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While Lehman Brothers went bankrupt, advisers raked in $1 bn in fees

When Lehman Brothers collapsed, a whole lot of money vanished with it. Its bankruptcy, on the other hand, just keeps on paying.

business Updated: Oct 17, 2010 21:05 IST

When Lehman Brothers collapsed, a whole lot of money vanished with it. Its bankruptcy, on the other hand, just keeps on paying.

Lehman's record-breaking bankruptcy has produced a staggering $1 billion in fees — doled out to legions of lawyers, advisers and bankers over the past two years.

The financial firm has been paying out, on average, more than $40 million a month, and based on that rate, it passed the $1 billion mark last month. September's details will be in the report due in mid-October.

A Lehman spokeswoman declined to comment.

The fees are a fraction of the $639 billion in assets that Lehman Brothers was running when it collapsed into bankruptcy in September 2008. But it is still more than, say, the gross domestic product of Caribbean nation of St. Lucia, or the combined average salaries of 8,000 financial advisers.

Experts say that the fees, which continue to rise daily, come at the expense of creditors seeking to be repaid.

"If you are a creditor, every dollar that is going to (debtor) counsel is a dollar not going to a creditor," said Stephen French, a managing partner at Legalbill, a Tennessee company that advises companies on managing their legal bills.

But Bryan Marsal of Alvarez & Marsal, the advisory firm running Lehman in the US, said in an emailed statement that his firm's work has improved recovery for creditors by more than $5 billion and the size and complexity of the case justify the fees.

That has meant hiring an army of advisers and accountants not only in the US, but to close up shops throughout Asia and Europe, where insolvency rules change in each country. Allowed claims from creditors in the case are expected to be about $365 billion. It expects to recover about $60 billion before expenses to pay creditors.

Lehman expects to emerge from bankruptcy during the first quarter of 2011. Then, it can start paying back creditors. The company has worked on a reorganisation plan that will put most of its remaining assets and operations into a newly created business called Lamco.

Most of the bills come from Alvarez & Marsal. Law firms Weil Gotshal & Manges, in charge of the bankruptcy court process, and Jones Day, which handles litigation, also top the list. The court-appointed examiner, his law firm and his advisers cost nearly $100 million.

First Published: Oct 17, 2010 21:02 IST