Winding up Lehman - Europe's biggest legal mandate?

There are fees and then, to judge by the UK administration of Lehman Brothers, there is something else entirely. Certainly, the six-month report from the bank's administrator, PricewaterhouseCoopers (PwC), confirms what lawyers were saying last year: this will be one of the largest assignments in European legal history. With Linklaters earning £33.5m in the six-month period to mid-March, the City giant has billed nearly £1.3m a week on average. That almost certainly constitutes more than 5% of its global revenue during that period and well over 10% of London revenue. For a firm of Linklaters' diversification and global scale this is a startling amount to generate from a single mandate. Few though will doubt the firm earned its money given the complexity and scale of the insolvency, on which at various times Linklaters has had several hundred lawyers engaged.

As one insolvency veteran comments: "It is value for money? That's a debate, but it's big and it's bloody difficult and if you're a creditor you probably think PwC and Linklaters haven't got enough bodies on it." The fees, which compare to a £77m bill for PwC, is also within typical billing parameters on a major insolvency, especially once you view fees in proportion to assets. PwC estimates European assets under Lehman's control at $50bn (£33.7bn), while $8.7bn (£5.9bn) in cash has been recovered and $12.2bn (£8.2bn) of client assets have now been returned. The collapse of a major investment bank was also uncharted territory, complicated by Lehman's extensive dealings with hedge funds and counterparties. PwC estimates the bank had 22,000 current and historic counterparties at the time of its collapse and left 130,000 over-the-counter derivatives contracts to value.

Still, even with much of the hard work in place in terms of creating the infrastructure and process to handle the stream of claims, which stretched PwC and Linklaters to the limit in the aftermath of Lehman's collapse, the mandate looks set to be comfortably the largest insolvency yet seen in the UK.

With the administrators in March proposing a mechanism to group and return assets via schemes of arrangement, Lehman is still expected to generate several more months of work at a similarly intense pace before it slows. And insolvency specialists predict the job could be generating substantial fees for a very long time, with some talk the process could drag on longer than the landmark administrations of BCCI and Enron's UK arm. It is entirely conceivable Lehman could become the most lucrative mandate ever in Europe in any practice line.

What such a unique assignment tells you about the wider insolvency market is less clear, beyond underlining the crucial importance for City firms of securing what big-ticket insolvency work is around when M&A hits a wall. By consensus activity levels are now up for insolvency lawyers but political pressure on banks and unwillingness of lenders to force procedures that will lead to further write-downs make many believe that restructurings will drive work levels, rather than wind-ups. But Linklaters' insolvency team, which also gets the massive brand benefit of having worked on such a cutting-edge administration, has the luxury during this cycle of considering that an academic debate.