Slowing Growth Prompts U.S. Law Firms to Beef Up Bankruptcy
Teams
Now that the economy is slowing, lawyers are preparing quietly to play
another role for their clients - by building up their bankruptcy
departments, according to the New York Times news service. Law firms and
legal recruiters say that demand for lawyers with experience in
bankruptcy is soaring.
And while firms indicate that they are already busy, many foresee a
sharp increase in bankruptcy filings soon, because companies that are
not yet in critical financial trouble - but expect to be soon - have
begun to reserve lawyers in advance. “A huge wave is coming, and
we want to make sure that we catch the wave,” said Luc Despins,
who joined the New York office of Milbank, Tweed, Hadley & McCloy in
1998 to build up its bankruptcy practice.
Legal recruiters said although statistics are hard to come by, the
demand for bankruptcy lawyers at all levels, including partners, has
been rising for several months now, and has increased sharply since
mid-October. Because experienced lawyers invariably have jobs already,
that means law firms have been poaching experienced bankruptcy lawyers
from rivals, executive placement specialists said. Jeff Schneider,
president of Schneider Legal Search in New York said his company was
looking to fill more than 50 positions at firms for bankruptcy lawyers
and helped several bankruptcy lawyers switch law firms recently.
Part of the reason for the scramble for lawyers with bankruptcy
experience is scarcity: Not that many lawyers have honed bankruptcy
skills in recent years. The total number of corporate bankruptcy filings
has been falling, to 8,211 in the three months ended Sept. 30, compared
with 9,243 in the previous three months and 8,986 in the third quarter
of last year, according to the American Bankruptcy Institute.
Handling of Power Crisis Under Fire; Davis Requests Extended Power
Sales Order
Federal energy regulators faced a barrage of criticism on Wednesday for
not more firmly regulating electricity prices in California and allowing
the state's power crisis to take utilities to the brink of bankruptcy,
according to Reuters. Meanwhile, a federal court ordered the Federal
Energy Regulatory Commission (FERC) to respond within a week to a legal
challenge from Southern California Edison seeking a return to a form of
price controls.
In a sign of the financial toll from the state's skyrocketing
wholesale power prices, Southern California Edison also said it has been
shut out of the market for bank loans and short-term debt. The utility,
a unit of Edison International, said in a regulatory filing it has been
unable to syndicate a $1 billion revolving credit line and cannot sell
commercial paper and other short-term debt securities. It also said it
has been forced to repurchase more than $419 million of pollution
control bonds that could not be remarketed because of the utility's
'precarious credit condition.' It said it may eventually have to buy
back another $131 million.
Concerns about the financial standing of the utilities have also hurt
their ability to buy power, and U.S. Energy Secretary Bill Richardson
extended for the second time a rarely used order mandating electricity
generators to sell them power. “I remain concerned that the
reliability of the grid in California may be endangered,”
Richardson said in a statement extending emergency decree, which would
have expired on Wednesday, until Jan. 5. “Electricity generators
and marketers continue to express reluctance to sell power in the
state,” Richardson noted.
California Gov. Gray Davis, who met with President Clinton earlier on
Wednesday, had lobbied for the extension, saying FERC had erred in
lifting wholesale price caps earlier this month. “I think they
miscalculated because they thought raising the price would assure
California had plenty of power but four days after they raised the price
13 generators withheld any power saying we don't think the utilities
have enough money left to pay us,” Davis told CNN in an interview.
“Clearly the theory under which the price cap was lifted didn't
work.”
Davis is ending a two-day Washington visit aimed at securing federal
support to fix the ongoing power crisis in his state, which has left
consumers threatened with power blackouts and the California utilities
near bankruptcy.
BREED Technologies Announces Emergence From Chapter 11
BREED Technologies Inc., a global producer of automotive safety
systems, yesterday announced its successful emergence from the chapter
11 bankruptcy process it began on Sept. 20, 1999, according a company
press release. BREED's plan of reorganization calls for the cancellation
of all outstanding stock of the company, with BREED continuing as a
private corporation with new capital and ownership structures. As
previously announced, John Riess, the former CEO of Gates Rubber
Company, has been named BREED's chief executive officer.
Digital Broadband Communications Files for Chapter 11
Protection
Digital Broadband Communications Inc., a broadband communications
provider, announced today that it has filed chapter 11 bankruptcy in the
U.S. Bankruptcy Court in Wilmington, Del., according to a company
press release. Digital Broadband has retained a small technical and
operations staff to support its customers and maintain its network
through Jan. 12, 2001.
Earlier in the month, Digital Broadband announced that it was cutting
back its business operations and laying off a substantial portion of its
workforce. Due to a dramatic downturn in the financial markets, Digital
Broadband was unable to attract sufficient additional financing to
maintain its growth.
J. Baker Footwear Licensor Bradlees Announces Liquidation
J. Baker Inc. yesterday announced that it has reached an agreement
in principle with an affiliate of Bradlees Inc. and Gordon Brothers
Retail Partners on the liquidation of the footwear departments operated
by the company's Morse Shoe Inc. subsidiary in stores owned and operated
by Bradlees, according to a newswire report. Bradlees announced on
Tuesday that it had filed for protection under chapter 11 of the U.S.
Bankruptcy Code and had retained Gordon Brothers to act as its agent to
liquidate inventory in all of its 105 stores.
Footstar Corp., a subsidiary of Footstar Inc., will purchase J.
Baker’s ongoing footwear businesses. However, Footstar has opted
to not purchase the licensed footwear departments in Bradlees
stores and related Bradlees assets, in accordance to a Nov. 16 agreement
between J. Baker and Footstar Corp.
J. Baker operates retail businesses in large, under-served niche
markets. The company operates 600 retail stores, three catalog titles
and two commerce-enabled web sites selling apparel and accessories for
big and tall men under the Casual Male Big & Tall, Repp Ltd. Big
& Tall and B&T Factory Stores trade names. The company offers
rugged workwear and healthcare apparel through its 70 Work 'n Gear
stores, direct marketing offerings and e- commerce initiatives. The
company also operates 1,318 licensed footwear departments in discount,
department and specialty stores nationwide through its JBI Footwear and
Morse Shoe divisions.
Bid4Assets to Sell Remaining Assets of Defunct Boo.com
Bid4Assets, the leading full-service asset disposition firm
specializing in assets from distressed situations, announced today that
it has been commissioned to auction the remaining U.S. assets of the
defunct boo.com north america Inc., according to a newswire report. The
sale includes high-end computer equipment originally valued at more than
$100,000.
The auction will be held online from Jan. 7-9, 2001 at
www.bid4assets.com. Asset inspection will be held on Tuesday, Jan. 4,
2001 from 10 a.m -1 p.m. ET in New York City. Inspections are by
appointment only and can be arranged by calling Bid4Assets at (877)
427-7387 or by e-mail at service@bid4assets.com.
Boo.com, a British-based e-retailer that had operated in 18
countries, shut down operations earlier this year due to lack of funds.
The British holding company's U.S. headquarters were located in New
York. Selling the assets of boo.com north america - which includes
desktop computers, laptops and monitors - is the last step for the
e-commerce company in its efforts to liquidate its remaining assets. The
company filed chapter 11 in U.S. Bankruptcy Court in the Southern
District of New York.
L&H Refiles for Creditor Protection in Belgium
Lernout & Hauspie (L&H), the debt-laden voice recognition
software company struggling for survival, said on Wednesday it has
refiled for protection from creditors in Belgium, according to
Reuters.
“After long deliberations with the lawyers, the board has
decided to file a new petition for concordat with the Ieper
court,” an L&H spokesman told Reuters. The spokesman said the
filing took place on Wednesday morning with the commercial court in
Ieper, and the company expected to be notified by the court later in the
day of when the case would be heard.
The Commercial Court in the western Belgian town of Ieper, where
L&H has its headquarters, on Dec. 8 rejected the company's request
for a concordat, which provides protection from creditors while a
company restructures. The court said that L&H had failed to provide
sufficient financial information. L&H previously had said it would
appeal the ruling, but on Wednesday said it had decided to file a new
request for protection from creditors.
“The board felt the best chance for success is going to Ieper
again,” the L&H spokesman said of the decision. “In
Ieper, we have immediate protection (from creditors) from the moment of
filing,” he added. The spokesman said the new filing included
updated financial figures based on new information, including the
results of the company's internal audit. The updated figures, however,
are not an official restatement of prior results. L&H, whose stock
had traded above $70 last March on both the U.S. Nasdaq and pan-European
Easdaq before falling to almost zero, is already operating under chapter
11 bankruptcy protection in the United States.
Struggling Unapix Loses Amex Listing
Troubled film company Unapix Entertainment said Tuesday that its common
stock has been delisted from the American Stock Exchange, according to a
newswire report. The New York-based company, which announced Nov. 28
that it had filed for chapter 11 with the U.S. Bankruptcy Court,
Southern District of New York, has failed to satisfy the listing
requirements, including market capitalization.
Unapix stock last traded at 16 cents with a market cap of $1.6
million. Unapix — which has undergone numerous reorganizations
— licenses, distributes and produces TV programming and feature
films. Its library includes “Mambo Cafe” and “Jack
Frost 2: The Revenge of the Mutant Killer Snowman.” Last
September, it unveiled a major cost-cutting plan, and said that its film
division, which distributed “Grass,” would focus on horror,
thriller, action-adventure and urban genres.
When announcing the bankruptcy filing, it said that it planned to
retain West Coast investment bank Salem Partners to explore a sale of
the company. Unapix said Tuesday that seven of its directors have
resigned. Five of them are no longer officers of the company.
Trans Energy Inc. Comments on Reported Bankruptcy Proceeding
In a statement issued on Wednesday, Dec. 27, Trans Energy Inc.
Chairman and CEO Loren E. Bagley said, “The bankruptcy proceeding
filed in Houston against Trans Energy by a single creditor translates
essentially to a breakdown in communications. An 8-K has not been filed,
as Trans Energy has only been formally notified of the filing of the
petition within the last 24 hours. The company has been in settlement
negotiations in this matter, and the filing comes as a surprise, based
upon a settlement having been reached. A Motion to Dismiss will be filed
immediately, and the company's counsel has requested an expedited
hearing. We fully expect the matter to be resolved, and expect that this
will have no continued adverse affect on the company. We would like to
assure the shareholders that we have taken a positive, proactive stance
on this issue.”
Upstate N.Y. Aerospace Firm Files for Bankruptcy
A once-promising aerospace company in upstate New York originally
formed to create a new single-engine aircraft has filed for bankruptcy
liquidation, according to the Times Union. Jaran Aerospace Corp.,
which was started in 1993 by Jason Wolnek, filed the chapter 7 petition
last week in U.S. Bankruptcy Court in Albany. The filing, which listed
total debts of more than $500,000, indicated the worth of the company's
assets was unknown. Jaran was formed on Wolnek's dream to build a plane
that would rival the Cessna 150. In recent years, however, the firm had
spent more time performing contract work.
“They had been doing composite work for other
manufacturers,” said Mike Manikowski, executive director of the
Ontario County Economic Development Corp., which is owed $250,000 by the
company. “They were working on ways to bind two surfaces together
without using screws or bolts.” Manikowski said Jaran ceased
operations a few months ago, about the same time Wolnek filed for
personal bankruptcy, citing many of the company's debts as his own.
At its peak, the company had 10-12 employees. Since the Ontario
County agency is Jaran's largest creditor, it will become the owner of
the company's intellectual property, including a number of patents and
designs for the proposed single-engine craft, Manikowski said.
'Hopefully, we can find someone else that can step into those shoes and
make this project work,' he said.
Regal Cinemas to File to Reorganize
Regal Cinemas, the nation's largest theater chain, appears ready to join
four other major theater operators that have sought refuge in bankruptcy
court this year, according to the Miami Herald. Regal has
informed at least two South Florida landlords that it plans to file for
reorganization next year.
Meanwhile, the Knoxville, Tenn.-based company has been negotiating to
pull out of some of its existing or planned South Florida locations.
Regal has backed out of operating an 18-screen theater in the Dolphin
Mall now under construction in west Miami-Dade County, said Michael
Swerdlow, the mall's co-developer. Regal signed a lease at developer
Jeff Berkowitz's Kendall Village Center for a 16-screen theater, but
Berkowitz said Regal has breached an agreement to begin construction. He
said his lawyer, Brian Bilzin, was notified by Regal of its intentions
to file bankruptcy early next year.
Mark Kottler, whose company Finestra Real Estate Development owns a
Lincoln Road retail project on Miami Beach with Regal as a tenant, also
received word from Regal that it planned to file a bankruptcy
reorganization. However, he said the company didn't say when the filing
would occur.
“It was inevitable,” said Beth Azor, president of Miami
real estate company Terranova Corp., of a bankruptcy filing for Regal.
“The movie industry unfortunately is in major trouble.”
Three months ago, General Cinemas closed its seven South Florida
theaters and soon thereafter filed for bankruptcy reorganization. United
Artists, Carmike Cinemas and Edwards Cinemas have also filed for
bankruptcy protection. Regal lost $167.3 million on $822.4 million in
revenue in the first nine months of the year, compared with a $14.5
million loss on $766.1 million in revenue for the same period last
year.
Graphics Company Asks for Time to Restructure Business
CTI Group Inc., a company that specializes in graphic design and digital
prepress for corporate graphic art departments, filed for chapter 11
bankruptcy reorganization last week in mid December, according to
Portland’s Business Journal. The 10-year-old Portland
company has enough money to cover payroll and other expenses, and it has
received a $750,000 revolving line of credit from one of its creditors
to help pay its bills, according to papers filed in U.S. Bankruptcy
Court.
Another hearing on CTI's post-petition financing is scheduled on Jan.
10 in bankruptcy court. The once-financially solid CTI stumbled this
year when a major customer drastically cut back its $4 million a year in
printing orders to $1 million. Over the past several years, the company
also rapidly acquired several smaller graphics businesses and new
equipment. CTI has facilities in Northwest Portland and Vancouver.
'They grew too fast, incurred too much debt and had a major customer
that had its own financial problems, and those two things caught them in
a position with too much debt service,' said Albert Kennedy, an attorney
at Tonkon Torp, which represents CTI Group. There's no danger of the
company going out of business, he said. Kennedy predicted CTI, which
employs 90 and reported revenue of $13 million last year, would emerge
from bankruptcy in April.
Commodore Files Chapter 11, Cancels Cruises
Florida cruise company Commodore Holdings Ltd filed chapter 11
bankruptcy on Wednesday and said it would suspend operation of its three
ships this weekend, after returning passengers to their ports of
embarkation, according to Reuters.
The company, based in Hollywood, Fla., said it was unable to
negotiate an agreement with its mortgage lenders in time to avoid
canceling cruises scheduled to begin on Saturday and Sunday aboard its
ships, the Enchanted Capri, the Enchanted Isle and the Crown Dynasty.
“We deeply regret having to take this action, but we had no other
choice,” Commodore CEO Fred Mayer said.
