The biggest bankruptcy in American history has also become the biggest fee bonanza free for all for the dozens of legal and financial advisors who are assisting with the orderly liquidation of Dick Fuld's former firm. Total fees paid out to all related partied now adds up to $741.6 million. Note - this is not for a reorganization: this is a pure liquidation. Of this, chief liquidator firm Alvarez & Marsal has pocketed an unprecedented $262 million. Bloomberg quotes George Fisher of Capital Guardian: "What a travesty. They’ve taken nearly three- quarters of a billion dollars out of a company that’s bankrupt, and nobody cares." Too bad the US government will never allow any other firm to file for either Chapter 11 or 7 as this may put a dent in the administration's plan to confuse everyone that the greatest Ponzi market/economy of all time is based on anything but a constant low-volume meltup in the markets. So obviously restructuring specialists will milk all they can from the one remnant of the biggest market collapse until its emergence into... fully liquidated status. Talk about value added.
For those who do care, here is more from Bloomberg:
The restructuring firm, which provided Lehman with its current chief executive officer, Bryan Marsal, is billing the bankruptcy estate for “interim management,” according to today’s filing with the U.S. Securities and Exchange Commission. The defunct investment bank has paid all of its lawyers and advisers $731.6 million through March 31, it said in the filing.
Lehman, which before it failed used accounting methods that concealed billions of dollars of risks, according to an examiner’s report, is liquidating to pay creditors. Its payments to managers and advisers haven’t faced major objections such as those in the case of bankrupt automaker Chrysler LLC, which used U.S. Treasury loans to wind itself down.
“The way the system’s supposed to work is creditors stand up and object to the fees, which essentially come out of their payments,” said Robert Lawless, a professor at the University of Illinois College of Law in Champaign who tracks fees. “They don’t throw good money after bad because at best they can only increase their payout a little.”
The meltup in equities has resulted in a dramatic surge in Lehman bond levels as well, which fully explains the complacency of creditors to pay out any invoice presented by the advisory teams. Which is another argument for why everyone is incentivized to see the Keynesian reflation experiment through to completion. The loss in P&L should the Fed ever decide that we are in the most obvious stock market bubble since the dot com era is just too unthinkable to ponder.
Shortly, Zero Hedge will go through some select fee statements of select banks, which provide full disclosure on every invoiced plane ticket, car rental, hotel charge and meal. Those tend to provide hours of entertainment. Then again some of the smarter filers (UCC legal advisors Milbank Tweed being a good example) are aware of our pesky fascination with their expense detail and as a result decide to file these separately and without public disclosure. One wonder just what they may be hiding...