KWM China buys reassurance by taking SJ Berwin name
An initial report into the financial affairs of King & Wood Mallesons’ (KWM) now defunct European arm estimates that unsecured creditors are set to lose £33.5m as the firm’s inner financial workings begin to surface.
According to the Quantuma report issued in March, the unsecured creditors category includes KWM’s biggest lender, Barclays, a series of suppliers such as property consultants Knight Frank and Mace Macro and former administrators AlixPartners. It also includes former partners, who according to the report are owed £12.6m.
The total amount available to unsecured creditors as at 17 January was only £3.5m, which is less than 10% of the amount owed. Meanwhile, the firm’s former employees, who are all assigned to a separate entity in administration, also have £3m worth of unsecured claims.
A former SJ Berwin partner said: ‘I’m more surprised there is anything left for unsecured creditors. My view is partners should not be expecting anything back as we were collectively responsible for the business and cocked up badly. Employees are much more morally deserving.’
The report also states that Quantuma’s bill is estimated to reach £1.2m, while legal fees relating to the administration are predicted to come in at about £1m. The fees will be shared among CMS Cameron McKenna, which is set to take home the largest share, alongside Pinsent Masons and Ashfords.
Barclays, which has both secured and unsecured debt, is listed as having a valid security over £16.5m. However, after attempts to sell all of the firm’s remaining assets, work in progress and accounts receivable, it is still not clear how much the bank will recover.
As of 30 September 2016, KWM had £39.5m in equity reserves when the firm’s liabilities amounted to £63.4m. Due to various partner departures throughout 2016, the firm lost £11m in equity reserves, and ended up with £15m less in capital in the autumn of 2016 than it did the year before.
Most of KWM’s European partnership had headed to more than 20 different firms by the time it went into administration, and the new European entity, dubbed KWM 2.0, bought the SJ Berwin name, closing the book on what was once a successful City practice.
One former partner concludes: ‘There was once a lot of talk among partners about leaving KWM and reforming SJ Berwin. The Chinese made a smart move by buying the name and making sure it never resurfaces, but it shows how cynical the whole thing was.’
georgiana.tudor@legalease.co.uk