Lehman’s Bounty: Big Bankruptcy Fees

, 1:16 pm

Source :  http://dealbook.blogs.nytimes.com/2008/10/09/lehmans-bounty-big-bankruptcy-fees


In the minute or so it takes you to read this post, Lehman Brothers‘ senior bankruptcy lawyers could have earned nearly $16.

That’s based on the rates of as high as $950 per hour that Weil Gotshal & Manges is seeking in order to represent Lehman in what is the largest bankruptcy case ever. The legal team is led by Harvey Miller (pictured above), one of the nation’s most prominent bankruptcy lawyers.

Bryan Marsal of turnaround firm Alvarez & Marsal will be charging $850 per hour to serve as Lehman’s chief restructuring officer during the case, subject to court approval. His firm is also up for an “incentive fee,” which hasn’t yet been set, according to court filings.

All these billable hours are likely to add up to big money.

Lynn LoPucki, a professor at UCLA Law School who is an expert on bankruptcy fees, estimates that the fees for the lawyers, accountants and financial advisers in the Lehman case could surpass $900 million, Bloomberg News reports.

That’s on a par with the total fees generated in the Enron bankruptcy, which by some estimates reached as high as $1 billion.

Mr. LoPucki provides a “fee calculator” on his Web site that allows anyone to estimate bankruptcy fees by entering relevant data about a case. It is based on studies of fee data from previous bankruptcies.

For example, one could make the extremely conservative assumptions that the Lehman bankruptcy will last as long as the bankruptcy of the much smaller brokerage Refco — 424 days — and involve as many professional firms as the bankruptcy of the financial firm Conseco — which was 31.

Given Lehman’s reported assets of $639 billion, that yields an estimated fee total of $638 million, according to the fee calculator.

Assume the Lehman case lasts as long as Enron’s bankruptcy — 956 days — and uses as many firms as Global Crossing’s — 43 — and the estimate jumps to $1.14 billion.


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