At Simpson Thacher & Bartlett, Nemecek will lead a new capital structure solutions practice, which he called a "rare opportunity", and is expected to have more room to run, according to one of the people familiar with the matter.
For the better part of 15 years at law firm Kirkland & Ellis, David Nemecek made a career out of exploiting loose lending agreements to perfect what would become a well-worn dance in the world of distressed corporate debt: Craft a debt overhaul too good for one set of a company's creditors to pass up while leaving other creditors with scraps and buying precious time for the company's private equity owners to avoid losses.
The maneuver made Nemecek a star among private equity firms stuck with hundreds of overleveraged and struggling companies -- that is, until his own warnings about creditors' response to those practices set the stage for his high-profile departure.
Nemecek has left for Simpson Thacher & Bartlett, capping weeks of speculation about his future sparked by a web of controversy involving an unprecedented legal move that entangled some of Kirkland's big-name clients, and where he, right or wrongly, was painted as instigator. His exit means that Kirkland has gained a major adversary in its competition for the biggest and most complex -- and profitable -- debt restructuring deals, and raises questions about whether the firm will continue with the aggressive strategies he helped pioneer.
It all started with the contentious legal action taken late last year by billionaire Patrick Drahi's Optimum Communications Inc., formerly known as Altice USA and Kirkland's then-client.
Optimum filed an antitrust lawsuit against its own lenders, a group including major private equity firms like Apollo Capital Management LP, Ares Management LLC, BlackRock Financial Management Inc. They had banded together in a so-called cooperation agreement, which Optimum alleged was an "illegal cartel."
The "cartel" also happened to include some of Kirkland's most important clients -- and who have since sought its dismissal.
While Kirkland didn't formally bring the antitrust suit, many involved nevertheless saw Nemecek's imprint on it. Optimum had been his client, and he already had an aggressive track record for helping clients block their creditors' ability to band together -- including in debt tied to the Warner Bros. Discovery split last year.
The Kirkland veteran specialized in the kinds of out-of-court debt arrangements that left some legacy lenders nursing heavy losses while favoring a select group of creditors, including restructurings for Envision Healthcare Corp., Carvana Co., PetSmart LLC and Macy's Inc. among many more.
Last year, he warned that cooperation pacts could be illegal.
"People who enter into cooperation agreements should be careful," Nemecek said as part of a panel discussion at the Bloomberg Global Credit Forum in Los Angeles last year. "There are serious legal considerations that they should be aware of, including the potential for antitrust claims."
That a Kirkland partner appeared to be encouraging legal theories that could dismantle the lenders' primary tool for defending against aggressive debt maneuvers struck a nerve then. By the time the Optimum suit was filed, some saw a through-line and raised the issue to Kirkland's executive committee, according to people familiar with the matter.
In short order, Kirkland relinquished the Optimum mandate and the firm and Nemecek began discussing his departure.
After Kirkland dropped Optimum, a move that appeared to be aimed at appeasing clients named in the lawsuit, Nemecek expressed frustration to peers and questioned whether the firm would continue supporting his strategies, according to people familiar with the matter who declined to be named discussing confidential information.
Nemecek and Kirkland didn't respond to requests for comment.
Just weeks later, Nemecek was on his way out -- joining Simpson to lead a new capital structure solutions practice. In a statement announcing his move, he called it a "rare opportunity."
Not all of Nemecek's deals had stellar outcomes. He advised on a transaction to overhaul debt at Saks Global Enterprises, which eventually slid into Chapter 11 anyway.
And if Optimum’s suit does prevail, it has the potential to upend the world in which Nemecek has thrived.
Still, at Simpson, Nemecek thinks he will have more room to run, one of the people said.
"Over the past decade, companies, sponsors, lenders and creditors have all turned to Dave for his expertise in solving their most difficult capital structure challenges," Alden Millard, chair of Simpson's executive committee, said in the statement detailing his appointment.