Law Firm Kirkland & Ellis Resigns From Travelport Over Disputed $1 Billion Debt Deal -- Update
By Andrew Scurria and Soma Biswas
The law firm representing one of Elliott Management Corp.'s
biggest private-equity bets has resigned after steering a debt deal
that angered some of the legal adviser's prominent Wall Street
clients, according to people familiar with the matter.
Kirkland & Ellis LLP, one of the most powerful law firms in
finance, resigned from representing Travelport Worldwide Ltd. after
the U.K.-based travel-booking company touched off a legal
confrontation with corporate-debt investors that Kirkland also
counts as clients, these people said.
The dispute arises from a $1 billion financing deal supplied by
Elliott and private-equity firm Siris Capital Group to help protect
their stakes in Travelport during the coronavirus pandemic after
they took the company private last year in a $2 billion deal.
The loan package depends on shifting valuable intellectual
property assets out of the grasp of Travelport's lenders, including
the debt-investing divisions of Blackstone Group Inc. and Bain
Capital LP, which have hired Kirkland on other matters surrounding
their private-equity businesses, people familiar with the matter
Those investors, represented by law firm Akin Gump Strauss Hauer
& Feld LLP and financial adviser PJT Partners Inc., have said
the transaction isn't allowed under Travelport's $2.9 billion
first-lien loan and have accused the company of defaulting on its
debt, according to people familiar with the matter.
A New York court might get the final say on whether the company
acted within its rights. Travelport filed a lawsuit Friday seeking
declaration that a default hasn't occurred.
The financing deal is backed by intellectual-property assets
that were previously within the lenders' reach but are now pledged
to Elliott and Siris as collateral. Several private-equity owned
companies advised by Kirkland have tried similar maneuvers in
recent years, taking advantage of flexible debt agreements to move
assets away from creditors and free up collateral for fresh
The Travelport deal has pitted heavyweights in the
debt-investing business against each other, with Elliott on one
side and Blackstone's GSO Capital Partners LP on the other. The
lenders' group, which includes GSO, Bain, Ares Management Corp. and
Canyon Partners LLC, has proposed a rival $500 million loan package
to help Travelport weather the pandemic, a person familiar with the
Kirkland was caught in the middle, people familiar with the
matter said. The law firm decided it wasn't possible to continue
representing Travelport given the extremely contentious dynamics
between the shareholders and lenders, one of the people said.
Such a resignation is unusual for any firm, let alone one as
dominant as Kirkland, which has been outpacing its peers during the
coronavirus pandemic in advising troubled companies on seeking
relief from creditors.
U.K.-based Travelport competes with rivals Amadeus IT Group SA
and Sabre Corp. in the business of linking airlines with booking
websites and travel agents. Falling air-transit volumes during the
pandemic have dented revenue at Travelport, which also missed out
on cash it expected from a $1.7 billion sale of its eNett payments
unit when the buyer, WEX Inc., said last month that it was
abandoning the deal.
To bridge the shortfall, Travelport started negotiations with
lenders for potential financing while also transferring
intellectual-property assets into a special subsidiary that would
back a new debt issuance.
Travelport sought help from Kirkland, the legal adviser to J.C.
Penney Co., Neiman Marcus Group Inc., Whiting Petroleum Corp. and
others during their bankruptcies. Law firms that navigate debt
restructurings commonly negotiate against investors that are also
clients on unrelated matters, according to people familiar with
But Travelport has set off an unusually intense standoff after
becoming the latest borrower to use a controversial strategy
popularized by J.Crew Group Inc. in 2016, when the retailer
transferred brands and trademarks to a special subsidiary to secure
fresh financing. While that benefited some creditors, others were
disadvantaged and sued to reclaim their rights to the branding.
In 2018, Neiman Marcus moved its prized MyTheresa division to a
holding company controlled by shareholders and outside the reach of
creditors, provoking litigation. J.Crew and Neiman Marcus filed for
bankruptcy last month, before final court rulings on whether the
asset moves were allowed.
The groundwork for these disputes was laid as lenders, eager to
squeeze out meager returns from the corporate debt market, accepted
fewer and fewer protections in recent years when investing.
Write to Andrew Scurria at Andrew.Scurria@wsj.com and Soma
Biswas at email@example.com
(END) Dow Jones Newswires
June 10, 2020 12:34 ET (16:34 GMT)
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