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Alvarez & Marsal oversees dismantling of Lehman

By A. James Memmott

February 3, 2009 at 10:57am

Breaking up is hard to do, so much so that the bankrupt Lehman Brothers Holding Inc. is adding employees, The Wall Street Journal reported Monday.

This has meant a windfall of sorts for Alvarez & Marsal, a firm that has come to be the restructuring firm to the financial stars.

Companies ranging from the makers of Hostess Twinkies to the HealthSouth Corporation to the Tribune Company have dialed up Alvarez & Marsal in tough times.

Consequently, it’s no surprise that Alvarez & Marsal is watching over the slow unwinding of Lehman’s remaining billions.

Even though many of its units were purchased by Barclays PLC and Normura Holdings Inc., Lehman still has holdings worth over $43 billion that must go toward meeting some of the demands of its creditors.

Bryan P. Marsal, a co-founder and co-CEO of Alvarez & Marshal, hopes to have Lehman’s affairs cleaned up and cleared out within 24 months.

Marsal, 57, became Lehman’s chief restructuring officer in September at a rate of $850 an hour plus incentives to be determined later, according to a filing with the Securities and Exchange Commission. In November he was named Lehman’s CEO, replacing Richard S. Fuld Jr.

According to the SEC filing, additional personnel were to be paid between $175 and $850 an hour. Lehman also agreed to reimburse Marsal and his co-workers for out-of-pocket expenses.

Alvarez & Marsal retained 150 Lehman employees when it took on the restructuring assignment. It has since hired back 200 additional Lehman employees, the paper reported. Marsal expects to add even more workers.

“We’re getting swamped with resumes,” Marsal told Peter Lattman of the Journal. “It’s just a tough, tough time, and there are a lot of good people out there looking for work.”

Marsal and his co-CEO, Tony Alvarez II, founded Alvarez & Marsal in 1983. The men had been colleagues at Norton Simon Inc.

The company specializes in picking up the corporate pieces after financial disasters, often with Alvarez or Marsal serving as the endangered company’s chief executive officer or its chief restructuring officer.

Marsal oversaw the recovery of HealthSouth Corporation in 2003 after an accounting scandal. Under his leadership, the company was able to avoid bankruptcy.

Earlier, he served as a restructuring adviser to Arthur Andersen LLP, an accounting firm swept up in the Enron scandal. The company did not survive, even though its 2002 conviction for obstruction of justice was vacated by the Supreme Court in 2005.

Alvarez has turned around several firms, including Interstate Bakeries Corporation, the maker of Wonder Bread and Hostess Twinkies.

Marsal has Lehman Brothers on a relative austerity budget, according to the Journal. The company, having sold its plush Times Square office to Barclays, now occupies a floor at the Time-Life building. There’s no executive dining suite, and Marsal is selling off the Lehman jets.

Fuld Jr., the former CEO, has an office in the new quarters, though he stopped being a paid employee on Jan. 1, according to the Journal.

“We asked him to stay if he has nowhere better to go,” Marsal said. “He’s been very good about making himself available for questions about Lehman assets.”

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