Legal Village

Restructuring round-up: the happy holidays edition

Posted 15/12/2008 by Brian Baxte

Looking for some seasonal cheer? One might be hard-pressed to find it in this economy, unless of course you're a bankruptcy lawyer. The long-awaited 'tidal wave' of work we've been hearing about for the past 24 months is finally here.

That has some restructuring lawyers longing for the days when they had more time on their hands.

"If we could spread this out more evenly over the year the year it would be so lovely," says Gregory Milmoe, co-head of Skadden Arps Slate Meagher & Flom's restructuring group.

Milmoe has been swamped in recent weeks handling refinancings for Harrah's and Realogy - both of which are owned by private equity giant Apollo Advisors, a longtime Skadden client - and now he will have to cope with the loss of fellow restructuring group cohead Timothy Pohl to Lazard.

But Pohl's defection is a sign of just how valuable bankruptcy and restructuring work is these days, with other transactional pickings slim.

Besides Skadden, Weil Gotshal & Manges has kept up the pace as well, advising Atlanta-based Simmons Bedding on a possible restructuring and Extended Stay Hotels in talks with its lenders. Weil Gotshal may also have picked up the biggest bankruptcy client of all, once General Motors confirms it has retained the firm.

Nortel Networks

It's a tough time to be North American's largest manufacturer of phone equipment. Saddled with debt, Toronto-based Nortel's stock price has sunk to 40 cents and the company is being urged to file for bankruptcy.

The New York Stock Exchange has reportedly told Nortel that the telecommunications company faces de-listing if it cannot bring its stock price above $1 in the next six months.

Nortel has turned to Cleary Gottlieb Steen & Hamilton bankruptcy partner James Bromley to advise it on a potential Chapter 11 filing. Bromley was part of a team from the firm that advised the Securities & Exchange Commission and Federal Reserve Bank of New York during the collapse of Lehman Brothers.

KB Toys

The economy must be in bad shape if a toy company is having trouble staying in business. Massachusetts-based KB Toys has announced that it is filing for bankruptcy and closing nearly half of its 1,200 stores.

It is the company's second such filing in four years. Wilmer Cutler Pickering Hale and Dorr and Delaware's Young Conaway Stargatt & Taylor have been retained as bankruptcy counsel. The same two firms also handled KB's first Chapter 11 filing in Delaware in 2004.

WilmerHale bankruptcy partner Mitchel Appelbaum, who advised KB during its initial bankrutpcy proceeding, is advising the company once again along with bankruptcy and financial restructuring group vice chair Philip Anker and counsel Nancy Manzer. The two are working with Young Conaway's Joel Waite and KB general counsel Scott Hochfelder on the matter.

KB was bought out of bankruptcy by New York-based private equity firm Prentice Capital Management in 2005, but the struggling toy retailer has been unable to overcome lackluster sales and increased competition from Target, Toys R Us, and Wal-Mart.

Iceland's bankrupt banks

Iceland nationalised its three largest banks this autumn after they amassed an estimated $61bn ($41bn) in debt - 12 times the size of the country's economy.

Morrison & Foerster is representing two of those banks - Reykjavik-based Glitnir and Landsbanki - in Chapter 11 filings in federal court in Manhattan. Glitnir filed for Chapter 11 in late November and Landsbanki did the same on 9 December. Both banks are seeking protection from their US creditors, listing assets and debts in excess of $1bn (£670m).

Gary Lee, cochair of MoFo's bankruptcy and restructuring group, is working on both matters along with bankruptcy partner Karen Ostad and senior counsel Kathleen Schaaf. All are based in New York.

The firm was introduced to the banks when it represented Barclays and Nomura as underwriters' counsel in a financing for Glitnir in 2005. But those days, it seems, are over.

This article first appeared on The Am Law Daily, Legal Week's US sister title.