Five rules of the insolvency game

As the high street suffers, lawyers pick up mandates from administrators

Rita Lowe
Rita Lowe

January is proving particularly torrid for companies in trouble and December was almost as bad for the UK high street. But the past two and a half months have also confirmed a few principles about the insolvency game for lawyers.

Principle one: if the company was deep in debt, the banks’ lawyers are in the best position to win the mandate from the administrators. If not, the company’s legacy lawyers are likely to be appointed. Take Blockbuster UK, which had no major discussions with lenders and saw longstanding adviser CMS Cameron McKenna appointed to act for administrators at Deloitte.

Principle two: The same law firm cannot advise both a parent company and its troubled subsidiary’s administrators. Blockbuster UK was advised by CMS partner Rita Lowe; Linklaters New York partner Dan Dufner is advising parent company Blockbuster Inc.

Principle three: one firm can take two roles on the same case, in the right circumstances. This happened with HMV, in which Linklaters partners Richard Hodgson and Richard Bussell are advising another team of Deloitte partners, while the firm’s Chris Howard is acting for HMV’s banks including RBS, with a Chinese wall to prevent the risk of conflict between the interests of the administrators and those of individual creditors.

Principle four: even if the banks’ lawyers take the lead administration role, legacy advisers may get the occasional look-in in the case of a conflict. Hence Ashurst’s anticipated small role for the PricewaterhouseCoopers partners on Jessops alongside main adviser SNR Denton, which had been representing the camera seller’s banks during crunch talks. And hence Simmons & Simmons partner Giles Dennison’s uncertainty over whether he would be instructed at all on the administration of longstanding client HMV: the firm will likely get conflict work if it arises.

Principle five: there are going to be plenty more restructuring mandates out there in the coming months.