Big Bankruptcies--Long Expected--Are Slowly Emerging

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July 11, 2008 5:29 PM

Big Bankruptcies--Long Expected--Are Slowly Emerging

Posted by Zach Lowe

Since the economic downturn hit about a year ago, lawyers lamenting the decline in deal-making have been waiting for an expected spike in bankruptcy work. So far, they've been mostly disappointed. But there are clear indicators now of a teadier stream in the filings. So say bankruptcy lawyers at Weil, Gotshal & Manges, which is representing both Sharper Image as it liquidates its assets, and the discount fashion chain Steve & Barry's, which filed for Chapter 11 this week.

Steve & Barry's has 276 stores nationwide and is known for items priced at $10 and under; NBA star Stephon Marbury and Sex & The City's Sarah Jessica Parker both have attached their names to lines sold by the chain.

The company first approached Weil Gotshal in the fall to advise it on a refinancing, say Lori Fife and Shai Waisman, partners handling the restructuring together with Weil Gotshal bankruptcy legend Harvey Miller. The lawyers were in court all day Thursday setting up an auction of Steve & Barry's assets, tentatively scheduled for August 12 at the law firm's New York offices. The retailer is hoping to find a buyer willing to take on the entire company, according to Waisman, but it also will consider other bids.

Fife and Miller guided Sharper Image through an auction process last month. The country's two largest liquidators, Hilco and Gordon Brothers, paid $49 million for the right to wring out whatever dollars are left in the gadget company, apparently by turning it into a virtual brand name for rent.

Fife and Waisman say Weil, Gotshal's Chapter 11 work has spiked noticeably in the last two months, and they expect the growth to continue. The firm has been tapped as bankruptcy counsel by Vertis Communications, a direct mail company, and LandSource, a major California real estate developer, Fife says.

The work is something of a vindication for Weil's bankruptcy team, which lost four major partners to Cadwalader, Wickersham & Taft in a widely-publicized moved that was viewed as a potential blow to Weil's bankruptcy supremacy. A year ago, the firm lost the then co-head of its bankruptcy practice, Martin Bienenstock, to Dewey & LeBoeuf.

"Things are definitely picking up," Fife says, "And I have a feeling there will be some more."

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