Cravath, Swaine To Advise On Harrisburg Bankruptcy Pro Bono, Will Charge Millions As Muni Default Dam Finally Breaks
Harrisburg, PA, whose bankruptcy is now about a year overdue, has just hired bankruptcy counsel: New York law firm Cravath, Swaine and Moore. The financial advisor has not been decided yet although the pitches there must be fast and furious, and probably involved every single bankruptcy advisory firm which recently has had exactly zero work courtesy of Ben Bernanke providing convertible DIPs at negative rates. Cravath took a tricky strategy to beat out other law firms: it would advise the city pro bono on its imminent Chapter 9. But don't think of it as money lost: think of it as league table credit, which will send the firm to the top of the ranks, and allow it to charge $1,000 an hour when the muni dominoes start tumbling left and right: after all Harrisburg is just the proverbial cherry pop. After it - the deluge. And the bankruptcy advisory vultures are already licking their chops over what will make the Lehman fee bonanza (now in the billions) seem like Greenspan's stingy monetary policy compared to Bernanke's global paradropping of Bennies.
From Dow Jones:
An elite New York law firm will advise Harrisburg City Council about a possible bankruptcy filing for free, while a state-appointed attorney will help city officials with immediate cash woes as Pennsylvania's capital teeters on insolvency.
The city council in a 6-0 vote late Tuesday approved hiring Cravath, Swaine and Moore, one of two finalists in its search for attorneys.
Councilman Brad Koplinski said Wednesday that council members were "pleasantly surprised" by Cravath's pitching its services pro bono, worth millions of dollars.
"We have someone in Cravath who we believe will give us a fair, impartial view of all of our options," Koplinski said.
Mayor Linda Thompson, who opposes a bankruptcy filing, welcomes the offer and will work with the attorneys, according to her spokesman Chuck Ardo.
"The firm will bring some reality into the picture," said Ardo, who said some in the city have misconceptions about municipal bankruptcy. "The firm, given its reputation, will advise the council in a much more realistic fashion."
As of yet it is unclear just what a bankruptcy will look like, and if Goldman is actively buying up the muni bonds in advance of a debt-to-equity, in which it will be the first bank to legally own the serfs making up the Harrisburg fiefdom.