Some private equity firms are starting to take a deeper look into fees from creditor advisors in a bid to avoid further equity erosion, according to 9fin sources.
Typically, sponsors foot the advisory bills for creditors on behalf of their portfolio companies. They are now seeking breakdowns by lenders on fees from lawyers and bankers involved in deals ranging from capital raises to out-of-court restructurings, and assessing whether they need to bear the expenses, sources said.
“Now sponsors are positioning themselves to say that they could hold it against you if you offer the same rate but your advisor fees are higher,” one of the sources said.
In particular, some bristled at bills submitted by counsel to revolver lenders, which are perceived as parties with straightforward restructuring paths — such as being uptiered, subordinated, or extended — compared to the work carried by ad hoc creditor groups, one of the sources said.
Company-side advisors would sometimes try to negotiate a cap on creditor advisory fees, though that would always almost spur pushback from the larger players in the restructuring world, they said.
Bigger law firms tend to charge less because of the efficiency of a larger market share, said a...
