Man Overboard!

As Colorado's Ocean Journey tries to stay afloat in a sea of red ink, bankruptcy experts keep nibbling away at the aquarium's finances.

When it decided to file for Chapter 11 in April, Ocean Journey hired the international law firm of LeBoeuf, Lamb, Greene & MacRae to handle the legal side of its restructuring -- at the "bargain rate" of $395 an hour for the firm's lead partner and $100 an hour per paralegal. The aquarium also retained its longtime lawyers at Holme Roberts & Owen to manage other aspects of the reorganization at similar prices ("Shark Bait," July 4).

And the feeding frenzy continues.

PricewaterhouseCoopers, which was hired to serve as Ocean Journey's financial advisor through the bankruptcy proceedings, recently billed the aquarium $117,000 for work performed through August. But according to Denver assistant city attorney Eugene Kottenstette, FTI Consulting, Inc., which acquired PwC's Business Recovery Services division earlier this year, is reserving the right to charge Ocean Journey an additional $100,000 or more for "previously unbilled services" -- including trips to other aquariums.

The City of Denver, which early on loaned Ocean Journey $6.1 million and remains a creditor, has had enough of the swelling expenses. On October 30, it filed an objection to the fees -- the first cost-related objection so far in the bankruptcy case. "Aquariums in Tampa, Florida, and Seattle, Washington, have little to do with Denver's Ocean Journey, yet thousands of dollars have apparently been spent by Debtor's financial advisor in studying these foreign aquariums...none of which has improved the financial performance of the Debtor," Kottenstette argues in his filing with United States Bankruptcy Court.

"Debtor appears to be close to exhausting new contributions for going forward expenses with professional fees," Kottenstette continues. "Professional fees of the magnitude contemplated by FTI, two law firms and an appraiser will adversely affect the ability to put together a feasible plan of reorganization."

Is Ocean Journey being bankrupted by its own bankruptcy?

Carl Eklund doesn't think so. Lead partner at the Denver office of LeBoeuf, Lamb, Greene & MacRae, Eklund insists that the aquarium "is not on the verge of running out of money." In fact, Ocean Journey announced just last week that it expects to file a reorganization plan by the end of the year.

Ocean Journey spokeswoman Kimberly Langston says she can't disclose how much the aquarium is budgeting to restructure its $57 million bond debt. The organization spent $733,000 on operations and bankruptcy-related expenses between April and September, she notes, and has enough money to continue paying bankruptcy fees if its insolvency case is completed by the end of 2002. "If this goes on beyond the end of the year," she concedes, "we'll probably need to look at raising extra funds."

Kottenstette says he can't understand why Ocean Journey hired an expensive international firm like PwC when "there are certainly smaller local financial advisors available."

PwC was chosen because of its expertise, Langston responds. "They have a group that focuses just on aquariums and related industries," she says. "I think the concern with the city is whether FTI will bill us for hours PwC has already given us for free," she adds, explaining that PwC performed some pro bono work. And at this point, aquarium officials aren't sure what FTI will be billing them. (The FTI director in charge of the Ocean Journey bankruptcy did not return calls from Westword.)

"I think the city is just being cautious and looking out for its interests," Langston says. "I trust the bankruptcy judge to raise a red flag if he thinks anything's out of line."

The opportunity to raise that red flag should come soon: Either the judge will call a hearing on the city's objection, or the parties will settle. Until then, Ocean Journey is betting on a compromise with its bondholders. In a news release issued last week, the aquarium noted that recent discussions with bondholders were "encouraging and represent positive steps for Ocean Journey to remain open."

Reorganization may not go as swimmingly as Ocean Journey would hope, however. The concluding argument in Kottenstette's objection, which hints at the city's growing impatience and frustration, sounds dark for the foundering fish house: "Professionals have been engaged for seven months, during which time Denver made no objections to the discretion of the Debtor, but there is no plan, no appraisal of improvements or land, no improvement of operations, no payment of adequate protection, no payment of real estate taxes on parcels generating rent, and substantial administrative expenses are accruing, only a portion of which have been disclosed. It is definitely time for the Debtor to cut administrative expenses and probably operational expenses as well."

Within the next few months, Denver should know if Ocean Journey beaches or buoys.

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Julie Jargon
Contact: Julie Jargon