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It wasn’t exactly a French mob storming the Bastille, but when journalists working for bankrupt Bridge Information Systems Inc. crashed the company’s first creditors meeting in Paris, they too were taking a stab at liberation. It was a little odd. The journalists of the New York-based financial information provider were lobbying bankers and lawyers not to keep their jobs, but to be freed from them. They wanted to be fired as soon as possible so they could claim severance packages and begin job hunting. But layoffs couldn’t be done swiftly. The sale of Bridge’s French operation had to be completed first, according to French law. And even then, there were complications. Thus resulted a scenario replayed elsewhere across still-paternalistic Europe. “It’s an area of law that’s still very national and very local,” says Bridge’s lawyer in Europe, Jan Van Gysegem of Cleary, Gottlieb, Steen & Hamilton in Brussels. “The Bridge case was interesting for us. It’s not often that you get to work on a transaction where that sort of issue comes up in so many places at the same time.” For debtors, however, it’s been a nightmare. European unification has done nothing for the standardization of bankruptcy law, particularly as corporations go global. “There is often a battle of jurisdictions between the U.S. bankruptcy courts and local European courts,” says David Lovett, a principal in the London office of the Southfield, Mich.-based restructuring and interim management firm AlixPartners LLC. “It’s a growing issue.” Lovett is working with one large bankrupt U.S. corporation that has 22 subsidiaries outside the nation. He’s hoping to arrange the exit of each of them from bankruptcy. “It’s important to have a knowledge of the U.S. system, as well as the European ones,” he says. As U.S. corporations expanded in Europe, so have U.S. turnaround advisory firms, such as AlixPartners, Alvarez & Marsal, Greenhill & Co., Houlihan Lokey Howard & Zukin, and Lazard. Despite their expertise, however, the Americans were caught off-guard. “Historically, the Americans came from the starting point that the Eurozone has one set of rules, and they were dismayed and confused when they found that it was different,” says Jeremy Goldring, a partner at Baker & McKenzie who manages the law firm’s global restructuring, recovery, and bankruptcy practice. Goldring says that with the Chapter 11 proceedings of Worcester, Mass.-based Arthur D. Little Inc., a management consulting firm, Baker & McKenzie had 250 lawyers in 26 offices trying to complete the sale of all of its subsidiaries on the same day. The documents involved in the completion took 15 hours just to sign, he says. BAPTISM BY FIRE The Bridge case was just as complex. The company, which filed for Chapter 11 protection with the U.S. Bankruptcy Court for the Southern District of New York, had more than 4,500 employees distributing information in 65 nations. After a competitive auction process run by Bear, Stearns & Co., Bridge agreed to sell the bulk of its North American business to Reuters Group plc for $275 million in May 2001. Other asset and contract sales were made to Wayne, Pa.-based SunGard Data Systems Inc. for $16.2 million and Dow Jones & Co. for $6.5 million. Outside the United States, Bridge had a network of operations, including its global Telerate business, the Bridge Information businesses in Europe and Asia, and the Bridge Trading Room System. Competition concerns precluded a sale of the businesses to either Reuters or Dow Jones. New York-based MoneyLine Network Inc. finally agreed Aug. 24 to buy these businesses for $15 million. That was the easy part. Completing the MoneyLine deal would lead Bridge and its advisers, Alvarez & Marsal, into the morass of European law regarding bankruptcy and M&A. For A&M, it was a baptism by fire. It was the first mandate involving a significant network of overseas businesses, each requiring specific knowledge of local laws. A&M professionals say it was the most intricate case the firm has worked on. “Bridge was the first company A&M worked on that involved extensive local presence and local negotiations — dealing with creditors and employees,” says Sankar Krishnan, an A&M partner who was Bridge’s chief restructuring officer. Other bankruptcies A&M worked on, such as the reorganization of Little Rock, Ark.-based Timex Corp., involved non-U.S. operations. But Bridge was the first company A&M handled with fully functioning management teams abroad. The assignment brought the firm face to face with European employment law, as well as other local jurisdictional issues. In the United States, the buyer of a business is not required to take on the employees of the target company. It can pick and choose which workers it wants and offer them new terms and conditions, which may not be as good as their previous ones. In Europe, a transfer of a business doesn’t confer such liberties on a buyer. The acquirer has no option but to take on the employees as well, thanks to the European Union transfer of undertakings directive of 1997. EMPLOYEES FORCED TO WAIT To make things more complicated, every member state has different local laws, which means they interpret the directive differently, says Van Gysegem. In Europe, once a business has been bought, it’s up to the buyer to reorganize the unit and then make dismissals under local law, he adds. In France, Telerate and Bridge data had been distributed by FinInfo SA. MoneyLine and FinInfo agreed to a separate arrangement to continue this data distribution agreement, but A&M was stuck with the problem of dealing with leftover journalists and administrative staff. “If you follow the law and you assume employees with a plan to dismiss them later, in a business with sophisticated employees, they don’t want to just sit there for a few months and wait to be dismissed,” Van Gysegem says. Muddying the waters even more were the financial troubles at Savvis Communications Corp., which provides network services to Bridge. Savvis said in September 2001 that it could shut down or declare bankruptcy the next month if it didn’t secure new funds. Savvis, which was spun off in an initial public offering by Bridge on Feb. 15, 2000, at $24 a share, was still heavily dependent on its former parent, which was its largest customer and shareholder. Bridge’s insolvency hit it hard, since it accounted for about 81 percent of Savvis’ 2000 total revenues. Finding Savvis further funding was inextricably linked to the Bridge auction. All of Bridge’s business flows over the Savvis network, so bidders for Bridge’s operations were interested in guaranteeing Savvis’ long-term viability. As part of its deal to buy Bridge’s North American assets, Reuters entered a five-year, $366 million contract to use Savvis’ Internet network to deliver information to its financial customers. MoneyLine signed a similar five-year pact worth $200 million when it closed its purchase. Combined, those two deals were expected to account for 80 percent of Savvis’ revenue, although the company warned at the end of 2001 that it was still nearing bankruptcy. In March 2002, Savvis was given a lifeline worth $158 million in equity funding, mainly from private equity firm Welsh, Carson, Anderson & Stowe, one of Savvis’ major shareholders. Eventually, too, French journalists were persuaded to wait. Tony Alvarez III and his Alvarez & Marsal team then had to negotiate a severance package with them, smoothing the way for MoneyLine’s dismissal of them when it completed its acquisition. LAWS ON FIRING STAFF The severance talks also covered Bridge. In most E.U. nations, if a seller fires employees before a transfer, then that may also be unlawful. In the United Kingdom, it would be considered “unfair dismissal.” In other countries, the concept of unfair dismissal doesn’t exist, but there are other sanctions. Only in countries such as Belgium and Greece can a seller easily fire staff before a takeover. Firing staff after a transfer can also be complicated. In the Netherlands, a company must get permission from a local employment office or a court in order to fire people — a process that could take several weeks, Van Gysegem says. In Germany, a company must engage employees in collective negotiations, and family circumstances can be taken into consideration in deciding who gets fired. In France and in many other European countries, the trade unions have to be involved. Strident journalists also plagued the disposal of the U.K. business of Bridge. In July, journalists at the London bureau of Bridge’s BridgeNews division threatened to strike after being excluded from a proposed $1.2 million severance package for their U.S. counterparts. (They eventually got their own deal.) Bridge’s Italian and Greek businesses were bought by their management teams, not MoneyLine. A good thing, too, A&M’s Krishnan says, because it saved MoneyLine from assuming more liabilities. Each business in Italy and Greece operated as a distributor and continued to buy data from the business being taken over by MoneyLine, which would now also make a fee on supplying data to the former subsidiaries. A&M also managed to provide MoneyLine with transition services to allow the deal to close on time. About seven A&M staff were working across Europe managing the businesses and paying the bills until MoneyLine could bring its staff in. That transition lasted for about two months. The deal was set to close with most of Bridge’s others on Oct. 17, but in Europe, MoneyLine still wasn’t ready to acquire many of the businesses. MoneyLine was still tangled in legal red tape and in some countries simply hadn’t been able to set up a bank account. All the entanglements were eventually worked out, and by early November, the deal was finally completed. For A&M, Bridge was a stepping stone to more European turnaround business. Its European staff has tripled since it first established a presence on the Continent in 2000. At the beginning of this year, A&M announced it had opened a London office in Canary Wharf that will serve as its European headquarters. “[Bridge] is one of the most complex deals we’ve done, in terms of size and in terms of global knowledge, to handle the various jurisdictional issues,” says Krishnan, the interim CRO. “Bridge gave us the platform and the knowledge to handle other complex issues.” Will others learn from the Bridge experience, too, especially U.S. corporations with serpentine operations in Europe? Only if they do some pre-planning before setting up shop, says AlixPartners’ Lovett, noting, “People have to be aware when opening up outside the U.S. to take a moment to consider the environment and, if and when they have to, how they’re going to exit.” This article was distributed by the American Lawyer Media News Service. Nicola Hobday is a London reporter at The Deal.

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