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Fees paid to the firms advising on the collapse of King & Wood Mallesons’ (KWM) former European and Middle East (EUME) arm have been revealed in a new administrator’s report, which also details the amount so far returned to the firm’s main creditor, Barclays.
The progress report from Quantuma reveals that the administrator has received almost £1.1m so far for its services, while CMS Cameron McKenna has been paid almost £850,000 in fees and disbursements for advice on what the report describes as “the complex legal issues which have arisen both in the pre- and post-administration periods”.
Pinsent Masons has received more than £186,000 for its work on the administration, while Ashfords has been paid almost £300,000 in fees and disbursements in its role as solicitor manager for the firm. The regional firm was brought in by Quantuma to manage the billing and collection of remaining files and the allocation of client monies.
CMS banking and finance head Rita Lowe, Pinsents restructuring partner Steven Cottee and Ashfords head of professional and financial risks Sam Palmer took the lead roles for their respective firms.
In its breakdown of legal costs in the report, Quantuma states that “the number of legal issues and assistance required in this matter far exceeded initial expectations”. The report also describes the administration process as being of “above-average complexity”.
The report also sets out details of the amounts paid to Barclays, KWM’s main secured creditor. It states: “The joint administrators instructed legal advisers to conduct a review of the bank’s security and it was concluded that the security is valid and valued at £16,557,222.”
To date, £4,473,767 has been paid in three dividends in April, May and July.
The administrators have received claims from 121 ordinary unsecured creditors, totalling just over £13m, as well as claims from 10 unsecured creditors of the the holding company for the firm’s employees, totalling about £3.5m, but the report states that these claims have yet to be adjudicated upon or verified.
In total, the administrators have so far recovered a total of £12.8m at a cost of £5.2m, leaving a current balance of £3.1m following the distributions to Barclays.
The report sets out the process by which the firms that took on teams from KWM will pay for their acquisitions. KWM is expected to pay £881,250 for the assets it retained in the wake of the collapse, after already paying £368,750, while DLA Piper – which recruited a six-partner real estate team in December – is due to pay £521,000 on 17 September after already having paid £876,000.
Reed Smith, which took on a 50-strong team across Europe, is in dialogue with Quantuma with regards to monthly payments, while other firms including Baker McKenzie, Goodwin Procter and Bircham Dyson Bell have already paid in full for their acquisitions.
Quantuma is also still working with about 40 ex-partners who have left the firm, to realise “accounts receivable which still vest in the firm” – a process that has so far raised about £682,000.
Quantuma’s fees come after KWM’s former financial adviser AlixPartners, which had been put forward as the firm’s proposed administrator, was paid £1.2m for its work leading up to the collapse. AlixPartners withdrew as proposed administrator in early January due to concerns about funding.
Separately, former KWM EUME managing partner Tim Bednall has been paid a consultancy fee of £25,380 for “his assistance in the collection of a number of significant debts”.
KWM’s EUME arm collapsed into administration at the start of the year, representing the end of the line for the legacy SJ Berwin business and the biggest ever UK law firm failure. Before its collapse, the EUME business had debts of £35m.
After the administration, KWM’s China arm agreed deals with about 30 partners to stay on and maintain a presence across London, Europe and the Middle East for the firm, although seven of those partners have since left.
The firm recently appointed its first EUME managing partner since the collapse, with China M&A partner Wang Rongkang relocating to London to take up the new role. Two UK lawyers have also been made up to partner, while in late July the firm announced its first lateral hires in Europe since the collapse, with two partners set to join in Frankfurt this October.
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