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Kirkland, Kutak Rock Unite Again in Toys 'R' Us Bankruptcy

Kirkland & Ellis and Kutak Rock, which have previously partnered up this year on Chapter 11 cases for Gymboree Retail Stores Inc. and Gordmans Stores Inc., have now submitted court papers showing how much they intend to charge—and have been paid—for their roles representing another ailing retailer.

Toys “R” Us Inc. filed for bankruptcy earlier this month in Richmond, Virginia, in an effort to restructure some $5 billion in debt. Kutak Rock is providing local counsel to Toys “R” Us, while Kirkland has grabbed the lead bankruptcy role for the Wayne, New Jersey-based toy retail giant.

Recent court filings show that Kirkland partners are billing Toys “R” Us between $930 to $1,745 per hour for their services; of counsel at hourly rates ranging from $555 to $1,745; and associates between $555 and $1,015 per hour. Kirkland bankruptcy partners Joshua Sussberg and Edward Sassower in New York are working with Chicago-based partners James Sprayregen, Anup Sathy and Chad Husnick in Chicago on the matter.

According to an Aug. 1 engagement letter to Cornell Boggs—hired by Toys “R” Us earlier this year to serve as its general counsel—and signed by Sprayregen, Kirkland received a $1 million advance retainer payment to take the lead for the company in its looming Chapter 11 case. The firm states in court records that it has since received additional retainer payments totaling roughly $8.13 million for its work on behalf of the debtor.

Recent court filings by Kutak Rock show that the firm received $75,000 in retainer payments from Toys “R” Us in the 90 days prior to its bankruptcy filing. Michael Condyles, managing partner of Kutak Rock’s Richmond office, is billing $520 per hour in his role as lead local counsel to the company. Condyles is working with Kutak Rock restructuring partners Peter Barrett ($470 per hour) and Jeremy Williams ($360 per hour).

Kutak Rock and Kirkland have had a mutually beneficially partnership in the retail restructuring arena in 2017.

In March, the two firms teamed up to advise Omaha-based discount department store chain Gordmans on its Chapter 11 case in the same city. Court records show that Kirkland restructuring partner Patrick Nash Jr. is Chicago is leading a team advising Gordmans, which paid advance retainers totaling $475,000 to the firm in the period prior to its bankruptcy. Kirkland partners and associates are billing Gordmans at the same hourly rates as in the Toys “R” Us case, although of counsel are slightly cheaper at rates ranging from $645 to $1,595.

Kutak Rock received a $42,745 retainer payment from Gordmans, according to a declaration by of counsel Joyce Dixon ($415 per hour) in Omaha. Dixon is working on the Gordmans case with Kutak Rock restructuring partners Jeffrey Wegner ($475 per hour) and Lisa Peters ($390 per hour). The company plans to liquidate its 106 stores in Chapter 11.

On Friday, San Francisco-based children’s clothing store Gymboree announced that it had emerged from bankruptcy, less than four months after filing for Chapter 11 protection in Richmond. Kirkland’s Sprayregen, Sussberg, Sathy and restructuring partner Steven Serajeddini in Chicago are representing Gymboree, which paid $4.57 million in retainers to the firm in the period prior to its bankruptcy, according to court records.

Kirkland has filed papers with the bankruptcy court seeking $723,794.58 and $969,689.03 in legal fees and expenses for its services to Gymboree in June and July, respectively. Hourly rates for Kirkland partners, of counsel and associates advising Gymboree are the same as the firm is billing in the Toys “R” Us case. Condyles is leading a team from Kutak Rock serving as local counsel to Gymboree, which court records show paid the firm an initial $50,000 retainer.

The Gymboree bankruptcy also yielded a role for Munger, Tolles & Olson, which received a $200,000 retainer to represent a special committee of the company’s board of directors. Court records show that partners from the firm are billing between $735 and $1,300 per hour; of counsel between $735 and $1,025; and associates at hourly rates ranging from $410 to $725.

Munger Tolles partners Thomas Walper and Seth Goldman in Los Angeles are seeking bankruptcy court approval for $110,726.72 in legal fees and expenses that the firm incurred on behalf of Gymboree in June, according to court filings. Munger Tolles also has been retained for a similar role advising independent directors in the Toys “R” Us case, although the firm has yet to file billing statements with the bankruptcy court in that matter.

In April, Kirkland and Munger Tolles worked together on the bankruptcy of Payless ShoeSource Inc. in St. Louis, with Sprayregen and Kirkland serving as lead restructuring counsel to one of the world’s shoe retailers, while Munger Tolles’ Walper led a team from his firm serving as conflicts counsel to the debtor. Court records show that Kirkland, which received $2 million from Payless in the two months prior to bankruptcy, sought nearly $5.2 million in legal fees and expenses in its final fee application earlier this month for its work in the Chapter 11 case.

Payless emerged from Chapter 11 in early August after closing more than 673 stores and shedding $435 million in debt. Munger Tolles, which had been paid a $200,000 retainer for its services as conflicts counsel to the debtor, sought payment for $936,321.61 in fees and expenses in its final fee application. Armstrong Teasdale also filed court papers seeking payment on $564,078.58 in fees and expenses that the St. Louis-based firm incurred during its role serving as local bankruptcy counsel to Payless. Canada’s Osler, Hoskin & Harcourt also advised Payless north of the border on matters related the Companies’ Creditors Arrangement Act (CCAA).

Rue21 Inc., a Warrendale, Pennsylvania-based teen fashion retailer that filed for bankruptcy in mid-May, also emerged from bankruptcy in recent days with 420 fewer stores. Kirkland, which disclosed in court papers that it had received $950,000 in advance retainers to advise Rue21 in its Chapter 11 case, has billed the debtor for more than $1.9 million in legal fees and expenses incurred between May 15 and July 31. Rue21’s local counsel, Reed Smith, has sought to be paid for $427,656.73 in fees and expenses during that same timeframe. Court records show that the firm also received $108,451.96 from the company in the year prior to its bankruptcy case.

As for Toys “R” Us, the home of Geoffrey the Giraffe has turned to Canadian firm Goodmans to handle CCAA proceedings. In Australia, Gilbert + Tobin is representing the company’s local affiliate in insolvency proceedings, according to local news reports, while Allens and King & Wood Mallesons are counseling Toys “R” Us’ lenders Down Under.

On Friday, Kirkland filed court papers detailing how much it has received so far in another big bankruptcy, the mid-September Chapter 11 filing of Seadrill Ltd. The Bermuda-based offshore oil driller paid an initial $500,000 retainer to the firm, which within the past year has received payments totaling a whopping $47.5 million, according to a declaration by Kirkland’s Sathy.

Kirkland lawyers are billing Seadrill at the same hourly rates as listed in the Toys “R” Us bankruptcy. Court filings show that Jackson Walker, which has been retained as co-counsel to the debtor, has received a $500,000 retainer from Seadrill for its services in the Chapter 11 case.