the cost

of the fee, whereas the unsecured creditors would be bearing only 25 percent. That is simply

unfair.” Id. at 899. Such a result here would be even more unfair because the Second Lien

Holders have claims of approximately $1.5 billion while unsecured creditors hold claims of less

than $200 million; thus, the Debtor’s bondholders would be shouldering 7/8 of the cost of the

success fee.

22. The Debtor does not dispute that the Committee needs financial advisors in this

case, nor does it dispute that Duff & Phelps is qualified to serve in that capacity. But the Debtor

maintains that Duff & Phelps’ compensation must be reasonable. The proposal embodied by the

Engagement Letter and sought in the Application does not meet that standard. The Debtor

submits that Duff & Phelps’ compensation and expense reimbursement should be subject to §

330 review and, if Duff & Phelps will not consent to such terms of employment, the Debtor

proposes the following modifications to Duff & Phelps’ proposed compensation:

(a) The fixed monthly fee should be no more than $100,000 for the first six months and $75,000 thereafter;

(b) The Deferred Restructuring Fee should be: (i) no greater than $500,000, (ii) contingent upon the Committee’s express support of the transaction(s) or in the case of a restructuring under a plan in the chapter 11 case supported by casting a majority of votes in favor of such plan and if Debtor is a proponent delivering a


12

Committee letter in support of such plan, (iii) with 50 percent of the fixed monthly fee creditable towards the amount due on any approved Deferred Restructuring Fee, (iv) earned and payable only once at the end of the Debtor’s Chapter 11 case;

(c) Any transactional fee approved in excess of $500,000 should be payable solely out of amounts that become available for distribution to holders of allowed general unsecured claims in this chapter 11 case;

(d) Reimbursement of expenses should be made subject to review for reasonableness under Sections 330 and 331 of the Bankruptcy Code; and

(e) Duff & Phelps’ indemnification rights under the Engagement Letter should be subject to the same terms and conditions that are applicable to Jefferies’ indemnification rights under its retention order. See Dkt. No. 546 at 3-4.

23. If Duff & Phelps does not voluntarily agree to retention pursuant to 11 U.S.C. §

330, rather than § 328, then the Debtor joins the U.S. Trustee in requesting that a hearing be

scheduled on the Application and the Debtor’s limited objection thereto.

[Remainder of page intentionally left blank.]


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WHEREFORE, the Debtor respectfully requests that the Court deny retention of Duff &

Phelps under 11 U.S.C. § 328 and grant such further relief as may be just and necessary under

the circumstances.

Dated: November 13, 2012

Respectfully submitted,

MAYER BROWN LLP

By: /s/ Charles S. KelleyCharles S. KelleyAttorney-in-ChargeState Bar No. 11199580Southern District of Texas Bar No. 15344700 Louisiana Street, Suite 3400Houston, TX 77002-2730Telephone: 713 238-3000Facsimile: 713 238-4888

and

Craig E. Reimer (admitted pro hac vice)Joshua A. Grenard (admitted pro hac vice)71 S. Wacker DriveChicago, IL 60606-4637Telephone: 312 782-0600Facsimile: 312 701-7711

ATTORNEYS TO THE DEBTOR AND DEBTOR-IN-POSSESSION


Exhibit A

Case 12-36187 Document 830-1 Filed in TXSB on 11/13/12 Page 1 of 10

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

IN RE: § CASE NO. 12-36187-H1-11§ HOUSTON, TEXAS

ATP OIL AND GAS CORPORATION, § THURSDAY,§ NOVEMBER 1, 2012

DEBTOR. § 1:33 P.M. TO 4:33 P.M.

STATUS AND SCHEDULING CONFERENCE IN THE MAIN CASEAND IN ADVERSARIES 12-3425, 12-3429, 12-3440,

12-3443, AND 12-3450

BEFORE THE HONORABLE MARVIN ISGURUNITED STATES BANKRUPTCY JUDGE

APPEARANCES:

FOR THE DEBTOR: SEE NEXT PAGE

FOR THE TRUSTEE: SEE NEXT PAGE

CASE MANAGER: ANITA DOLEZEL

COURT RECORDER: PAULA CRAWFORD

TRANSCRIPTION SERVICE BY:

JUDICIAL TRANSCRIBERS OF TEXAS, LLC935 ELDRIDGE ROAD, #144SUGAR LAND, TEXAS 77478

(281) 277-5325 (office) " (281) 277-0946 (fax) www.judicialtranscribers.com

Proceedings recorded by electronic sound recording, transcript produced by transcription service.

JUDICIAL TRANSCRIBERS OF TEXAS, LLC


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APPEARANCES IN THE MAIN CASE:

FOR THE DEBTOR MAYER BROWN, LLPATP OIL AND GAS CORPORATION: Charles S. Kelley, Esq.

William H. Knull, Esq.700 Louisiana, Suite 3400Houston, TX 77002

FOR MACQUARIE INVESTMENTS, GORDON ARATA MCCOLLAMLLC, MACQUARIE AMERICAS DUPLANTIS & EAGANCORP., AND KEBA ENERGY: Courtney S. Lauer, Esq.

1980 Post Oak Blvd., Ste. 1800Houston, TX 77056

FOR UNSECURED CREDITORS PORTER HEDGES, LLPCOMMITTEE: Matthew Vaughn, Esq.

1000 Main Street, 36th FloorHouston, TX 77002

MILBANK, TWEED, HADLEY &MCCLOY, LLP

David S. Cohen, Esq.1850 K Street, NW, Ste. 1100Washington, DC 20006

FOR AD HOC GROUP OF DIAMOND MCCARTHY, LLPSHAREHOLDERS: Kyung S. Lee, Esq.(EQUITY EXPLORATORY GROUP) Charles Rubio, Esq.

Two Houston Center909 Fannin St., 15th FloorHouston, TX 77010

Also present: George McDaniel, Shareholder

(VIA TELEPHONE) Gary HermanStrategic Turnaround EquityPartners, LP

(VIA TELEPHONE) Peter KaufmanMichael BallestariDavid HermanGordian Group



3

FOR AD HOC COMMITTEE AND VINSON & ELKINSLOCAL COUNSEL FOR WACHTELL, Harry Perrin, Esq.LIPTON, ROSEN & KATZ: 1001 Fannin Street, Ste. 2500

Houston, TX 77002

(VIA TELEPHONE)WACHTELL, LIPTON, ROSEN & KATZEmil Kleinhaus, Esq.51 West 52nd StreetNew York, NY 10019

FOR CREDIT SUISSE AG: HAYNES & BOONEKelli M. Stephenson, Esq.

(VIA TELEPHONE) Charles A. Beckham, Jr., Esq.1221 McKinney St., Ste. 2100Houston, TX 77010

(VIA TELEPHONE)CRAVATH, SWAINE & MOORE, LLPPaul Zumbro, Esq. Stephanie Tumbiolo, Esq.Rachel Fritzler, Esq.825 Eighth AvenueNew York, NY 10019

APPEARANCES FOR ADVERSARY 12-3425:

FOR THE DEBTOR MAYER BROWN, LLPATP OIL AND GAS CORPORATION: William H. Knull, Esq.

700 Louisiana, Suite 3400Houston, TX 77002

FOR DIAMOND OFFSHORE FULBRIGHT JAWORSKI, LLPCOMPANY: Berry D. Spears, Esq.

600 Congress Avenue, Ste. 2400Austin, TX 78701

FOR UNSECURED CREDITORS MILBANK, TWEED, HADLEY &MCCLOY, LLP

David S. Cohen, Esq.1850 K Street, NW, Ste. 1100Washington, DC 20006



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FOR CREDIT SUISSE AG: HAYNES & BOONEKelli M. Stephenson, Esq.

(VIA TELEPHONE) Charles A. Beckham, Jr., Esq.1221 McKinney St., Ste. 2100Houston, TX 77010

(VIA TELEPHONE)CRAVATH, SWAINE & MOORE, LLPPaul Zumbro, Esq. Stephanie Tumbiolo, Esq.Rachel Fritzler, Esq.825 Eighth AvenueNew York, NY 10019

FOR UNSECURED CREDITORS PORTER HEDGES, LLPCOMMITTEE: Matthew Vaughn, Esq.

1000 Main Street, 36th FloorHouston, TX 77002

FOR BANK OF NEW YORK ANDREWS KURTH, LLPMELLON TRUST CO., N.A.: John J. Sparacino, Esq.

600 Travis, Ste. 4200Houston, TX 77002

FOR AD HOC COMMITTEE AND VINSON & ELKINSLOCAL COUNSEL FOR WACHTELL, Harry Perrin, Esq.LIPTON, ROSEN & KATZ: 1001 Fannin Street, Ste. 2500

Houston, TX 77002

(VIA TELEPHONE)WACHTELL, LIPTON, ROSEN & KATZEmil Kleinhaus, Esq.Mr. Snyder51 West 52nd StreetNew York, NY 10019

FOR EPS CARGO HANDLERS ADAMS AND REESE, LLPCOMPANY; EPS LOGISTICS Robin Cheatham, Esq.COMPANY; EXPEDITORS AND 701 Poydras Street, Suite 4500PRODUCTION SERVICES COMPANY; New Orleans, LA 70139HARVEY GULF INTERNATIONALMARINE, INC.; HORNBECKOFFSHORE SERVICES, LLC:



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FOR FRANK’S CASING CREW LISKOW & LEWIS& RENTAL TOOLS, INC.: J.P. Hebert, Esq.SHELL OFFSHORE, INC.; 822 Harding St.CHAMPION TECHNOLOGIES, INC.; P.O. Box 52008CETCO OILFIELD SERVICES Lafayette, LA 70505COMPANY; and OFFSHORE ENERGY SERVICES, INC.): LISKOW & LEWIS

Michael D. Rubenstein, Esq.1001 Fannin Street, Ste. 1800Houston, TX 77002

FOR BARRY GRAHAM OIL SERVICES, PHELPS DUNBARLLC; MARTIN HOLDINGS, LLC; Brian Wallace, Esq.C-PORT/STONE, LLC; GULF 365 Canal Street, Ste. 2000OFFSHORE LOGISTICS, LLC; and New Orleans, LA 70130OFFSHORE SERVICE VESSELS, LLC:

FOR AD HOC GROUP OF DIAMOND MCCARTHY, LLPSHAREHOLDERS: Kyung S. Lee, Esq.(EQUITY EXPLORATORY GROUP) Two Houston Center

909 Fannin St., 15th FloorHouston, TX 77010

FOR U.S. DEPARTMENT OF U.S. DEPARTMENT OF JUSTICETHE INTERIOR: Victor Zhao, Esq.

1100 L Street NWWashington, DC 20005

FOR TM ENERGY HOLDINGS, LLC, BRACEWELL & GIULIANI, LLPGMZ ENERGY HOLDINGS, LLC, and Marcy E. Kurtz, Esq.CLP ENERGY, LLC: 711 Louisiana St., Ste. 2300

Houston, TX 77002


FOR TM ENERGY HOLDINGS, LLC, BRACEWELL & GIULIANI, LLPGMZ ENERGY HOLDINGS, LLC, and Marcy E. Kurtz, Esq.CLP ENERGY, LLC: 711 Louisiana St., Ste. 2300

Houston, TX 77002

FOR M-I SWACO, SCHLUMBERGER SNOW FOGEL SPENCE, LLPTECHNOLOGY CORPORATION, Kenneth Green, Esq. SMITH INTERNATIONAL, INC., 2929 Allen Parkway, Ste. 4100Davis Offshore Corporation Houston, TX 77019and Kenrig Fueling Technology:



6

FOR CREDIT SUISSE AG: HAYNES & BOONEKelli M. Stephenson, Esq.1221 McKinney St., Ste. 2100Houston, TX 77010


FOR BRISTOW US, LLC: JONES WALKERJohn Kolwe, Esq.600 Jefferson St., Ste. 1500Lafayette, LA 50501


FOR THE DEBTOR MAYER BROWN, LLPATP OIL AND GAS CORPORATION: William H. Knull, Esq.

700 Louisiana, Suite 3400Houston, TX 77002

FOR NGP CAPITAL RESOURCES THOMPSON & KNIGHTCOMPANY: Tye Hancock, Esq.

Rhett Campbell, Esq.333 Clay St., Ste. 3300Houston, TX 77002

DEBTOR’S OFFICIAL CONFLICTS MUNSCH HARDT KOPF & HARR, PCCOUNSEL: Randall A. Rios, Esq.

700 Louisiana, Ste. 4600Houston, TX 77002

MUNSCH HARDT KOPF & HARR, PCDavid C. Mattka, Esq.3800 Lincoln Plaza500 N. Akard StreetDallas, TX 75201


FOR SEACOR MARINE, LLC: LOOPER REED & MCGRAW, P.C.Ben L. Aderholt, Esq.1300 Post Oak Blvd., Ste. 2000Houston, TX 77056



16

1 I just want to make a comment that --

2 MR. VAUGHN: Yes, sir.

3 THE COURT: -- as you all continue your

4 discussions, that I want you to take into consideration --


6 THE COURT: -- with respect to the proposed

7 performance fee or --


9 THE COURT: -- transaction fee, whatever it’s

10 called, --

11 MR. VAUGHN: Right.

12 THE COURT: -- I was concerned that the alignment

13 of the interests of your proposed advisor was -- that the

14 compensation wasn’t aligned with the interest of the

15 Committee. And I wanted to be certain that if there was to be

16 some sort of performance payment, that it be aligned with the

17 interest of the Committee.

18 MR. VAUGHN: Understood, Your Honor.

19 THE COURT: And it seemed to me that the way that it

20 was currently written, that we could have a --

21 MR. VAUGHN: Where’s the linkage between --

22 THE COURT: -- plan confirmed that provided zero

23 percent to the Unsecured Creditors, but gave these guys a

24 million-and-a-half dollars for a performance fee.

25 MR. VAUGHN: I understand.



17

1 THE COURT: And I don’t want to get into exactly

2 what it ought to be, but I will tell you that you’re going to

3 probably have trouble from me if we have economic interests of

4 a professional that are disaligned with the interest of its

5 constituency.

6 MR. VAUGHN: Understood, Your Honor.

7 THE COURT: I wanted to make that comment.

8 MR. VAUGHN: I appreciate that.

9 THE COURT: As to whether we ought to do a --

10 MR. KELLEY: That is certainly one of the issues

11 that’s under discussion.

12 THE COURT: Okay. And as to whether it ought to be

13 a performance fee or transaction fee, I’m going to let you all

14 discuss that and I’m not making a comment whether I think

15 that’s a good idea or a bad idea. I’m only saying, if there

16 is one I want to be sure the interests are economically

17 aligned.

18 MR. VAUGHN: Understood. Thank you, Your Honor.

19 THE COURT: Thank you.

20 All right.

21 MR. KELLEY: Thank you, Your Honor.

22 The next item on the main case Agenda has to do with

23 the date that was set approximately two weeks ago with respect

24 to the issue of the Equity Committee.

25 Just to update Your Honor, where I understand we



136

1 (Proceeding adjourned at 4:33 p.m.)

2 * * * * *

3 I certify that the foregoing is a correct transcript

4 to the best of my ability from the electronic sound recording

5 of the proceedings in the above-entitled matter.

6 /S./ MARY D. HENRY

7 AAERT CET**D-337

8 JUDICIAL TRANSCRIBERS OF TEXAS, INC.

9 JTT INVOICE # 50563

10 DATE: NOVEMBER 3, 2012

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Exhibit B


SUMMARY OF RECENT DUFF & PHELPS ENGAGEMENTS

CASE MONTHLY FEETRANSACTION/

DEFERRED FEENOTES

Cases Cited in Madden Declaration

In re Visteon Corp.$175,000 for First 2 Months;

$150,000 Thereafter$1,500,000

In re Dura Automotive Sys, Inc. $150,000 $1,500,000

In re Hayes Lemmerz Int’l $150,000Fee Equal to 1% of Property

Recovered by Unsecured Creditors

• Monthly Fees Credited Against Transaction Fee as Follows: 25% of Monthly Fee After 6 Months; 50% of Monthly Fee After 9 Months; 75% of Monthly Fee After 12 Months

In re Global Power Equip. Group, Inc. $75,000 N/A

In re Citadel Broad. Corp. $175,000 $500,000

In re Int’l Aluminum Corp. $125,000 $500,000*

• D&P Requested $500,000 as Deferred Fee; Court Declined to Approve Deferred Fee In Retention Order & After Subsequent Review Under Section 330, Granted D&P A Deferred Fee of $125,000 (Dkt. #s 208, 555)

In re Philadephia Newspapers, LLC $150,000 N/A

In re Champion Enters., Inc. $150,000 $500,000

In re Real Mex Restaurants, Inc. $125,000 $500,000• Court Declined to Authorize “Financing Fee”• Monthly and Deferred Fee Subject to Section 330 Challenge by

All Parties

In re Trico Marine Servs., Inc. $125,000 $950,000• Monthly Fees Credited Against Deferred Fee up to $375,000• Deferred Restructuring or Financing Fees Subject to Section 330

Challenge by All Parties

In re Chem Rx Corp. $100,000 $300,000*• Court Declined to Approve Deferred Fee In Retention Order• Monthly and Deferred Fee Subject to Section 330 Challenge by

All Parties

In re Truvo USA LLC$150,000 for First 4 Months;

$75,000 Thereafter

Fee Equal to 5% of Recovery to Creditors Committee Above €18

million, Not to Exceed $2,000,000

• 100% of Monthly Fees After Month 3 Credited Against Deferred Fee

• Court Declined to Authorize “Financing Fee”• “Tail Period” for Deferred Fee Shortened from 18 Months to 6

Months

Cases Not Cited in Madden Declaration

In re Seahawk Drilling, Inc. $100,000 $500,000• 50% of Monthly Fees Credited Against Deferred Fee After 5

Months• Court Declined to Authorize “Tail Period” for Deferred Fee

In re K-V Discovery Solutions, Inc. $125,000Reserves Ability to Seek

Reasonable Deferred Restructuring Fee At Future Date

• D&P Expressly States it is Not Entitled to More Than One Deferred Restructuring Fee


Documents

Case 12-36187 Document 830 Filed in TXSB on 11/13/12 Page ... · by Duff & Phelps) to credit a substantial portion of the monthly fee against the proposed transaction or deferred