Tuesday, June 27, 2017

Dana Gas Restructuring: Almost Certain Winners


Well Almost Every Time


As promised earlier, some thoughts on potential winners and losers from Dana Gas’s “clever boots” maneuver.  Given AA's positive nature, let’s start this series of posts with the most likely winners. 
As with any restructuring, the most likely winners are the financial and legal advisors engaged by the obligor and the creditors as well as other firms that may be called upon to provide services, e.g.,  accounting firms, subject matter experts (here Shari'ah law and "Islamic" financial structuring), etc.  
Assuming payment of fees (particularly those owed by the obligor) there is a financial win for both sets of advisors.
But reputational risks remain until the restructuring is complete. And sometimes even after.
Did a financial advisor give bad advice that harmed its client and did news of that harm become public?  Sometimes an advisor makes a bone-headed demand. The other party’s advisor recognizes the mistake, prudently keeps silent itself and advises its client to do so. Its client reaps the benefit. 
Did a law firm miss a critical detail and a legal case went awry?  Did its pen make an unintentional slip in document drafting that resulted in unintended benefit to the other side?  Or did it miss an intentional attempt by the other party’s legal advisor to “redo” the termsheet through clever drafting?  As one of AA’s legal eagle friends notes when you’re on the benefit end you need to have a poker face.  When you’re on the receiving end of mischief intentional or otherwise, you need to have a sharp mind and loud voice. 
  • DG’s advisors are Houlihan Lokey (financial) and Squire Patton Boggs (legal) as per the Company’s 5 June 2017 press release. 
  • Creditors have reportedly engaged Moelis (financial) and Weil, Gotshal & Manges (legal) as per Reuters.  

At present, advisor reputational risks are focused on the advisors being tagged whether rightly or wrongly with DG’s high risk and poorly thought out strategy.   More on that point to follow.      

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