John Melbourn, chief executive, group risk at NatWest, said the bank had consulted widely with lawyers and accountants in the corporate rescue field and concluded that lead banks in rescues should keep fees down by introducing 'modern approaches to purchasing'.
Lead banks should also use a weekly monitoring framework to ensure cost-effective management of the rescue, he said. Under the scheme professional firms would provide weekly cost reports. This would enable the bank to spot cost problems at the beginning. The advisers would also have to provide estimates of their future costs at regular intervals.
The lead bank would discuss these cost reports and estimates with the advisers with a view to agreeing savings. The bank would also review the advisers' performance every three months or at the end of a case to identify ways in which working practices could be improved.
Annually, the bank would compare the advisers with firms in other cases. Other suggestions include standardising documentation for the whole restructuring community and a list of required questions to give to the company involved at the outset.
The cost of company rescues has been increasingly in the spotlight following the recent social security committee report on the work of the Maxwell insolvency practitioners. Costs incurred by Price Waterhouse, administrator to Maxwell Communication Corporation, and its solicitors, Norton Rose, have reached nearly pounds 25m. Price Waterhouse aims to keep the billion-dollar MCC businesses going while it sells them off.
Other restructurings such as Heron, Brent Walker and WPP have dragged on for more than a year and run up huge costs due to professional advisers' fees.
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