Rx fee structure
I know that for many M&A transactions, banks will charge a transaction/success fee that is a percentage of the total transaction, but does the same apply to Rx? Additionally, could that change depending on whether you are working with creditor/debtor side? If you're helping the company restructure its $1bn cap stack, do you get a percentage of that figure? If you're the banker for an ad hoc group of $1bn bond holders, is it a percentage of that figure?
Interested
Debtor side can get quite detailed/bespoke, likely varies by industry of company in question. Generally the answer to your question is yes and it will depend on the type of restructuring. For example, you might see an EL that includes the following: 100k/month fixed fee, financing transaction fee that includes either an amendment fee / % fee based on gross proceeds of debt / % fee based on 1L/2L debt, a sale and/or restructuring transaction fee that contemplates different scenarios ($x if in-court, $y if out-of-court), a step-up % fee based on TEV ranges, ranges based on if the debt is “materially modified” (if applicable, more than just the bank debt is modified), % of principal debt outstanding. Not an exhaustive list, but point is it could be any kind of appropriate f’d up similar combo.
Not 100% sure on creditor side, I think they are generally simpler (monthly fee + “restructuring” fee). Keep in mind that in-court fees for an ad hoc group will likely be paid out of the estates coffers and thus require court approval (same as debtor-side).
Wouldn’t be a bad idea to take a spin through some dockets and search for ELs yourself.
Thank you so much, this is very helpful. Dumb question, but what is an EL?
Engagement letter
Just for additional information. Usually the court filing for the investment banker in the docket is usually called some thing like "application for retention of [RX IB] as investment banker" and the engagement letter is sometimes attached in the document as an Exhibit. Otherwise, the filing itself will be explicit about the fee structure
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