Greece gives Lazard repeat business

Lazard gets the call when governments face fiscal mess

Ukraine, for its part, was struggling to meet debt payments even before what the U.S. and European Union say is a Russian-backed rebellion in its eastern regions began last year. It’s now seeking to avert default after its economy shrank an estimated 7.5% in 2014 amid the fighting.

Payments to advisers are determined by the size of the debt reduction and the degree to which creditors participate, and Lazard earned as much as ¤25 million over two years for previous Greek work, the government said in 2012.

Although the company doesn’t break out its revenue from advising governments, Lazard’s entire financial-advisory business brought in US$1.2 billion in operating revenue in 2014, making a payment the size of Greece’s more than a drop in the bucket. Sovereign clients last year included Cyprus and Ethiopia, the firm said in announcing earnings Thursday.

The firm’s roots advising governments in crisis lie much closer to home than Athens and Kyiv. In the mid-1970s Lazard banker Felix Rohatyn was appointed to lead the effort to solve New York City’s financial crisis, which brought the city to the brink of bankruptcy. As part of the response, he chaired the Municipal Assistance Corp., which allowed New York to refinance its debt — though at a significant cost to public services like transit and the police.

Those efforts evolved in parallel with Lazard’s work around the same time in Paris on behalf of Indonesia, which created the basis of a dedicated team for government advisory in the French capital.

Since those early assignments, Lazard’s mandates advising countries in trouble have taken the firm to Buenos Aires in the wake of Argentina’s 2001 default and to Baghdad after the U.S.-led invasion that deposed Saddam Hussein.

While Lazard has developed a niche in helping governments get out of sticky situations, “it’s a delicate game,” said Charles Dallara, a former chief executive of the Institute of International Finance. “And I think that their success and influence widely varies from case to case.”

Lazard’s work for Argentina might be difficult to place squarely in the “win” column. The Latin American country, once one of the world’s wealthiest states, remains largely shut out of international debt markets more than a decade after its US$95-billion default. Argentina spent much of last year locked in litigation with hedge funds that refused to agree to the losses imposed on bondholders as part of its original restructuring.

Unlike in corporate restructuring situations, government clients don’t disappear by going out of business, helping make repeat assignments like that for Greece possible. “Is there any saving RadioShack? Probably not, at this point,” Mr. Cohan said, referring to the U.S. retail chain that’s preparing a bankruptcy filing. “But Greece isn’t going away.”

LONDON • When the government goes broke, the broke call Lazard Ltd.

While Lazard is best known for mergers and acquisitions, the firm has found lucrative work advising governments in two of the world’s current economic trouble spots: Greece and Ukraine.

The roles are in keeping with Lazard’s long — and not always successful — history as a top adviser to cash-strapped governments. Argentina, Egypt, Indonesia, Iraq, Ivory Coast: all have turned to Lazard over the years. So did New York City, back in the 1970s.

It’s nice work for Lazard, which gets to collect fees that supplement its main businesses of advising companies and managing money.

“This is a very high-margin business,” said William Cohan, a former Lazard banker and author of a book on the firm. “All their expenses are paid, and they have no capital at risk. This is as sweet as it gets.”

The Lazard team, led by Paris-based banker Matthieu Pigasse, advised a previous Greek government during the nation’s last major financial crisis, when an exit from the euro currency area loomed as a possibility if talks failed. Last week, the nation’s new government hired Lazard to help again as the country seeks to ease the pressure from a debt load of about ¤315 billion.

Ukraine is also working with Lazard, according to people familiar with the situation.

Based officially in Bermuda with major offices in Paris and New York, Lazard faces challenges with both of those assignments.

The newly elected Greek government of Alexis Tsipras has pledged to increase wages, halt public-sector layoffs and cancel planned asset sales — all part of a package of structural reforms demanded by creditor states including Germany. Finance Minister Yanis Varoufakis is weighing plans to trade existing debt for new bonds pegged to economic growth, after a proposal to impose a loss of capital on creditors met opposition.