Saturday, January 10, 2009

A Good Start...

...Is 10,000 lawyers at the bottom of the ocean... This is even more true if you are involved in the bankruptcy of recently defunct Tribune (well if you are Sam Zell you wake up, you look in the mirror and can go back to bed happy cause you are so damn handsome) especially as a creditor, the recent retention application for Sidley Austin would make your greedy black heart churn with arrhythmia. As disclosed in the application, associates will fluff your pillow for $240 to $650 an hour; counsel will cut your milk for you for $400 to $875/hour, and partners will gladly xerox blank page after blank page for a measly $1,100.... Yes you heard that right, $1,100 per HOUR, for HOUR AFTER HOUR... WTF? That's on par with Emperors VIP Club's BBBJ hourly rates, and in all honesty I would rather spend it on this than on this...

So let's do some simple math here. Assuming 4-5 partners, "working" hard anywhere between 10 and 30 hours a day (uh, yes... click here for more), 6 days a week (cause you have to tell the wife/husband you are in the office on Sunday night when you are really at the grand reopening of Studio 54), and these partners have around 10 henchmen running around spilling coffee, tying shoelaces and keeping a spot in line for Giants tickets, you quickly run up a bill of $120,000/day, or $3.6 million a month, or $43 million a year.... Assuming this bankruptcy lasts the usual 2.5 years, than Sidley will take a cool $100 million straight from creditors' pockets.

Now that in itself would be ok if that's the extent of the vulture fest, but hold on.... Enter stage right we have the usual procession of grave robbers. The application of the turnaround expert Alvarez and Marsal lists hourly rates from $175 to $750 (take a wild guess which one will be the dominant), Jenner and Block joins the fray as "Special Counsel for Certain Litigation Matters" charging on an hourly basis "in accordance with its ordinary and customary rates" which range from $160 to $1,000/hour, and the list goes on: PWC hired as Tax Advisors, McDermott Will and Emery as Special Counsel for Domestic Legal Matters, Paul Hasting as Special Counsel for General Real Estate and Related Matters, Reed Smith as Special Counsel for Certain Litigation Matters; Cole, Schotz, Meisel, Forman and Leonard as Co-Counsel to the Debtors (I guess this is in case the Sidley Austin Xerox Machine is broken and Kinko's across the street is bankrupt) and last but not least Lazard as Financial Advisor. All these counsels, special counsels and whatnots will likely milk the company for about $15 million a month, meaning the professional fees amassed during the bankruptcy will cost roughly half a billion dollars, as Tribune's employees are fired in droves. And this doesnt even include all the financial advisors that each separate class of security will likely need to hire as in for example the case of the 4th lien double secret subordinated bonds convertible into Double Whoppers, which will fight tooth and nail to prove their claims are worth at least par.

Based on some simple math half a billion would result in about a 5 cent recovery on the Company's $11 billion of total debt. It is a little odd that creditors aren't screaming bloody murder over this daylight rape.
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