In the circus of US Chapter 11 bankruptcies, this is what counts as prudence:
(iv) any Sale Transaction Fee and/or Minority Sale Transaction Fee shall not exceed $150,000,000 in the aggregate.
In case you have been living under a rock for the last month, the bankruptcy of auto parts maker First Brands has been gripping Wall Street (and the FT’s journalists and editors). Sudden freefall bankruptcies with complex capital structures and allegations of fraud don’t come along very often, unfortunately. And an intriguing subplot for distressed debt nerds is just how much the whole thing is going to cost.
Last week, the major advisers to the First Brand debtors — law firm Weil, Gotshal & Manges, the investment bank Lazard, and the consulting firm Alvarez & Marsal — filed retention applications with the federal bankruptcy court in Houston, providing some preliminary details on how much the firms are going to charge the bankruptcy estate.
The line above comes from the Lazard application, which is the most complex. That’s because investment banks don’t bill by the hour but rather demand lump sum transaction fees. In fact, Lazard lists seven different types of transactions that it can get paid for (though there are various offsets and credits built in, to avoid egregious double-counting and somewhat ease the burden).
