Commentary: Courts case - time to restructure the restructuring laws?
There is an old adage among restructuring lawyers that there is no point frittering away money on creditors when it can be better spent on commercial advisers. The joke is only used among those experienced enough to make light of such a sensitive topic. But even some of the City's most seasoned restructuring partners have expressed surprise - and envy - at the level of fees Allen & Overy (A&O) has earned from the liquidation of furniture outlet Courts. The firm is taking a significant share of the £18.5m paid in professional services fees.
January 16, 2008 at 10:08 PM
3 minute read
There is an old adage among restructuring lawyers that there is no point frittering away money on creditors when it can be better spent on commercial advisers. The joke is only used among those experienced enough to make light of such a sensitive topic.
But even some of the City's most seasoned restructuring partners have expressed surprise – and envy – at the level of fees Allen & Overy (A&O) has earned from the liquidation of furniture outlet Courts. The firm is taking a significant share of the £18.5m paid in professional services fees
Some rivals question the size of some of the bills, with one partner commenting: "Courts has been a very nice pot-boiler for A&O. The British Energy fees were in the region of £50m, for a massive business. When you look at Courts, compared with the value of assets, it seems like a very big figure."
Some have even gone so far as to say that a serious look at how the UK insolvency proceedings work in comparison to the US' Chapter 11 proceedings is called for. In the US the involvement of a judge can help make sure there are no needless delays. The accountant-led UK system is often criticised for playing safe, leading to drawn-out processes with high adviser fees. Then again, in the US, where management teams have far more sway, praise for speed and the better representation of shareholders' interests is tempered by the high costs of a court-based system.
A&O restructuring partner Ian Field comments: "Large cross-border restructurings are expensive procedures, but I do not think restructurings based on UK procedures are more expensive than those based on Chapter 11. UK procedures are extremely flexible and there are a number of great new tools to use in the next wave of restructurings."
There are some excuses for the high costs. While insolvency partner charge-out rates are not in themselves disproportionate – they are lower than tax partner rates at top firms – many proceedings drag on for several years over multiple jurisdictions requiring significant man power.
Unlike their corporate counterparts, restructuring lawyers rarely take large success fees although, as one partner puts it, it is not unheard of in the current quiet market for firms to 'take a flyer' in case they are successful.
And while firms argue that the globalisation of companies leads to proceedings becoming more complex, perhaps more relevantly, the increasingly structured debt market has brought rising numbers of advisers to the fray.
Freshfields Bruckhaus Deringer restructuring head Ken Baird says: "The multiplicity of fees are a direct product of the number of parties involved. There are more and more ways to layer debt as the financial markets extract more value. It is the cost of doing complex business."
In this context the professional adviser fees are always going to be substantial, whether or not firms can justify their staffing and efficiency through the process. This is especially pronounced when restructurings fail, with the fees rising rapidly as soon as a company is liquidated.
As one insolvency partner admits: "Complex companies will continue to collapse. Advisers will continue to take large chunks of fees. Gone are the halcyon days of the restructuring lawyer, but that does not mean we do not allow ourselves a sly smile when a client is in trouble."
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllKPMG's Bid To Practice Law in US On Hold As Arizona Court Exercises Caution
Law Firms 'Struggling' With Partner Pay Segmentation, as Top Rainmakers Bring In More Revenue
5 minute readTrending Stories
- 1Two More Victims Alleged in New Sean Combs Sex Trafficking Indictment
- 2Jackson Lewis Leaders Discuss Firms Innovator Efforts, From Prompt-a-Thons to Gen AI Pilots
- 3Trump's DOJ Files Lawsuit Seeking to Block $14B Tech Merger
- 4'No Retributive Actions,' Kash Patel Pledges if Confirmed to FBI
- 5Justice Department Sues to Block $14 Billion Juniper Buyout by Hewlett Packard Enterprise
Who Got The Work
J. Brugh Lower of Gibbons has entered an appearance for industrial equipment supplier Devco Corporation in a pending trademark infringement lawsuit. The suit, accusing the defendant of selling knock-off Graco products, was filed Dec. 18 in New Jersey District Court by Rivkin Radler on behalf of Graco Inc. and Graco Minnesota. The case, assigned to U.S. District Judge Zahid N. Quraishi, is 3:24-cv-11294, Graco Inc. et al v. Devco Corporation.
Who Got The Work
Rebecca Maller-Stein and Kent A. Yalowitz of Arnold & Porter Kaye Scholer have entered their appearances for Hanaco Venture Capital and its executives, Lior Prosor and David Frankel, in a pending securities lawsuit. The action, filed on Dec. 24 in New York Southern District Court by Zell, Aron & Co. on behalf of Goldeneye Advisors, accuses the defendants of negligently and fraudulently managing the plaintiff's $1 million investment. The case, assigned to U.S. District Judge Vernon S. Broderick, is 1:24-cv-09918, Goldeneye Advisors, LLC v. Hanaco Venture Capital, Ltd. et al.
Who Got The Work
Attorneys from A&O Shearman has stepped in as defense counsel for Toronto-Dominion Bank and other defendants in a pending securities class action. The suit, filed Dec. 11 in New York Southern District Court by Bleichmar Fonti & Auld, accuses the defendants of concealing the bank's 'pervasive' deficiencies in regards to its compliance with the Bank Secrecy Act and the quality of its anti-money laundering controls. The case, assigned to U.S. District Judge Arun Subramanian, is 1:24-cv-09445, Gonzalez v. The Toronto-Dominion Bank et al.
Who Got The Work
Crown Castle International, a Pennsylvania company providing shared communications infrastructure, has turned to Luke D. Wolf of Gordon Rees Scully Mansukhani to fend off a pending breach-of-contract lawsuit. The court action, filed Nov. 25 in Michigan Eastern District Court by Hooper Hathaway PC on behalf of The Town Residences LLC, accuses Crown Castle of failing to transfer approximately $30,000 in utility payments from T-Mobile in breach of a roof-top lease and assignment agreement. The case, assigned to U.S. District Judge Susan K. Declercq, is 2:24-cv-13131, The Town Residences LLC v. T-Mobile US, Inc. et al.
Who Got The Work
Wilfred P. Coronato and Daniel M. Schwartz of McCarter & English have stepped in as defense counsel to Electrolux Home Products Inc. in a pending product liability lawsuit. The court action, filed Nov. 26 in New York Eastern District Court by Poulos Lopiccolo PC and Nagel Rice LLP on behalf of David Stern, alleges that the defendant's refrigerators’ drawers and shelving repeatedly break and fall apart within months after purchase. The case, assigned to U.S. District Judge Joan M. Azrack, is 2:24-cv-08204, Stern v. Electrolux Home Products, Inc.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250