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The (Monthly) Cost Of Bankruptcy

Tyler Durden's picture





 

Readers have been recently inquiring why it is that so many financial advisors have sprouted all over the place and are scrambling to represent bankrupt companies: after all the company is, well, "bankrupt" - how much money can financial advisors really make on these kinds of deals? The answer may be surprising, especially in light of the proliferation of various splinter financial advisors who had previously been part of larger firms.

I present to you comparable fee schedule, compliments of Miller Buckfire, which itself was recently the target of a gratuitous campaign to demonetize the advisor in its noble (yet definitely not pro bono) cause of representing bankrupt REIT General Growth Properties. Luckily, the firm managed to convince the Judge and anyone else who cared that the total complete all in cap of $33 million in the event of a successful restructuring (and somehow nobody even jokingly assumed the Obama administration would let this bellweather of everything that is wrong in CRE liquidate) is more than earned: whoever said being proficient with excel macros, making pretty powerpoints and having a (formerly) big rolodex does not pay off.

But back to the matter at hand: below are the monthly retainer fees that firms such as Evercore ($400,000 a month in its reorganization of nationalized General Motors), Lazard, Blackstone and Rothschild extract out of complacent creditor committees and nationalized entities (in colorful splendor compliments of Miller Buckfire):

So when you wonder next how it is that banks will sustain themselves in the future and expense $1,000 dinners every night, now that IPOs (as much as Cohen and Steers would like to invest in the IPO of Simon Property for the 2nd time... and 3rd) and M&A are dead, Goldman controls all equity and fixed income markets, and the vertical yield curve is set to flatten, wonder no more: the vultures already are circling and are picking off the meat of their clients to the tune of about $10,000/day.

And speaking of $1,000 dinners, shortly Zero Hedge will analyze the expense report of one Capstone Advisory Group, made famous for employing one Robert Manzo, and how its "investment bankers" tried to slip one too many past the myopic eyes of its dazed, shocked and hypnotized creditors who had already gotten the Vaseline treatment thanks to Stephen Rattner's strikingly convincing negotiating tactics.

 


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Tue, 08/11/2009 - 21:58 | Link to Comment Anonymous
Tue, 08/11/2009 - 22:14 | Link to Comment Anonymous
Wed, 08/12/2009 - 02:52 | Link to Comment KevinB
KevinB's picture

Somehow, I don't think Elliott is popping up quite as often as he used to...

Tue, 08/11/2009 - 22:56 | Link to Comment Anonymous
Tue, 08/11/2009 - 22:56 | Link to Comment Anonymous
Tue, 08/11/2009 - 23:14 | Link to Comment channel_zero
channel_zero's picture

the law firms and and financial consultants ARE thieves. they are not 'basically' thieves , or 'like' thieves. they simply are thieves. they have legal authority by the judge who almost always signs off on the bills. law firms over-bill and make up billable hours that don't exist.

I can second this observation. I worked for an accountant who had first-hand experience and did not care for the fantasy billing of bankruptcy accountants.

It just goes to show you there are no rewards for an honest days labor.

Tue, 08/11/2009 - 23:17 | Link to Comment Anonymous
Wed, 08/12/2009 - 00:09 | Link to Comment Anonymous
Wed, 08/12/2009 - 02:14 | Link to Comment Anal_yst
Anal_yst's picture

My only qualm with your very informative post is that firms like Evercore and Blackstone are virtually impossible (although not literally) to get-into straight out of college.  Even to get a gig on their "A" restructuring team after say 2-3 years work and a top-10 B-school is an impressive feat.  Not impossible, again, but to say there's tons of "non-value-add" junior people methinks might be a bit of a stretch. 

Wed, 08/12/2009 - 00:37 | Link to Comment Anonymous
Wed, 08/12/2009 - 03:16 | Link to Comment Anonymous
Wed, 08/12/2009 - 08:04 | Link to Comment Anonymous
Tue, 08/11/2009 - 23:00 | Link to Comment Anonymous
Tue, 08/11/2009 - 23:09 | Link to Comment mgarrett84
mgarrett84's picture

Don't Heavily focus on single names any more, but got one here for you.   NYSE:FCN they are killing it in this environment with increased demand from bankruptcy and related events.  Forensic account unit should be really strong here.  

 

This was one of my few stocks I was willing to consider being long in 2007 when I figured came to realize sup-prime would be where the credit-crisis would first manifest itself.  

 

TYLER,  got a question for you.   Do you believe the shock that rippled through the markets in march 2007 (partially a yen carry unwind)  was caused by a large institution (maybe GS) positioning for the coming crisis.  Also,  was the crisis really a surprise to most?  I was 23 at the time and didn't have deepest understanding of markets and the economy,  but the coming crisis was blatantly obvious to me in size and scope.  Following many paths led me to the same conclusion as well.  Would really like to here your take on this.

Tue, 08/11/2009 - 23:14 | Link to Comment Anonymous
Wed, 08/12/2009 - 16:05 | Link to Comment frozenfood (not verified)
Wed, 08/12/2009 - 00:13 | Link to Comment Handle with care
Handle with care's picture

I've seen this at the lower end when VC funded companies go bust.

 

Amazingly the amount of money left over after the assets have been sold is almost always the same amount as the receivers fees!

 

Astonishing coincidence.  Or more likely they price the assets low to get a quick sale (hmm seem familiar) so they can get paid quickly.

 

The founders were too demoralised to do anything about it.  The investors had moved on and mentally written the whole thing off and no-one else had any idea if they had any rights or not, so the receivers would simply help themselves to any remaining value

Wed, 08/12/2009 - 02:18 | Link to Comment Anal_yst
Anal_yst's picture

If everyone else (overgeneralizing) is too (insert at least one): indifferent, lazy, ignorant, incapable, etc, then fuck 'em.  Just because the receivers (in your case) are strong is no reason to hate them; quite the contrary, ire should be on those who lack the fortitude to claim what is/should be theirs.

Wed, 08/12/2009 - 03:21 | Link to Comment Handle with care
Handle with care's picture

Blaming the victim is exactly what Wall Street has done to justify its rape of everyone else.

 

The receivers are supposed to be professionals who's job is to maximise the returns for all the stakeholders in the company.  Not a bunch of thieves that have to be defended against.

 

Its another piece of evidence of the complete collapse of professional ethics and the now commonly held view that if you can get away with it, then its right, no matter the ethics or morality.

 

Financial advisors who sold people products that then blew up are defended using the same reasoning.  As if society would be a better place if all the surgeons took time out from learning surgery to learn finance so they can better defend themselves, if all the mechanics, plumbers, dentists small business owners should invest the time in learning finance to defend themselves.  Absolutely not.  If a profession has reached a state where its customers are viewed as legitimate prey unless they invest the time to be able to reach a level of expertise in a totally different field merely to protect themselves against the professionals they've hired to help them then that profession needs to be regulated with an iron hand and jail sentences.

 

I once met one of those guys who works in a boiler room scamming people out of money for non-existent shares.  His rational was identical.  The people are stupid for believing him and therefore deserve to lose their money.  I'm not a violent person, but someone sitting nearby overheard this and came over and bitchslapped the guy till he was snivelling on the floor begging to buy us all drinks.  He was scum and so is anyone else who takes the same view that its OK to rip off grandmothers because their lack of knowledge of finance and trusting natures means anything they lose is their own fault for not being a cynical financial services person.  All the people who work in the financial services could do with a good bitch slapping and at the very minimum regulations need to be passed that demand ethics from professional advisors.  We need lemon laws for financial products to stop the car salesmen selling us junk because we didn't all go to mechanic school 

Wed, 08/12/2009 - 07:04 | Link to Comment Ben_the_Bald
Ben_the_Bald's picture

This reminds me of an interview of Jack Bogle by Bill Moyers, back in September of 2007. This is Bogle:

 

"We all know that in professions, the idea has been service to the client before service to self. That's what a profession is. That's what medicine was. That's what accountancy was. That's what attorneys used to be. That's what trusteeship used to be inside the mutual fund industry. But, we've moved from that to a big capital accumulation — self interest — creating wealth for the providers of these services when the providers of these services are in fact subtracting value from society. So, it doesn't work."

Wed, 08/12/2009 - 10:44 | Link to Comment Anonymous
Wed, 08/12/2009 - 05:48 | Link to Comment Anonymous
Wed, 08/12/2009 - 08:11 | Link to Comment waterdog
waterdog's picture

All this talk about lawyers has made me realize that I have not made one today. I see the bathroom is clear, back in a minute boys.

Wed, 08/12/2009 - 09:25 | Link to Comment Anonymous
Wed, 08/12/2009 - 11:02 | Link to Comment Anonymous
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