Restructuring consultancy firm Alvarez & Marsal has decided to take the easy way out, and simply give creditors in the Lehman's bankruptcy equity instead of trying to maximize cash recoveries. The bulk of Lehman's residual value (or lack thereof) is contained in its hard to value real estate and private equity assets. According to Bryan Marsal, cited by the Financial Times, A&M has decided to spin the asset pools into two separate companies, and instead of following through on maximizing the value of the liquidating assets and generating as much cash for these as possible, it will simply give creditors equity which may or may not be worth anything at some future point, essentially leaving bondholders to fare for themselves.
This brilliant solution did not come cheap: in a bankruptcy court filed compensation application, A&M is asking that its hard work be rewarded with the paltry sum of $400,000 per work day. A&M requests that for the period from September 15 to November 1, it be paid $14 million dollars for the 26,087 hours that the firm spent on hard liquidating work in the 35 work-day interval. A close read of the application shows just how hard various A&M team members worked: of special notice is Managing Director Daniel Ehrmann who clocked in at an impressive 545 hours for the month and a half period. As a reference, there are 840 work hours in the 35 business days between Sept 15 and Nov 1. Zero Hedge salutes these working men and women's dedication to their craft. We are also keeping our eyes peeled as the other 99 or so advisors in this liquidation submit their fee applications over the next few days, to see just how much it will cost creditors to know they will end up with potentially worthless equity.
As a point of reference, Lehman 6.675% Notes due 1/2012 closed at 11.5 on Friday. We are curious how bondholders will receive this exciting news.
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