restructuring

Big winner in Lehman mess: attorneys

Jim Kim — Fri, 10 Oct 2008 13:15:41 -0400

For the attorneys lucky enough to have a piece of the Lehman Brothers bankruptcy pie, these are good times. Law firm Weil, Gotshal & Manges is seeking up to $950 an hour to represent Lehman while restructuring specialist Alvarez & Marsal is seeking hourly payments of up to $850, the Financial Times reports. This is by far the largest bankruptcy filing--and likely the most complex--in U.S. history. Lehman Brothers filed for Chapter 11 protection last month, with assets of $639 billion and liabilities of $613 billion. By one estimate, total fees for lawyers will hit $900 million. That compares with $760 million for the Enron case and $630 million for WorldCom, the FT notes. It will no doubt drag on, as Lehman Brothers transacted with more 8,000 parties.

For more:
- here's the article

Related Articles:
The Death of Lehman Brothers

Boutiques, top firms co-exist in restructuring business

Jim Kim — Fri, 25 Jul 2008 08:00:03 -0400

TheDeal.com notes that investment bankers were once precluded by law from representing a client company in bankruptcy court. That left much of the restructuring business to boutiques, who continue to dominate. In 2005, the law restricting bankers was amended by the Bankruptcy Reform Act. Are top Wall Street firms now ready to assert themselves in what looks to be a lucrative market? It's fair to say they all have staffed up. Morgan Stanley, Goldman Sachs and Lehman Brothers are among those who positioned themselves a bit better. But TheDeal.com notes that there's a high level of cooperation between boutiques and banks. The smaller advisory firms turn to the big banks for financing and other services. And the law still prevents a firm from being both a bankruptcy adviser and an underwriter. Most banks are really interested in the capital-raising angle.

For more:
- here's the article from TheDeal.com

Another upside surprise: Citigroup beats expectations

Jim Kim — Fri, 18 Jul 2008 07:59:22 -0400

Citigroup reported a loss of 54 cents for the April-to-June quarter, which was not as bad as the 66 cents analysts were expecting. The loss reflects $7.2 billion in writedowns, which again was lower than the $9 billion or so that the most pessimistic analysts were expecting. As a barometer of how the credit crunch has hit the bank, we note that revenue was down nearly 30 percent from a year ago. Still, the quarterly upside surprise was additional good news from the commercial bank sector, in line with the positive results from Wells Fargo and JPMorgan Chase. Right now, the capital situations seems to be in hand. But we've learned that it's unwise to assume the worst is over. Still, there are plenty of assets to be sold--Citigroup is in the midst of a large restructuring that will call for many asset sales--and that just may be the only source of capital it needs going forward.

For more:
- here's an article on earnings from CNNMoney.com

Goldman Sachs fee causes controversy

Jim Kim — Mon, 07 Jul 2008 08:09:59 -0400

The Telegraph reports that British mortgage firm Bradford & Bingley will pay Goldman Sachs an advisory fee even though a deal with private equity firm TPG fell apart. It will be paid a separate fee for another deal, one that "was secured from existing investors and with the direct assistance of the City regulator, the Financial Services Authority." This is not sitting well with some people. If the TPG deal had gone through, none of this would have been an issue. Goldman Sachs says there may be some misunderstanding about its role. It has worked on a number of assignments, include the ongoing restructuring. It's not an agent for TPG. Still, it kind of looks bad. Had this been in the United States, the furor would have been loud.

For more:
- here's the Telegraph article

Break-up-Citigroup advocates not giving up

Tue, 13 May 2008 06:59:54 -0400

Vikram Pandit's much anticipated new strategy for Citigroup was anti-climactic in several ways. Among the most disappointed were those who have been advocating a break up of the behemoth bank. Not that anyone really expected Pandit to announce anything along these lines, but the break-up bulls are not giving up. A commentary on Breakingviews says shareholders have a right to expect a lot of Pandit, including more information about financial targets and returns on specific capital investments. The commentary also says shareholders should extract, somehow, a promise that he will eschew the conglomerate model if it falls short of stated goals. I doubt this will happen.

For more:
- here's the Breakingviews commentary

What to make of Citigroup's strategy

Mon, 12 May 2008 06:59:57 -0400

Fairly or not, there are some who are less then awestruck by Vikram Pandit's much-anticipated new "strategy" for Citigroup. I wouldn't call it a strategy. It's more a of a survival blueprint for the next few years. The news that it will sell $500 billion in assets certainly is not a surprise. I was, however, a little surprised by the idea that it will grow revenue 9 percent a year, mainly via costs cuts. Some people were expecting a new plan to create real market opportunities. To say a revenue plan essentially boils down to layoffs and whatnot is less than stirring. So, the bottom line is that management still is searching for that secret sauce that eluded Pandit's predecessors. Maybe it doesn't exist. We'll see.

For more on Citigroup:
- here's the AP article

Citigroup reaches out to... HP?

Wed, 23 Apr 2008 06:59:57 -0400

Hewlett Packard to the rescue? Vikram Pandit, CEO of Citigroup, is reaching out to HP executives for insight into how to stand firm in the face of investor pressure to spin off key assets. The talk seems to be on IT issues, and how they can stitch various units into something whole. HP, of course, went through something similar when Mark Hurd became CEO. He resisted pressure to spin off the PC-making group. Just as Pandit is under pressure to spin out portions of the Citi empire. So will Hurd, at some point, join the Citigroup board? It's unclear if the two CEOs have met face to face, but clearly, Pandit is not above seeking advice wherever he can get it.

For more:
- here's the Financial Times article

Bold move: Pandit rejects break-up of Citigroup

Fri, 18 Apr 2008 06:59:57 -0400

We noted recently that Vikram Pandit, CEO of Citigroup, had rejected the idea of breaking up Citigroup. Now, he's going public with his views. In an interview with Business Week, Pandit said he "couldn't get a better set of assets" and the conglomerate approach was "clearly the right model." This won't earn him points with the many Citigroup bears out there, who may be emboldened by the bank's first-quarter earnings. But perhaps he sees something like what Lou Gerstner saw when he declined to break up IBM all those years ago. Pandit is bullish on four areas: management services, investment banking, wealth management and credit cards. Of course, many thought that cars and investment banking ought to be spun out somehow. His immediate concern is getting through the credit crunch. That means costs, among other things. Only then can he attempt to put in place a real strategy that will define his tenure.

For more:
- here's the Business Week article

Citigroup bids management committee farewell

Wed, 16 Apr 2008 06:59:58 -0400

According to the New York Times, Citigroup is disbanding its somewhat controversial management committee. It started as a good way to cross pollinate ideas across a far-flung empire. But it apparently took on a life of its own, becoming an important internal status symbol and including more than 100 people. The Times notes: "Most saw the meetings as nothing more than corporate cheerleading sessions--a waste of time and money at a semi-exotic locale." This is a sign of Vikram Pandit's intent to remake the company. The jury will be out for a while, but at least he's not sitting on his hands.

For more:
- here's the Times item

The future of Citigroup

Thu, 03 Apr 2008 07:59:56 -0400

The New York Times notes that Citigroup's stock has sunk below the price it traded at 10 years ago, when the mega-merger with Travelers was announced. It has been a long bitter road to this point, and it remains unclear whether CEO Vikram Pandit can somehow right the ship. The merger at the time was visionary, but it never delivered the intended results--a tired truth by now. But a real break up does not seem to be in the cards, though some think there might be an offering of the now separate credit card unit. In some ways, Citigroup is the Street's favorite whipping boy. It's so easy to criticize. Pandit has a lot of pressure on him--and some think he'll never be successful without a true break up.

For more:
- here's the New York Times article

Related Articles:
Will restructuring satisfy Citigroup critics? Article
Citigroup still paring the exec ranks? Article
Street growing ever more bearish on Citigroup. Article
Pandit against a break up? Article