What is a financial rescue worth? That is the question posed by a high-stakes fee dispute between Wasserstein Perella & Co. and backers of the ICO Global Communications Ltd.

satellite-phone project.

Bermuda-registered ICO emerged from bankruptcy proceedings in May through a Wasserstein-orchestrated $1.2 billion bailout led by cellular-phone titan Craig McCaw.

Now, Wasserstein is seeking almost $45 million for its efforts, which all sides agree would be a record for financial advisers in a bankruptcy case. But Mr. McCaw and ICO's creditors are balking at the fee request, claiming Wasserstein is entitled to only $8.5 million.

Legally, the dispute turns on whether the rescue package was a "financing'' of ICO, as Wasserstein contends, or a "sale'' to Mr. McCaw, as he and ICO's backers say. Wasserstein's September 1999 contract with ICO specified very different fees for arranging a financing and for arranging a sale, though in reality the distinction is often blurred in the context of a bankruptcy reorganisation.

The quarrel spilled into public view with recent filings in US Bankruptcy Court in Delaware, where ICO's backers call Wasserstein's proposed fee "patently unreasonable'', and say it would mean paying the New York-based restructuring firm more than $11,000 an hour. Wasserstein says it earned the $45 million fee with a "uniquely creative and extraordinarily successful'' rescue plan.

The dispute also underscores changes in the highly specialised world of bankruptcy and restructurings. Bailouts are becoming more complex, often resembling mergers or stock offerings, participants say, and fees are rising.

Concerned by several recent disputes over fees, representatives from several large restructuring advisers met earlier this month to commiserate over the situation.

A typical restructuring might generate millions of dollars of fees, while mergers and acquisitions can produce fees in the tens of millions. "As bankruptcy becomes more and more an M&A forum, M&A-type fee arrangements are creeping in, and people are having sticker shock,'' said Robert J. Rosenberg, head of the restructuring practice at law firm Latham & Watkins.

Most disagreements are settled quietly out of court. But talks among Wasserstein, Mr. McCaw and ICO's creditors have yet to reach an agreement.

Negotiations are continuing, but the judge last week set a December hearing to resolve the dispute.

In another of the rare fee disputes to become public, creditors in the Chapter 11 reorganisation of Laroche Industries Inc. in May filed an objection to the fee application of financial advisers Chanin Capital Partners. Lenders argued that under Chanin's contract, it would get a "success fee'' of nearly $1.5 million whether creditors "recover 10 cents or 100 cents on the dollar, and whether the case lasts three months or three years. Thus, this `success fee' is not tied to `success' of the case in any respect.'' The creditors and Chanin agreed to replace the success fee with a fee on the amount of capital Chanin raises for Laroche.

Also, Wasserstein in March sued Danka Business Systems Plc, seeking at least $16 million in fees, after it says it saved the office-equipment supplier from filing for bankruptcy. Two months later, Danka agreed to pay Wasserstein $4.3 million to settle that dispute.

Merger-type rescues pose an additional complication. The new owner didn't hire the financial adviser and has every incentive to limit the fee. But in traditional mergers, it is the last thing companies will spar over given the difficulty of negotiating mergers at all, and most buyers grin and bear it.

"The guy ultimately paying the bill is not the guy who signed the agreement,'' Mr. Rosenberg says.

In the case of ICO, the contract calls for the creditors and Mr. McCaw to split evenly restructuring fees up to $36 million. But Mr. McCaw will have to pay any fees above $36 million.

Bankruptcies of telecommunications upstarts are particularly complex, because half-built companies don't produce the revenue needed for them to survive as stand-alone firms, making mergers a preferred solution. For instance, most of ICO's satellites haven't even been built yet.

Efforts to save Iridium LLC, another satellite-phone system that sought bankruptcy protection last summer, have so far failed. Prime contractor Motorola Inc. plans to remove the Iridium satellites from orbit and let them burn up as they fall to Earth.

Few people gave ICO much hope for survival when it filed for bankruptcy last August, just two weeks after Iridium. The filing followed failed attempts by Hughes Electronics Corp., which had the contract to build the ICO satellites, to raise new funds to keep the project on track. Courts in Bermuda and the Cayman Islands were threatening to liquidate ICO's assets.

But Mr. McCaw emerged as an unexpected savior in October. The cellular-phone pioneer is the chief backer of Teledesic LLC, which plans to use satellites to deliver high-speed Internet access. Mr. McCaw led a group of investors that took control of ICO by injecting $1.2 billion in three stages. He has since merged ICO and Teledesic under a joint holding company.

To Wasserstein, the restructuring was the product of its hard work, devising the three-stage rescue plan, contacting more than 200 potential investors, orchestrating competitive bids and helping Mr. McCaw attract additional investors. In a court filing, Wasserstein said it "conceived and executed, under extreme time pressure, an unprecedented and wholly original comprehensive financing package'' that let ICO emerge from Chapter 11. To Mr.

McCaw, however, his quick offer meant that Wasserstein didn't have to work as hard as it expected for its fee. In court filings, ICO says that Wasserstein did little work once the outlines of the plan were completed in October. A spokesman for Mr. McCaw and ICO-Teledesic Global Ltd. declined to comment.

Moreover, ICO's creditors suggest Wasserstein may have had a leg up with Mr.

McCaw, because Wasserstein was representing Nextel Communications Inc. on another potential deal. Mr. McCaw is the second-largest shareholder in Nextel and sits on its board. Martin Tully, an attorney for the creditors, says they would like to learn more about Wasserstein's relations with Nextel and Mr.

McCaw before ICO pays the fee.

The two sides can't agree on how to interpret Wasserstein's contract. The 13-page agreement provides different fees for a "restructuring'', a "financing'' and a "sale'' of ICO.

Mr. McCaw says the deal was a sale, because he now controls more than 80 percent of the voting stock of ICO. Wasserstein's contract calls for an 0.7 percent fee on a sale. Applying the fee to the $1.22 billion purchase price yields a fee of $8.5 million.

But Wasserstein says the deal was a financing, with a higher, more complicated fee structure. Even if the deal is considered a sale, Kenneth Buckfire, a Wasserstein managing director, says Mr. McCaw is excluding roughly $3 billion in assumed debt that should be subject to the fee. Fees earned under different provisions of the contract should be added together, Wasserstein argues.

ICO fees Creditors made out fairly well in the ICO restructuring, considering that the company could have ended up in liquidation. Creditors were owed about $675 million, including $550 million face value on the bonds, plus $125 million in accrued interest and trade claims. In the restructuring, they got stock and warrants valued at $450 million to $500 million.

THERE'S GOLD IN THOSE LIQUIDATIONS Many restructuring advisers have filed for healthy fees in the ICO case, but only the Wasserstein fee is being disputed. Other claims include: ICO's lawyers, Shearman & Sterling, applied for $4.3 million, and Freshfields for $2.8 million.

Creditors committee financial adviser Jefferies & Co. applied for $1 million; Creditors committee lawyers Milbank, Tweed, Hadley & McCloy for $1.5 million; ICO's auditor PricewaterhouseCoopers LP for $2.2 million; and Provisional liquidator KPMG for $3.1 million.