If you want to get up to speed on corportate bankruptcy-related issues, check out Basic Bankruptcy Issues: A Primer for In-House Counsel, which was written by Carmen Lonstein, Esq. of Baker & McKenize.   This primer is intended to provide guidance on basic business bankruptcy issues to in-house counsel with a limited background in bankruptcy matters and is a great resource for contract attorneys seeking to learn the Chaper 11 bankruptcy process.

The primer covers such topics as:

- Types of Business Bankruptcy Cases And Key Players
- Fundamental Bankruptcy Concepts
- Basic Chapter 11 Concepts
- Some Basic Creditor Remedies And Strategies

For the full primer click here.

Financial actors such as hedge funds increasingly influence large Chapter 11 cases, such as Chrysler’s and GM’s.

With Chrysler LLC’s sale to Fiat SpA past the U.S. Supreme Court, and with General Motors Corp. commencing its own “surgical” bankruptcy on the Chrysler model, it may be tempting to think that we’ve turned a corner: Tentative deals with most major stakeholders of the automakers assure a quick trip through the Chapter 11 emergency room. Now, we might think, it is just a matter of convalescence. This sense of relief may help to explain why the S&P 500 stock market index reached a 2009 high the same day GM declared bankruptcy.

Like their U.S. counterparts, insolvency and restructuring lawyers at Canada’s largest firms have been working around the clock since the winter to keep up with the avalanche of major bankruptcy filings to hit Canadian courts. At least a dozen large Canadian bankruptcies have been filed so far this year under the Companies’ Creditors Arrangement Act (CCAA), Canada’s significantly streamlined version of Chapter 11. In many cases, Canadian lawyers are also serving as Canadian counsel to companies that have filed parallel U.S. bankruptcy court petitions.

For full article click here.

And so, with Chrysler’s 24-page Chapter 11 filing in U.S. bankruptcy court in Manhattan, another large document review (reviews??) loom in the future.

Along with Jones Day, New York bankruptcy boutique Togut, Segal & Segal is also advising the automaker.  But lips are kind of sealed.  At Jones Day, partners Corinne Ball and David Heiman — the founder of the firm’s bankruptcy and restructuring practice and the ones whose names appear on the Chrysler bankruptcy filing — have not responded to requests for comment.   No, not us (everybody takes calls from The Posse List) but the legal media.

Sources say the firm is fielding a team of more than 30 lawyers to handle the Chrysler bankruptcy, as well as the company’s negotiations with the U.S. government, debt holders, and Fiat on its future survival.

Here are the names of the 30 Jones Day souls who will spend a good portion of the next few days/weeks/months/years — it remains to be seen how “quick” this bankruptcy will be — working on all things Chrysler:

Bankruptcy and Restructuring: New York office restructuring head Corrine Ball (lead counsel), practice group founder David Heiman in Cleveland, Atlanta office restructuring head Jeffrey Ellman, partners Richard Engman and Pedro Jimenez and associates Veerle Roovers, Nathan Lebioda, and Jason Cover in New York, partner Mark Cody and associates Joseph Tiller and Robert Krebs in Chicago, and associate Thomas Wilson in Cleveland.

Litigation: Global head of litigation Thomas “Tim” Cullen, Jr., in Washington, D.C., partner Gregory Shumaker in D.C., and of counsel Robert Hamilton in Columbus.

Banking and Finance: Financial institution litigation and regulation practice cohead Brett Barragate in New York and partner John Mazey in Dallas.

M&A: North American practice head Jere Thomson in New York, partners Marilyn Sonnie, John Kane, and Randi Lesnick, and associates Matthew Gray, Zoe Vantzos, and Christopher Froelich in New York.

Employee Benefits: Partners John Cornell and Manan Shah and associate Lisa Jesner in New York.

Tax: Partners Candace Ridgway in Washington, D.C., and Edward Kennedy in New York.

For a nice primer on the Chrysler bankruptcy click here.   The bankruptcy plan “timeline” as announced may be too aggressive (see analysis here) because as the Wall Street Journal opines a Chrysler bankruptcy won’t be quick because it will be difficult for a judge to sort through the many conflicting claims (click here).

Still waaaaaaaaaaay too early to figure out where document reviews will happen but our Deep Throat at Jones Day will (we hope: our Stella Artois bills are through the roof) keep us in the loop.

Many Posse List members who want to go solo or freelance have asked us about bankruptcy practice.  There are a good many of you who have worked on some of the major bankruptcy document reviews in the past few years (Federal-Mogul, United Airlines, Calpine, Enron, tec.) and will be well-prepared for the bankruptcy document reviews rolling out.  Many of you have acquired a good working knowledge of Chapter 11 bankruptcy procedures.

But for the many of you who asked about doing solo/freelance consumer bankruptcy work you need to very well-grounded.  As a recent Texas Lawyer article stated “if the practice of law is full of potholes, then the practice of bankruptcy is full of punji pits”.    The article has some good warnings.  The intricacies of bankruptcy law are mind-numbing (two us on The Posse List staff are ex-bankruptcy attorneys) and we agree:  miss one of the legion of deadlines, and the client loses valuable rights. File a petition without the debtor going through the required pre-petition credit counseling, and the judge will dismiss the case.  Fail to timely object to a debtor’s Chapter 13 plan that does not provide adequately for the treatment of a vehicle loan under 11 U.S.C. §1325(a)(9), and the creditor may lose thousands of dollars that otherwise would have been paid in the plan.  Etc., etc.

The U.S. Bankruptcy Code is not user friendly, and it does not lend itself to figuring out its intricacies alone.  Even with help from experienced practitioners and diligent self-study, learning to practice bankruptcy law can be an intellectually humbling experience.

We do not suggest you take a series of one CLE after another.  We strongly suggest you start with an excellent course on consumer bankruptcy at Sole Practice University which is taught by Jay Fleischman (click here).  He is very popular teacher at SPU and we have found that many students have enrolled at SPU specifically for his course.  What’s good about SPU is the collateral benefits of all the other courses related to creating and marketing your practice plus the great community that’s going on, too.   But check out the site yourself and do the numbers.  At less than $50 per month its value is unsurpassed. You can find sign-up information by clicking here.

And for some very good background material (both consumer and bankruptcy law for contract attorneys, freelancers, etc.) try these websites and blogs.  We’ll add to the list as we find more:

American Bankruptcy Institute

Bankruptcy Law Network

Bankruptcy and Restructuring

Federal Courts Offer Training on Bankruptcy Basics           

Learning bankruptcy 

Nolo’s Foreclosure and Bankruptcy Blog

SEC: How Chapter 11 works

The Bankruptcy Blog

The Bankruptcy Lawyers Blog

Links to various bankruptcy blogs

Bankruptcy-related mergers and acquisitions have hit their highest level globally since August 2004, and are set to keep rising as more companies are forced into distressed sales, according to Thomson Reuters data and restructuring practitioners.   It is one reason for the increase in bankruptcy-related work for contract attorneys in both the U.S. and Europe.   Thomson Reuters identified 34 announced deals in March alone, and 67 so far this year, where the target company was in bankruptcy or administration proceedings. The vast majority were in the US or Japan – reflecting the earlier onset of the recession in the US and more liberal bankruptcy rules in both countries, which allow companies to continue operating while they reorganize.

Among the highest-profile deals were those of Delphi, the US car parts maker that recently sold its brakes and suspension business to a Chinese buyer, and BearingPoint, the US technology consultancy that sold its government operations to Deloitte.

Practitioners around the world forecast that the number of transactions involving distressed companies must rise further.

“We’ve only just begun,” said Gregory Milmoe, a US restructuring partner at Skadden Arps.   “Given the dearth of capital and the substantial increase in the number of companies that will be troubled, one would expect the M&A rate to increase dramatically.”

Richard Stables, global co-head of restructuring at Lazard, said: “People cannot borrow as much as they once could, so you’ve got to figure out how to fill the gap . . . That’s why you may think about selling part or even all of the business.”

Monthly totals for bankruptcy M&A peaked at 87 in July 2002 and slumped to seven in May 2007, just before the credit crunch hit. In the last downturn, a flurry of telecoms and technology company failures led to asset sales to strategic buyers as well as private equity buyers.

This time, industrial and retail companies have been the most prominent distressed sellers but private equity buyers have been few because debt has become far more expensive. Insolvencies traditionally peak a year to 18 months after the start of a recession, so more bankruptcy-related sales are forecast to emerge later this year, practitioners said.

Sources: Financial Times, Thomson Reuters, Skadden, Arps, Slate, Meagher & Flom LLP

The first thing a bankrupt company does is arrange what’s known as debtor-in-possession (DIP) financing, which enables the firm to keep stores open and pay salaries even as it starts stiffing other creditors.  Because the rules permit DIP lenders to jump to the head of the creditors’ line, large banks viewed the DIP market as a relatively low-risk business.  Now, of course, many of the firms that provided DIP financing (are themselves functionally bankrupt.  The surviving banks now regard all types of lending — to consumers and businesses, in bankruptcy and out of bankruptcy — as a highly hazardous activity.  Meanwhile, the private-equity firms and hedge funds that had been big buyers of bankrupt firms are shying away.

So U.S. companies face greater risk of liquidation because sources of financing that allow them to reorganize are drying up.  The previous big providers of DIP financing were companies like GE Capital and JP Morgan.  Standard & Poor’s has reported that there has been no substantial increase in DIP volumes in 2008, in spite of a jump in the number of bankruptcies, highlighting the reluctance of banks and investors to finance companies in bankruptcy.

When we made the rounds of law firms last month, and also attended a few ACC functions, the lack of DIP financing was discussed but so was the strategy of avoiding the whole bankruptcy conundrum by looking at debt exchange, where creditors are asked to accept concessions to reorganize debt outside the courts.  It was expected that more “quiet” deals/negotiations would be cut.

Other companies have been contemplating pre-emptive bankruptcies while they have cash, to improve their chances of an organized restructuring.  Many bankruptcy bloggers speculated this was the case with Nortel Networks which filed for Chapter 11 earlier this month.

Cleary Gottlieb Steen & Hamilton picked  picked up two major bankruptcy assignments on Wednesday when the firm was formally retained by Toronto-based Nortel Networks and Cayman Islands-based Apex Silver Mines Limited.   Leading the firm’s engagement on both matters is New York-based bankruptcy and restructuring partner James Bromley. Bromley was previously part of a team from the firm that advised the SEC and Federal Reserve Bank of New York during the collapse of Lehman Brothers.   Bromley was reported in December to be leading a Cleary team advising Nortel in its restructuring efforts. Once Canada’s largest company by market value, Nortel is one of the largest manufacturers of telecommunications equipment in North America. But the company has been hit hard since the tech bubble burst in 2000.

Full story click here.   

Our bankruptcy attorney contacts tell us they expect these cases will result in significant document reviews.  Cleary uses a number of staffing agencies and e-discovery companies.  For those of you who have worked Cleary doc reviews you might want to check with your respective agencies and see if they have any “leads”.  At this point, we don’t have any information on whom Cleary might use.

NOTE:  many of the D.C. and NYC law firms we chat with tell us most agencies are telling them “we are assembling rosters of attorneys, JD’s, paralegals and support staff with experience and expertise with bankruptcy/subprime/bailout related issues such as mortgage Litigation, foreclosure litigation, credit market related securities litigation,  bankruptcy/restructuring, etc.”

If you have any of this experience, and have not done so, you might want to create a resume emphasising this experience and start promoting yourself with your agencies.  At a recent Association of Corporate Counsel function we attended it was taken as fact that despite a move to do more document review in-house, the surge of corporate bankruptcies would cause corporations to use BigLaw for the normal large scale bankruptcy document reviews.

Michael Sage, the co-head of restructuring at O’Melveny & Myers, joined Dechert on Monday.  Sage, who joined O’Melveny in 2007, has represented creditors and bondholders in the Chapter 11 proceedings for Refco Inc. and Ziff Davis Media Inc. He is just the latest in a series of high-profile moves in the bankruptcy bar.

“This stage of the economic cycle has seen a heightened demand for restructuring and reorganization of legal services,” says H. Jeffrey Schwartz, head of restructuring at Dechert. “And also it’s January. Typically lateral moves of significant practitioners across the board would occur at the outset of the calendar year.”

Last week Cadwalader, Wickersham & Taft restructuring co-chair Bruce Zirinsky left for Greenberg Traurig, while plaintiffs firm Milberg kicked off its own bankruptcy practice by Gibson Dunn’s former practice co-head Jonathan Landers. Bankruptcy star James Sprayregen returned to Kirkland & Ellis in December after a two-year stint at Goldman Sachs. And in November, Paul, Hastings, Janofsky & Walker announced it hired Luc Despins from Milbank Tweed Hadley & McCloy.

Sage primarily represents creditors in bankruptcies and out-of-court restructurings. He bills $895 an hour, according to an August filing in the Ziff Davis bankruptcy, which earned O’Melveny nearly $1.02 million in fees.

For full article click here.

“I perceived that Dechert

A “clerical error” could cost Bank of America and Citibank $51 million if Heller Ehrman has its way in bankruptcy court.

Bank of America, acting for itself and as an agent of Citibank, terminated both institutions security interests on Aug. 3, 2007, according to public records obtained from the California Secretary of State. The banks admit they made a mistake, and still want to be considered secured creditors, but courts haven’t looked kindly on similar errors in the past.

A secured creditor must “perfect” its security interests with uniform commercial code filings and file updates every five years. The bank last submitted such a “continuation” in 2005, so another filing wasn’t needed until 2010. On Oct. 1, a week after Heller said it would dissolve, the bank filed a “correction statement” saying the 2007 filing was a “clerical error.” On Monday, the bank declined to discuss how or why the error occurred, or who made it — the 2007 filing required no signature.

For the full article click here.