Sorrell turns on advisers

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The Independent Online
WPP, the advertising group, has protested to the Office of Fair Trading about the costs of its recent financial restructuring.

Under the terms of the refinancing of its pounds 527m debts, WPP agreed to meet the banks' fees, including the bills of their professional advisers. Last week, thanks mainly to pounds 13.5m of restructuring costs, WPP reported a sharp drop in half-year profits to pounds 1.8m from pounds 16m.

Martin Sorrell, WPP chief executive, estimates the total bill will come to pounds 20m - of which around pounds 2m is due to the banks' accountants and pounds 1m to the banks' lawyers.

What is upsetting Mr Sorrell and his colleagues, however, is that they appear to be powerless to force the banks' accountants and lawyers to give detailed breakdowns of their charges. Though the professional advisers are paid by WPP, their clients are the banks.

Robert Lerwill, WPP's finance director, has written to the Financial Services Unit of the OFT, asking for its observations on the size of the fees the company has had to incur to save itself from possible receivership and whether 'it is in the public interest for the company to be paying for fees for advisers it did not instruct and who are not accountable to us'.

The OFT has yet to respond, but the letter will highlight the whole issue of the costs associated with restructuring companies in difficulties.

Brent Walker swallowed a pounds 40m bill for its restructuring, one of the most protracted and complex ever seen.

WPP negotiated its refinancing package with a 28-strong syndicate of banks led by JP Morgan, Bankers Trust, Citibank and Barclays. On the legal side, the banks were advised by Slaughter and May, the City law firm. In June alone, Slaughter and May is thought to have run up a pounds 450,000 bill.

'We are not saying they did not provide value for money,' Mr Lerwill said, 'but we have no way of testing it when we write the cheques.'

WPP wanted to take the matter to the Law Society, but the banks refused. They said they could see nothing excessive about the firm's fees.

A Slaughter and May partner reacted angrily to WPP's action. 'The OFT should tell Mr Sorrell to jump in a lake.' He said the WPP refinancing had 'involved quite a number of people in very intensive work at weekends and through the night'. He added that his firm was accountable to the banks.

Mr Sorrell, he said, should tackle them about his firm's fees. 'His complaint is with the banks, not with us. They have got a hold over him and he has promised them he will pay their fees. But he also has a hold over them, when it comes to using them next time.'

Christopher Huhne, page 8

(Photograph omitted)

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