Case bjh11 Doc 413 Filed 01/13/12 Entered 01/13/12 18:54:06 Desc Main Document Page 1 of 22

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1 Main Document Page 1 of 22 Stephen A. McCartin (TX ) Holland Neff O'Neil (TX ) Virgil Ochoa (TX ) GARDERE WYNNE SEWELL LLP 3000 Thanksgiving Tower 1601 Elm Street Dallas, TX Telephone: (214) Facsimile: (214) smccartin@gardere.com honeil@gardere.com vochoa@gardere.com and Jeffrey C. Krause (CA 94053) Gregory K. Jones (CA ) STUTMAN, TREISTER & GLATT PROFESSIONAL CORPORATION 1901 Avenue of the Stars, 12th Floor Los Angeles, CA Telephone: (310) Facsimile: (310) jkrause@stutman.com gjones@stutman.com COUNSEL FOR DEBTORS AND DEBTORS IN POSSESSION IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION In re: R.E. LOANS, LLC, R.E. FUTURE, LLC and CAPITAL SALVAGE, a California corporation, Debtors. Chapter 11 Case No BJH Jointly Administered FIRST INTERIM FEE APPLICATION OF MACKINAC PARTNERS FOR ALLOWANCE OF FEES AND REIMBURSEMENT OF EXPENSES Fee Application of: Mackinac Partners Capacity: Financial Advisors/Restructuring Consultants Time Period: September 13, 2011-December 31, The Order Establishing Procedures for Interim Compensation and Reimbursement of Professionals [Docket No. 112] (the Compensation Order ) requires estate professionals such as Mackinac to file this First Fee Application REIMBURSEMENT OF EXPENSES - Page - 1

2 Main Document Page 2 of 22 Bankruptcy Petition Filed on: 09/13/2011 Date of Entry of Last Retention Order: 10/31/2011 Status of Case: Amount Requested as of 11/30/2011: Reductions: Fees: $916, Voluntary fee reductions: 8, Expenses: $ 63, Expense reductions: N/A Total: $980, Total Reductions: 8, Draw Down Request: Expense Detail: Retainer Received: $350, Copies per page cost and total: $(0.15 pp) Previous Draw Down(s): $0 Fax per page cost and total: N/A Remaining Retainer (now): $350, Computer Research: $ Requested Draw Down: N/A Other: $ Retainer Remaining (after): N/A Other: $ Hourly Rates Highest Billed Rate: $ Total Hours Billed as of 11/30/11: 2, Blended Rate: $ Total Fees Billed as of 11/30/11: $908, /s/ W. Farley Dakan January 13, 2012 Signature Date Preparer s Note: Net Amounts Requested equals the total fees and expenses requested for allowance less voluntary reductions. Total Compensation Due equals the Net Amounts Requested less payments already received from the Debtors. by January 13, 2012 and that such an application shall cover the period from the Petition Date through December 31, Compensation Order, 2(f). Due to internal account mechanisms and procedures, Mackinac has not been able to finalize an invoice of fees and expenses for the month of December, Thus, Mackinac will further supplement this First Fee Application for the fees and expenses incurred for the month of December, 2011 once such an invoice of fees and expenses is finalized. 2 This amount includes a voluntary reduction of $8, in fees. REIMBURSEMENT OF EXPENSES - Page - 2

3 Main Document Page 3 of 22 In re: IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS FORT WORTH DIVISION R.E. LOANS, LLC, R.E. FUTURE, LLC and CAPITAL SALVAGE, a California corporation, Debtors. Chapter 11 Case No BJH Jointly Administered FIRST INTERIM FEE APPLICATION OF MACKINAC PARTNERS FOR ALLOWANCE OF FEES AND REIMBURSEMENT OF EXPENSES A HEARING WILL BE CONDUCTED ON THIS MATTER ON FEBRUARY 7, 2012 AT 9:15 A.M. IN THE COURTROOM OF THE HONORABLE BARBARA J. HOUSER, UNITED STATES BANKRUPTCY JUDGE FOR THE NORTHERN DISTRICT OF TEXAS, AT 1100 COMMERCE STREET, 14TH FLOOR, DALLAS, TEXAS IF YOU OBJECT TO THE RELIEF REQUESTED HEREIN, YOU MUST RESPOND IN WRITING, SPECIFICALLY ANSWERING EACH PARAGRAPH OF THIS PLEADING. UNLESS OTHERWISE DIRECTED BY THE COURT, YOU MUST FILE YOUR RESPONSE WITH THE CLERK OF THE BANKRUPTCY COURT ON OR BEFORE 5:00 P.M. (C.S.T.) ON FEBRUARY 6, YOU MUST SERVE A COPY OF YOUR RESPONSE ON COUNSEL FOR THE DEBTOR; OTHERWISE, THE COURT MAY TREAT THE PLEADING AS UNOPPOSED AND GRANT THE RELIEF REQUESTED. Mackinac Partners ( Mackinac or Applicant ), as Restructuring Consultants and Chief Restructuring Officer for the Debtors, files this First Interim Fee Application of Mackinac Partners for Allowance of Fees and Reimbursement of Expenses (the First Fee Application ) REIMBURSEMENT OF EXPENSES - Page - 3

4 Main Document Page 4 of 22 for the period commencing on September 13, 2011, and through December 31, 2011 (the First Application Period ). 3 In support of the First Fee Application, Mackinac states as follows: I. SUMMARY OF REQUEST Name of Applicant: Role in Case: Mackinac Partners Financial Advisors/Restructuring Consultants First Application Period: September 13, 2011 through December 31, 2011 Fees 4 Expenses 5 Total 6 Amounts Requested (as of 11/30/11) 7 $908, $63, $971, Less: Amounts Previously Paid $726, $63, $790, Total Compensation Requested $181, $0.00 = $181, II. JURISDICTION AND VENUE 1. This Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334, and this matter constitutes a core proceeding pursuant to 28 U.S.C. 157(b)(2). Venue in this district is proper pursuant to 28 U.S.C and The basis for the relief requested herein are 11 U.S.C. 330 and 331, Federal Rule of Bankruptcy Procedure (the Bankruptcy Rules ) 2016(a) and the Local Rules of the United States Bankruptcy Court for the Northern District of Texas (the Local Rules ). This First Fee Application is also filed in accordance with the Final Order Authorizing Employment of Mackinac Partners and James A. Weissenborn from the Petition Date, to Provide Interim Management and Management Assistance to the Debtors 3 As of the date of the filing of the First Fee Application, the data for the month of December, 2011 had not been finalized by Mackinac s accounting programs and procedures. Those amounts should be finalized prior to January 20, 2012 and this First Fee Application will be supplemented promptly thereafter. 4 Please refer to footnote 1. 5 Please refer to footnote 1. 6 Please refer to footnote 1. 7 Please refer to footnote 1. 8 This amount includes a voluntary reduction of $8, in fees. REIMBURSEMENT OF EXPENSES - Page - 4

5 Main Document Page 5 of 22 Pursuant to 11 U.S.C. 363 [Docket No. 179], and the Order Establishing Procedures for Interim Compensation and Reimbursement of Professionals [Docket No. 112]. III. BACKGROUND 2. R.E. Loans, LLC ( R.E. Loans ) Capital Salvage, a California corporation ( Capital Salvage ) and R.E. Future, LLC ( R.E. Future, collectively, the Debtors ) each filed a voluntary chapter 11 petition on September 13, 2011 (the Petition Date ). Pursuant to Bankruptcy Code sections 1107(a) and 1108, the Debtors are continuing to operate their respective businesses and managing their respective financial affairs as debtors in possession. 3. R.E. Loans is a California limited liability company. B-4 Partners, LLC ( B-4 ), a California limited liability company, is currently the sole member of R.E. Loans and it was the manager of R.E. Loans until the Petition Date. Capital Salvage and R.E. Future (the REO Subsidiaries ) are entities that own certain real property acquired by such entities following foreclosure proceedings initiated by R.E. Loans. R.E. Loans is the sole shareholder of Capital Salvage and the sole member and was, until the Petition Date, the sole manager of R.E. Future. 4. The Debtors cases are being jointly administered by Order entered September 22, 2011 under Case No bjh11, pending in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. See Order Directing Joint Administration of Chapter 11 Cases [Docket No. 78]. 5. An Official Committee of Noteholders (the Committee ) was appointed on September 22, See Appointment of the Official Committee of Note Holders [Docket No. 77]. REIMBURSEMENT OF EXPENSES - Page - 5

6 Main Document Page 6 of 22 IV. RETENTION OF MACKINAC AND COMPENSATION PROCEDURES A. Mackinac Employment 6. On September 13, 2011, the Debtors filed the Application to Authorize Employment of Mackinac Partners and James A. Weissenborn on an Interim and Final Basis from the Petition Date, to Provide Interim Management and Management Assistance to the Debtors Pursuant to 11 U.S.C. 363 [Docket No. 10] (the Mackinac Application ). The Mackinac Application was supported by the Declaration of James A. Weissenborn in Support of Application to Authorize Employment of Mackinac Partners and James A. Weissenborn on an Interim and Final Basis from the Petition Date, to Provide Interim Management and Management Assistance to the Debtors Pursuant to 11 U.S.C. 363 [Docket No. 11]. 7. On September 19, 2011, the Court entered an Interim Order Authorizing Employment of Mackinac Partners and James A. Weissenborn on an Interim and Final Basis from the Petition Date, to Provide Interim Management and Management Assistance to the Debtors Pursuant to 11 U.S.C. 363 [Docket No. 52]. 8. On October 31, 2011, the Court approved the Mackinac Application on a final basis by entering the Final Order Authorizing Employment of Mackinac Partners and James A. Weissenborn on an Interim and Final Basis from the Petition Date, to Provide Interim Management and Management Assistance to the Debtors Pursuant to 11 U.S.C. 363 [Docket No. 179] (the Retention Order ), which was effective as of the Petition Date. B. Compensation Procedures 9. On October 11, 2011, this Court established procedures for the interim compensation and reimbursement of professionals by entering the Order Establishing Procedures for Interim Compensation and Reimbursement of Professionals [Docket No. 112] REIMBURSEMENT OF EXPENSES - Page - 6

7 Main Document Page 7 of 22 (the Compensation Order ). The Compensation Order authorized estate professionals to submit monthly fee and expense statements to the Debtors, counsel for the Debtors, counsel for the Committee, the United States Trustee, and counsel for Wells Fargo Capital Finance, LLC ( Wells Fargo, collectively, the Notice Parties ). If no objections were communicated by any of the Notice Parties, such monthly fee and expense statements were submitted for payment by the Debtors in the amounts equal to eighty percent (80%) of the monthly fees earned and onehundred percent (100%) of the monthly expenses incurred by the professionals during that month. 10. The Compensation Order also requires each estate professional to file an application with this Court every four months for interim approval of that professional s compensation and expense reimbursements and requesting payment of the remaining twenty percent (20%) of fees (the Holdback ) earned during the application period. The Compensation Order established that the first application be filed by on January 13, 2012, for the period from the Petition Date through December 31, During the First Application Period, in accordance with the Compensation Order, Mackinac submitted monthly invoices to the Notice Parties. Mackinac received no objection to any of its invoices; consequently, in accordance with the Compensation Order, the Debtors have paid Mackinac, in the aggregate, $726, in fees and $63, in expense reimbursements. Mackinac seeks approval of all fees and expenses incurred during the First Application Period, and likewise requests authority to receive payment of the Holdback, as well as any other fees or expenses requested herein which remain unpaid. REIMBURSEMENT OF EXPENSES - Page - 7

8 Main Document Page 8 of 22 V. PROGRESS DURING THE FIRST APPLICATION PERIOD AND CURRENT STATUS A. Timeline of Major Events in First Application Period From the Petition Date Through November 30, This First Fee Application contains information pertaining to the services rendered by Mackinac for the period from September 13, 2011 to November 30, Mackinac will further supplement this Application with its December Invoice once it has been finalized During the First Application Period, Mackinac has assumed responsibility as the sole manager of both R.E. Loans and R.E. Future and James A. Weissenborn has been elected as the only director and the President of Capital Salvage. In its capacity, Mackinac runs day-to-day operations for all of the Debtors and oversees all management decisions for the Debtors. Specifically, Mackinac has rendered services to the Debtors in three main areas, which will be more fully described below: a. General management of the Debtors financial affairs; b. Assisting the Debtors in their efforts to dispose of assets; and c. Aiding and advising Debtors counsel relating to the activities and decisions involved in these chapter 11 cases. B. General Management of the Debtors Affairs 14. During the pendency of these cases, Mackinac has managed the day-to-day affairs of the Debtors. Among other services that Mackinac has rendered, Mackinac controls the 9 Refer to footnote Refer to footnote 1. REIMBURSEMENT OF EXPENSES - Page - 8

9 Main Document Page 9 of 22 Debtors disbursements, makes staffing decisions, manages the Debtors cash and other assets, and prepares financial reports. 15. Mackinac has also developed a business plan to deal with the Debtors liquidity issues and prepared various cash flow analyses and budgets necessary for operations. 16. Mackinac routinely interfaces with the Debtors debtor in possession financing (the DIP Financing ) lender, Wells Fargo Capital Finance, LLC (the DIP Lender ) to ensure compliance with the terms of the DIP Financing and conformity to the DIP Financing budget. C. Asset Disposition 17. The Debtors assets are predominantly secured promissory notes and real property in locations throughout the United States. During the First Application Period, Mackinac has made significant progress in disposing of the Debtors assets. Pursuant to several orders of this Court, Mackinac has also been successful marketing and selling various pieces of the Debtors real property and/or otherwise working with Land Advisors, DebtX and the various other brokers and professionals engaged to market and sell assets Mackinac has also continued to market and maintain the Debtors real property. Considering the multitude of real property that the Debtors own, among other things, Mackinac has had to continue to market the properties, entertain offers, negotiate with prospective buyers, obtain real property appraisals, and interact with DebtX and LandAdvisors. As a part of the 11 Multiple pieces of real property and assets of the Debtors were disposed of pursuant to orders of this Court. See e.g. Agreed Order Granting Emergency Motion for Order Authorizing Debtors to Consummate Contract of Sale and Escrow Agreement with Forestar (USA) Real Estate Group [Docket No. 144]; see also Order Granting Motion for Order Pursuant to Bankruptcy Code Section 363: (I) Authorizing the Sale of Lots at the Weyrich Development and JC Reeves Property, Free and Clear of Liens, Claims, and Encumbrances and (II) Establishing Procedures for the Continued Sale of Lots, In the Ordinary Course of the Debtors Businesses, Free and Clear of Liens, Claims, and Encumbrances [Docket No. 316]; Order Granting Motion for Order Pursuant to Bankruptcy Code Section 363: (1) Establishing Procedures for the Release of Liens on Properties at the Pointe Lakeview Homes and (2) Determining That Prior Lien Releases Were Made in the Ordinary Course of Business [Docket No. 317]; Order Granting Motion For Order (I) Pursuant to Bankruptcy Code Section 363 Authorizing the Sale of Certain Real Property and Improvements in Thurston County, Washington to Lott Clean Water Alliance, Free and Clear of Liens, Claims, and Encumbrances and (II) Approving and Directing Payment of Brokers Commission for Sale Transaction [Docket No. 319]. REIMBURSEMENT OF EXPENSES - Page - 9

10 Main Document Page 10 of 22 constant marketing of the Debtors real property, Mackinac has also specifically developed marketing materials, identified and evaluated prospective purchasers, and conducted the sale process of multiple pieces of real property. Maintenance of the Debtors multitude of real property involves site visits to the actual property themselves, site visits to comparable properties in order to ascertain the market value of the real properties, and working with the asset managers of the real property in preserving the value of the Debtors assets. When it has been necessary, Mackinac has also had to engage in collection efforts on various loans through foreclosures or other means. 19. Moreover, Mackinac has also had to analyze the tax implications related to running the Debtors businesses and the disposition the Debtors assets as well as monitor the payments on the large amount of promissory notes involved in these cases. D. Chapter 11 Cases Administration 20. Mackinac has been an invaluable source in aiding the Debtors counsel in the administration of these estates. Mackinac has been: a. Aiding in the preparation of the Debtors Schedules and Statements of Financial Affairs; b. Preparing the Monthly Operating Reports and necessary budgets to be filed with this Court; c. Ensuring compliance with the administrative requirements of a debtor in possession imposed by the Office of the United States Trustee and the Bankruptcy code in general; d. Negotiating a chapter 11 plan of reorganization and disclosure statement with various constituents in these cases, namely, Wells Fargo Capital Finance and the Committee; e. Assisting Debtors counsel in and preparing for litigation-related matters including, but not limited to, (i) responding to the SEC subpoena and (ii) REIMBURSEMENT OF EXPENSES - Page - 10

11 Main Document Page 11 of 22 preparing and providing multitudes of documents and other discovery to the Committee. f. Communicating with creditors, interest holders, and this Court relating to various motions and other developments in these cases. VI. COMPENSATION REQUESTED 21. By this First Fee Application, Mackinac seeks approval of compensation for services rendered from September 13, 2011, through December 31, As of the filing of this First Fee Application, the amounts available are only through November 30, 2011, and total fees in the amount of $908, and expenses incurred in the amount of $63, This First Fee Application will be supplemented with the additional amounts for December, Attached as Exhibit A is a summary of all fees and expenses requested for payment by Mackinac and an accounting of all payments received to date by Mackinac from the Debtors. 22. As of November 30, 2011, Mackinac had expended an aggregate of approximately 2, hours on these cases, resulting in an estimated blended hourly rate of about $ for the Mackinac professionals working on the case. The rates charged are Mackinac s normal hourly billing rates in effect during the First Application Period. 23. Mackinac represents that, to the best of its knowledge, it has complied with sections 330 and 331 of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and the Guidelines adopted by the Executive Office for the United States Trustee. 24. No agreement or understanding exists between Mackinac and any other entity for the sharing of compensation to be received for services rendered in connection with these cases. 25. All services performed by Mackinac were performed for and on the behalf of the Debtors and not on behalf of any other individual or entity. These services were rendered in 12 Please refer to footnote 1. REIMBURSEMENT OF EXPENSES - Page - 11

12 Main Document Page 12 of 22 discharge of Mackinac s professional responsibilities as financial advisors and restructuring consultants to the Debtors in these cases. Mackinac s services have been substantial, necessary, and beneficial to the Debtors and their estates and to the creditors thereof. 26. Mackinac maintained written records of the time expended by its professionals in the rendition of professional services to the Debtors. Attached hereto as Exhibit B is a breakdown of the hours, hourly rates, and fees attributable to the professionals who have performed services on behalf of Debtors through November 30, In addition, Mackinac has categorized these services by task. Exhibit B also includes a summary of the amount of hours incurred relative to each category, and records of all actual and necessary out-of-pocket expenses incurred in connection with the rendition of services on behalf of the Debtors. 27. Mackinac has worked to keep the number of professionals involved in this case to a minimum at all stages to (a) maximize familiarity with various issues and avoid duplication of efforts, (b) employ special expertise in any given field when necessary, and (c) maximize economic use of professionals consistent with sound professional practice. 28. Accordingly, Mackinac hereby submits its request for fees and expenses for the First Application Period. VII. SUMMARY OF SERVICES PERFORMED 29. The professional services performed by Mackinac on behalf of the Debtors through November 30, 2011, are fully described in the detailed time entries attached hereto as Exhibit B and summarized in Exhibit A. In addition, Mackinac has tracked the time billed in this case by certain categories, which are summarized as follows: a. Accounting/Auditing/Development of Cash Projections. These categories include all work performed by Mackinac relating to accounting and auditing of the Debtors businesses as well as the REIMBURSEMENT OF EXPENSES - Page - 12

13 Main Document Page 13 of 22 development of cash projections. Examples of this category include drafting draw requests, updating budgets and variance reports, and analyzing various budgets. During the First Application Period, fees in this category total $16,250, representing 53.3 hours of professional services. b. Asset Analysis and Recovery/Asset Disposition/Contracts. These categories include fees related to the going-concern sale of the Debtor s real property and certain of its assets. This category includes services related to (i) negotiation and development of the marketing and sales of real property, (ii) meetings and discussions with various parties with interest in the Debtors assets, (iii) research and preparation regarding motions to sell assets, and (iv) meeting with borrowers and lenders related to the sale of the Debtors assets. During the First Application Period, fees in this category total $152,087, representing hours of professional services. c. Business Model/Support. This category includes fees related to drafting, revising, and analyzing the Debtors business model. During the First Application Period, fees in this category total $7,138, representing 16.6 hours of professional services. d. Business Operations. This category includes fees related to the day-to-day operations of the Debtors businesses including, but not limited to, property management, meetings with asset managers, property tax planning, meeting with employees of the Debtors, reviewing and analyzing of various documents and drafting correspondence. During the First Application Period, fees in this category total $350,861, representing hours of professional services. e. Case Administration/Claims Administration and Objections/ General Overview. These categories include fees applicable to services related to bankruptcy activities, including, but not limited to: (i) the preparation of statements of financial affairs and schedules of assets and liabilities, (ii) the preparation of the Debtors Monthly Operating Reports to be filed with this Court, (iii) the review of executory contracts and loan documents, and (iv) the review of bankruptcy filings. During the First Application Period, fees in this category total $97,669, representing hours of professional services. f. Cash Management. This category includes fees applicable to services, including, but not limited to: (i) addressing issues related to bank accounts of the Debtors, and (ii) review and analysis of issues pertaining to the DIP Financing. During the First REIMBURSEMENT OF EXPENSES - Page - 13

14 Main Document Page 14 of 22 Application Period, fees in this category total $16,989.00, representing 47.3 hours of professional services. g. Creditor Requests. This category includes fees applicable to services related to responding to creditors requests, noteholder inquiries and providing documents and information to the U.S. Trustee s office. During the First Application Period, fees in this category total $952.00, representing 1.7 hours of professional services. h. Data Analysis. This category includes, but is not limited to, services rendered on various information technology issues, updating owned real estate listing statuses of the Debtors real property, running amortization analyses on loans, and creating financial models. During the First Application Period, fees in this category total $20,093, representing 72.7 hours of professional services. i. Document Generation/Due Diligence/Report and Document Creation. This category includes fees applicable to services, including, but not limited to the generation, production, retrieval, and analysis of various documents requested by interested parties such as the Committee. During the First Application Period, fees in this category total $37,776, representing hours of professional services. j. Fee/Employment Application and Objections. This category relates to negotiation, preparation and prosecution of employment applications of Mackinac. The fees in this category also relate to the review, preparation, objection, and/or negotiation of all monthly fee statements and fee applications. During the First Application Period, fees in this category total $5,420, representing 10.3 hours of professional services. k. Financing This category includes fees applicable to services including, but not limited to, resolving issues related to the financing needs of the Debtors such as the Debtors potential exit facilities, reviewing proposals from potential lenders, and managing the data room and due diligence information to prospective buyers. During the First Application Period, fees in this category total $80,432, representing hours of professional services. l. Litigation. This category includes fees applicable to services, including, but not limited to: (i) review and analysis of complaints and lawsuits that have been filed against the Debtors, (ii) addressing issues related to the SEC subpoena and other SEC- REIMBURSEMENT OF EXPENSES - Page - 14

15 Main Document Page 15 of 22 related matters, and (iii) litigation document review. During the First Application Period, fees in this category total $50,323, representing hours of professional services. m. Meetings/Preparation. This category includes fees applicable to services rendered in preparation for and attendance at meetings, preparation for and attendance at court hearings and 341 creditors meetings. During the First Application Period, fees in this category total $47,592, representing hours of professional services. n. Meeting of Creditors. This category includes fees applicable to services pertaining to the preparation for Committee calls, obtaining and disseminating information to the Committee s professionals, and responding to Committee inquiries. During the First Application Period, fees in this category total $23,576, representing 42.1 hours of professional services. o. Organization/Field Work. This category includes fees applicable to services related to site visits, comparable tract visits, and due diligence meetings pertaining to the Sandpoint (Pend Orielle) property. During the First Application Period, fees in this category total $2,805, representing 10.2 hours of professional services. p. Plan and Disclosure Statement. This category includes fees applicable to services, including, but not limited to: (i) discussions with attorneys regarding the proposed plan of reorganization, and (ii) work with respect to formulation of the proposed Plan and Disclosure Statement. During the First Application Period, fees in this category total $2,856, representing 5.1 hours of professional services. q. Relief from Stay Proceedings. This category includes fees applicable to services addressing applicable automatic stay issues as it relates to the Debtors businesses and the Debtors creditors. During the First Application Period, fees in this category total $616, representing 1.1 hours of professional services. r. Strategic Planning. This category includes fees applicable to services rendered by Mackinac as it relates to overall strategic planning. During the First Application Period, fees in this category total $330, representing 1.2 hours of professional services. s. Tax Issues. This category includes fees applicable to services rendered in addressing the tax consequences and tax issues that have arisen or will arise in the disposition of the Debtors assets. REIMBURSEMENT OF EXPENSES - Page - 15

16 Main Document Page 16 of 22 During the First Application Period, fees in this category total $2,530, representing 5.4 hours of professional services. t. Vendor Discussions. This category includes fees applicable to services provided as it relates to the effect of the bankruptcy cases on the Debtors vendors. During the First Application Period, fees in this category total $560, representing 1.0 hours of professional services. VIII. SUMMARY OF EXPENSES 30. It has been necessary for Mackinac to incur and to pay in advance out-of-pocket expenses in connection with its representation of Debtors during the First Application Period. Careful records of these expenses have been maintained by Mackinac. As reflected on Exhibit B, those expenses total $63, through November 30, IX. JUSTIFICATION FOR AWARD 31. In an attempt to establish an objective basis for determining the amount of compensation that is reasonable for professionals services pursuant to section 330 of the Bankruptcy Code, the Fifth Circuit has instructed the lower courts that they must explain the findings and reasons on which an award of professional fees is based. See In re First Colonial Corp. of America, 544 F.2d 1291 (5th Cir.), cert. denied, 431 U.S. 904 (1977). 32. To aid the lower courts, the First Colonial court applied the factors originally set forth in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974). The Johnson factors to be considered in determining the reasonableness of professionals fees are delineated below, and Mackinac s compliance therewith, if applicable, is described following each factor: a. Time and Labor Required. Exhibit B to this First Fee Application, lists, in detail, all of the work performed by Mackinac for which compensation is requested during the First Application Period. Mackinac submits that the information contained in these exhibits supports the fees requested and reflects the reasonableness of such fees. Through November 30, 2011, Mackinac has billed REIMBURSEMENT OF EXPENSES - Page - 16

17 Main Document Page 17 of 22 2, hours for total fees of $908,160.25, at a blended hourly rate of $ b. Novelty and Difficulty. Mackinac believes that various issues involved in this case have been extremely complex and challenging. This case has required swift action, and has required Mackinac professionals to quickly assess the situation and available information and to then immediately develop and implement the necessary processes and reporting to manage cash, forecast operations and provide required bankruptcy disclosures. In addition to the focus on necessary financial processes and reporting, Mackinac was involved in pulling together various constituents to address funding issues and work with the Debtors and their advisors and constituents to manage the bankruptcy process and development of an exit strategy. c. Skill Requisite to Perform the Legal Service Properly. Mackinac professionals working on this matter are specialists in bankruptcy and restructuring, specifically related to managing distressed real property assets. Mackinac contends that consultants without such expertise would have expended many more hours addressing the issues raised in this case thus far. d. Preclusion of Other Employment. The time demands of general representation of the Debtors in these cases resulted in some disruption of other employment engagements undertaken by Mackinac. While no large-scale reassignment of work has been required to properly represent the Debtors, this representation did consume a significant amount of time and preclude work for other clients. e. Customary Fee. The hourly rates charged for each professional performing services for these estates are summarized on Exhibit B. These rates are no greater, and in some instances may be lower, than those being charged by professionals with similar qualifications and experience. The rates used in these cases are the same as those customarily charged by Mackinac to their usual and regular corporate legal clients. Based on investigation by Mackinac, the hourly rates requested herein compare favorably with average costs for similar consultancy services being provided by national and regional consulting professionals that regularly appear in complex cases before the Northern District of Texas. f. Whether the Fee is Fixed or Contingent. Mackinac s fees are neither fixed nor contingent other than on the contingency of allowance by the Court and availability of assets for payment. REIMBURSEMENT OF EXPENSES - Page - 17

18 Main Document Page 18 of 22 Fees are based on the actual total number of hours worked, less hours written off, plus actual expenses incurred. g. Time Limitations. The provision of services to a debtor in a chapter 11 case is inherently time sensitive, particularly in the first few months of a proceeding such as this one in which time is of the essence. Nonetheless, in trying to facilitate this case to enable the estates to receive maximum value for their assets, Mackinac was required to provide capable consulting services within the time limitations imposed by the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, attorneys for various parties in interest, and this Court. h. Amount Involved and Results Obtained. Exhibit B to this First Fee Application details Mackinac s work during the First Application Period, the date services were rendered, the individual performing such services, descriptions of the services provided, and the time expended per category of tasks. Mackinac has assisted the Debtors in all facets of their liquidation of assets as well as managing the Debtors day-to-day operations. Mackinac believes that the information contained in these exhibits supports the reasonableness of its requested compensation and that it is fair and justified in these cases. i. Experience, Reputation, and Ability of the Attorneys. Mackinac s professionals have regularly appeared in significant representations over many years, including bankruptcy cases throughout the United States. j. Undesirability of Case. Mackinac has not found this case to be undesirable, but rather, considers the issues that have been raised in this case to be of the type that Mackinac is trained to adequately address. k. Nature and Length of Professional Relationship with Client. As noted in the Mackinac Application, Mackinac began its involvement with the Debtors approximately one and a half years prior to the Petition Date. l. Awards in Similar Cases. Based on Mackinac s experience, the fees requested herein are consistent with fees allowed in proceedings of similar scope for the services rendered. REIMBURSEMENT OF EXPENSES - Page - 18

19 Main Document Page 19 of 22 WHEREFORE, Mackinac Partners respectfully request that this Court enter an order (a) allowing and authorizing compensation to Mackinac through December 31, 2011, in the amounts set forth herein as well as the amounts for the month of December, 2011 to be provided in a supplement to this First Fee Application; (b) directing the Debtors, and their agents or representatives, to immediately pay any unpaid amounts outstanding; and (c) awarding Mackinac such other and further relief that this Court deems just and proper. DATED: January 13, 2012 Respectfully submitted by: /s/ W. Farley Dakan W. Farley Dakan MACKINAC PARTNERS 816 Congress Avenue, Suite 1280 Austin, TX Telephone: (512) fdakan@mackinacpartners.com FINANCIAL ADVISORS/RESTRUCTURING CONSULTANTS FOR DEBTOR AND DEBTOR- IN-POSSESSION /s/ Holland N. O Neil Stephen A. McCartin (TX ) Holland Neff O'Neil (TX ) Virgil Ochoa (TX ) GARDERE WYNNE SEWELL LLP 3000 Thanksgiving Tower 1601 Elm Street Dallas, TX Telephone: (214) Facsimile: (214) smccartin@gardere.com honeil@gardere.com vochoa@gardere.com REIMBURSEMENT OF EXPENSES - Page - 19

20 Main Document Page 20 of 22 and Jeffrey C. Krause (CA 94053) Gregory K. Jones (CA ) STUTMAN, TREISTER & GLATT PROFESSIONAL CORPORATION 1901 Avenue of the Stars, 12th Floor Los Angeles, CA Telephone: (310) Facsimile: (310) COUNSEL FOR DEBTORS AND DEBTORS IN POSSESSION CERTIFICATE OF COUNSEL I hereby certify that I have read the Fee Application and, to the best of my knowledge, information, and belief, formed after reasonable inquiry, that, except as noted in the Fee Application, the compensation and expense reimbursement sought therein is in conformity with Guidelines for Compensation and Expense Reimbursement of Professionals. I further certify that the compensation and expense reimbursement requested are billed at rates, in accordance with the standard practices of Mackinac, which are no less favorable than those customarily employed by Mackinac and generally accepted by Mackinac s clients. /s/ W. Farley Dakan W. Farley Dakan REIMBURSEMENT OF EXPENSES - Page - 20

21 Main Document Page 21 of 22 EXHIBIT A REIMBURSEMENT OF EXPENSES - Page - 21

22 Main Document Page 22 of 22 EXHIBIT B REIMBURSEMENT OF EXPENSES - Page - 22