A General Motors Corp bankruptcy might yield a $1.2 billion “bonanza” for bankers, accountants and lawyers, surpassing record fees being made by advisers on the collapse of Lehman Brothers Holdings Inc. GM, trying to lower debt and wages out of court, said December 2 it must slash $62 billion in liabilities by almost half, excluding government loans. Otherwise it may wind up like Lehman, which will pay an estimated $906 million in judge-approved charges for professional services, said Lynn LoPucki, who teaches bankruptcy law at the University of California, Los Angeles.
“The bonanza has already begun and will continue through the bankruptcy,” said LoPucki, who keeps a database of bankruptcy statistics. “GM is in serious financial difficulty and can’t make the cuts they need outside of bankruptcy because they can’t force creditors to go along with them.”
Law firms including Dewey & LeBoeuf LLP and Weil, Gotshal & Manges LLP, already advising the automaker, would be among those reaping millions in fees in a GM bankruptcy.
Investment bankers and restructuring experts at Morgan Stanley, Blackstone Group LP and Evercore Partners Inc also have been counseling GM, and the UAW autoworkers union consults Lazard Ltd, according to people familiar with the matter.
Tom Wilkinson, a GM spokesman, declined to comment on potential bankruptcy fees.
GM’s viability plan presented February 17 to the government showed four restructuring options, including the company’s already-begun out-of-court revamp that would create a streamlined automaker focusing on brands including Cadillac and Chevrolet and its electric Volt model.
Saab bankruptcy
The Detroit automaker pushed its Saab unit in Sweden into bankruptcy this month and has said it is studying the future of its European divisions.
The viability plan would cost the US $27 billion in loans, while three types of bankruptcies might require government financing of $36 billion to $86 billion, GM estimated.
The Obama administration, poised to study viability plans of GM and Chrysler LLC, is “not pressing the bankruptcy option,” Senator Carl Levin said after a meeting with members of the president’s auto task force.
“According to the guys I met with today, they’re not the ones who are pointing to bankruptcy,” the Michigan Democrat said. “They’re not pressing it. That’s not their goal.”
President Barack Obama’s chief spokesman, Robert Gibbs, last week refused to rule out an automaker bankruptcy. The administration has been canvassing commercial banks about a $40 billion bankruptcy loan, a person close to the process said.
LoPucki’s fee estimate is based on comparisons with other large cases and reflects differences such as the number of employees, which indicates “real size and complexity in the business,” he said. GM has about 244,500 employees, or about five times as many as Lehman had, he said.
