Costs to liquidate Pillowtex pile up

$33 million for lawyers, advisers

Five years after Kannapolis textile giant Pillowtex closed, the bills for lawyers and other bankruptcy advisers in the case have topped $33 million.

Two law firms and an accounting agency collected about three-fourths of the money, according to a Charlotte Observer review of U.S. Bankruptcy Court records. And the bills keep piling up as Pillowtex continues to liquidate.

The fees outraged some former employees, who believed they never got a fair settlement from the company. Most netted an average of about $1,200.

"That just floors me," said Kannapolis resident Diane Winecoff, who spent about 45 years in the mill. "What are they doing to get that kind of money? They're not helping the workers."

Pillowtex abruptly shut down and filed for bankruptcy in July 2003 after more than a century in Cabarrus County. About 7,650 people lost their jobs, including more than 4,000 in Cabarrus and Rowan counties, part of the largest mass layoff in state history.

The $33.5 million bill is as of March, the last time the fees were updated. Most court-approved fees -- $30.6 million -- covered work before liquidation began in June 2007. That sum is about double the total that bankruptcy expert Lynn LoPucki had expected to see, based on his study of other cases and the size of assets when Pillowtex entered bankruptcy.

The length of the case and the number of firms involved contributed to increased fees, said LoPucki, a UCLA Law School professor writing a book on controlling professional fees in bankruptcy cases. Nineteen firms split the $33.5 million.

Of 240 large public companies that LoPucki studied, the median time between filing for bankruptcy and receiving court approval for their liquidation plan was about 1 1/2 years. Before a judge approved Pillowtex's liquidation plan last year, the company had needed four years to catalog and deal with claims from employees, vendors and others.

The case could stretch into next year. When it's completed, Pillowtex will have netted $218.5 million from selling assets such as its land and towel and sheet brands, as well as collecting money owed to the estate, according to a filing by its main law firm, Debevoise and Plimpton of New York City. Pillowtex is expected to distribute $230.1 million to creditors ranging from former employees to banks.

The law firms and other bankruptcy advisers also received their money from proceeds the estate collected.

The bankruptcy filing also shows that several partners at Debevoise and Plimpton charged $885 an hour. That comes to $14.75 a minute, or several dollars more than most Pillowtex workers earned in an hour.

Max Bowlin, a Kannapolis resident who worked at the mill for 43 years, called the professional fees "unreal." To him, $885 "is too high for anybody to make that kind of money."

Debevoise partner Richard Hahn, one of the attorneys earning the top fee, said the firm had a range of rates it charged. Some were below $100 an hour, records show, for law and docket clerks.

A Debevoise associate logged fees over four years of nearly $1.7 million for 4,592 billable hours, the equivalent of working full time for 2.2 years. Where possible, the firm tried to maintain staffing continuity for efficiency, Hahn said.

In court filings, Debevoise said its work on the complex case has provided substantial benefits to the estate and its creditors. In cooperation with its advisers and the committee of unsecured creditors, Pillowtex will have resolved about 4,400 claims that could have cost the company $2.8 billion.

Hahn said unsecured creditors -- groups with claims not secured by company assets -- got about 8 to 10 cents on the dollar, which he called much better than what was initially expected for their claims.