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With $ 2,300 in phone calls, Purdue launches huge bankruptcy tab

(Bloomberg) – A phone call with the Department of Justice: $ 2,300. Two days at the Ritz-Carlton: $ 830. Oh, and a long cab ride to and from the court in White Plains, New York – it will cost $ 1,000, these are just a few of the nearly $ 400 million in fees and expenses accrued by working professionals. to the bankruptcy of Stamford, Connecticut. based on Purdue Pharma LP. The bills total more than half of the amount that all those wronged by OxyContin would share under the drugmaker’s proposed settlement for personal injury claims. Purdue’s financial woes have turned into an ATM for the lawyers and consultants hired by the company and its creditors who are sorting out claims the drug maker has fanned the flames of the opioid crisis in the United States. White-shoe law firms, leading restructuring advisers and investment bankers raise thousands of dollars an hour for their work on the case as those affected by Purdue’s products wait for a payment – as is the norm in business bankruptcy. it is a large sum of money that would otherwise pay the victims of a horrific crime, ”said Bob Lawless, professor of law at the University of Illinois, in an interview. “You have to pay the undertaker. Do they have to be paid that much? Purdue is unusual because its biggest creditors are not sellers or owners, but cities and states reeling from the opioid epidemic, as well as the people who have lost everything, including their loved ones, to cause of opioid drugs. in that case, the company said in an emailed statement, stressing that it was responsible for the fees of several groups of creditors. “This is one of the most complex bankruptcies in history, and it deserves seasoned and experienced financial advice and advisers from all sides of the business,” the company said. Purdue “is acting as quickly as possible to deliver a settlement worth over $ 10 billion” that would help ease the opioid crisis, the company said. If and when the Purdue bankruptcy judge approves the settlement proposed, the remaining assets of the drugmaker will be turned over to trusts. for the benefit of states, cities and counties that have sued to recover billions spent on dealing with the opioid crisis in the United States. There is nothing illegal about lawyers and consultants being paid during bankruptcy. Anyone who provides goods and services to a business under Chapter 11 protection – from utilities to homeowners – is expected to be paid in the ordinary course of business. The nature and hourly rates of fees and expenses are similar to other bankruptcies, and restructuring professionals must seek court approval periodically for their bills. Yet a close examination of Purdue’s case reveals a surprising divide between the haves and have-nots. The case is inundated with letters to Purdue bankruptcy judge Robert Drain arguing for compensation, or just information, from Purdue. There is a former professional baseball player, describing the “deep heartache” he still feels after losing his son to an overdose years ago. Or the former military doctor who says he suffered a debilitating stroke after becoming addicted to opioids in 2018. Some notes are handwritten from prison by people who say there was an addiction. People who have filed personal injury claims have waited months for any kind of payment. . They will end up being divided using a points-based rubric, with the highest number of points awarded for OxyContin deaths. According to an estimate provided in court documents, Purdue’s senior bankruptcy lawyer Davis Polk & Wardwell has already been paid more than $ 100 million for his work on the case, according to the latest transaction. report filed by the drug manufacturer. The New York-based company is the biggest earner on a list of more than 25 mass-paid bankruptcy advisers. In October 2019 alone, a month after Purdue filed for bankruptcy, Davis Polk & Wardwell logged nearly 7,000 hours on the case. That added more than $ 5 million in fees for a single month, thanks to a team of nearly 100 legal professionals. Ritz Hotel Separated from its fees, the firm charged Purdue $ 64,000 in expenses in October – mostly for the computer research, but also taxis. back and forth to court and over $ 5,000 for meals like Just Salad and a Manhattan pizzeria. The company also spent around $ 3,500 that month at the Westchester County Ritz-Carlton, the closest hotel within walking distance of White Plains Bankruptcy Court. Davis Polk rented several conference rooms at hotel, which allowed for meetings between stakeholders and saved money by downsizing According to someone familiar with the matter, Purdue’s advisor roster is a who’s who of restructuring powerful players, investment bank PJT Partners at the law firm Skadden Arps Slate Meagher & Flom. Consulting firm AlixPartners received $ 17.9 million for its work, largely for tracing the flow of billions of dollars from Purdue to its billionaire owners. Davis Polk, Skadden Arps, AlixPartners and PJT all declined to comment their fees or not I do not respond to requests for comment. Giving an Opinion Much of the expense can be attributed to the staggering scale of the case. Simply informing the public was a monumental task: the company spent over $ 20 million to notify potential creditors of the deadline for filing claims. The ad blitz was designed to reach nearly all American adults about six times, according to court documents more than 600,000 complaints were ultimately filed against Purdue – nearly 10 times the amount deposited against Lehman Brothers Holdings, the investment bank. whose bankruptcy accelerated the financial situation. 2008 crisis. Prime Clerk, the company responsible for notifying Purdue’s creditors and handling claims, has been paid more than $ 50 million for its work on the case so far. The drugmaker has negotiated with U.S. states, the federal government, local governments, individual opioid victims, and insurance companies, to name a few, over $ 1 trillion in damages presumed. “In these negotiations, you want someone who has a lot of experience, someone who is well regarded and at the top of the profession,” Lawless said. “These people are expensive.” Hourly Rates Marshall Huebner, Davis Polk’s main partner in the case, currently charges $ 1,790 an hour for his services, according to court documents. A lower-ranking Purdue creditors attorney, Ira Dizengoff of Akin Gump Strauss Hauer & Feld, charges $ 1,655 an hour this year. Patrick Fitzgerald of Skadden Arps charges $ 1,775 an hour. Huebner declined to comment. Dizengoff and Fitzgerald did not respond to the messages. The numbers are mind-boggling, but have become the norm in the high-stakes world of Chapter 11 bankruptcy. PG&E Corp., the California utility driven into bankruptcy by lawsuits, was paying about $ 1 million a day at one point to disentangle his debts. “Traditionally, bankruptcy has been about economy. I think that spirit is long gone, ”said Adam Levitin, professor of bankruptcy law at Georgetown University. “At the end of the day, bankruptcy lawyers are not doing themselves a service in the public interest.” The bankruptcy case is Purdue Pharma LP, 19-23649, US Bankruptcy Court for the Southern District of New York (White Plains). articles like this please visit us at bloomberg.com Subscribe now to stay ahead with the most trusted source of business news. © 2021 Bloomberg LP


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About Jessica Zavala

Jessica Zavala

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