Simpson Thacher & Bartlett Lands Kirkland & Ellis Restructuring Star

A prominent restructuring lawyer, David Nemecek, has left Kirkland & Ellis to join rival firm Simpson Thacher & Bartlett, a move poised to bolster Simpson’s corporate restructuring practice. The shift comes after Nemecek’s pioneering debt restructuring tactics at Kirkland created friction with the firm’s large asset management client base.

Nemecek’s Departure and Impact on Kirkland & Ellis

Nemecek, who spent over a decade at Kirkland & Ellis, is known for his aggressive approach to restructurings. This approach led to a lawsuit in November 2023 from Kirkland client Optimum Communications against private equity groups Apollo, Ares, and Oaktree, alleging antitrust violations related to a $26 billion debt agreement Financial Times. This marked the first instance of a competition claim in a distressed debt situation.

Several asset managers voiced concerns to Kirkland management regarding the lawsuit, as some firms paid over $100 million annually in fees to Kirkland for other legal services. In January 2024, Kirkland resigned as transaction counsel to Optimum and decided to avoid similar “creditor-on-creditor violence” scenarios.

Simpson Thacher’s Strategic Gain

Simpson Thacher aims to create a “client-centric” restructuring practice encompassing both out-of-court refinancings and traditional Chapter 11 bankruptcy strategies. Nemecek will co-lead a new practice group called the Capital Structure Solutions Practice. He stated that Simpson Thacher offers “massive synergies” due to its strong private equity and public company practices Financial Times.

The hiring of Nemecek is considered a significant win for Simpson Thacher, enhancing its ability to attract business from companies navigating complex balance sheet negotiations against hedge funds and private capital firms.

Potential Conflicts and Future Outlook

Simpson Thacher, long-term counsel to Blackstone and KKR, acknowledges the potential for conflicts but believes it is well-equipped to manage them. Alden Millard, Simpson’s chair, emphasized the firm’s experience in advising a diverse range of clients, both sponsors and borrowers Financial Times.

Nemecek anticipates that the intensity of distressed debt disputes will persist as asset managers continue to diversify their investments. He believes companies will continue seeking concessions from creditors, leading to emotional and complicated negotiations, positioning his practice well regardless of market conditions.