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March 17, 2009 5:37 PM

The Bankruptcy Files: Door Makers, RV Manufacturers, Sports Museums, and Telecoms

Posted by Brian Baxter

From an increase in bankruptcy work in Asia to a unique ruling in California allowing a bankrupt city to void existing union contracts, bankruptcy and restructuring work has become one of the few lucrative practice areas during our current economic recession.

Here are some of the latest bankruptcy filings and out-of-court restructurings to register on our radar.

Masonite International

Chapter 11 is knocking at the door of Masonite International, which manufacturers doors and door components. The Canadian company was acquired by New York-based private equity firm KKR in 2005 for $2.5 billion. But that acquisition left Masonite shackled by crippling debt that the company has tried to unlock itself from during the past three years.

On Monday the Tampa-based U.S. subsidiary filed for bankruptcy in Delaware as part of a prepackaged reorganization plan to cut its $2.64 billion in debt in half. Three affiliates and four of Masonite's Canadian units also sought protection from creditors in Ontario Superior Court in Toronto under the Companies' Creditors Arrangement Act.

Bloomberg reports that Masonite's earnings have been hit hard as housing prices have fallen to their lowest levels in decades. Kirkland & Ellis has been retained as Masonite's Chapter 11 counsel.

Daniel DeFrancheschi, director of the restructuring and bankruptcy group at Delaware's Richards, Layton & Finger, is serving as local counsel in U.S. bankruptcy proceedings. Toronto's Goodmans has been retained as Canadian counsel to Masonite, whose parent company is based in Mississauga, Ontario.

Monaco Coach / Fleetwood Enterprises

Despite the fact that many of us might be living in one of them soon, manufacturers of recreational vehicles and motor homes have not faired well during the recession. Just last week two companies--Monaco Coach and Fleetwood Enterprises--filed for bankruptcy.

Bloomberg reports that the slump in RV sales last year was caused by increased fuel prices and tighter access to credit by potential buyers.

Craig Millet, cochair of the national business restructuring and reorganization practice group at Gibson, Dunn & Crutcher in Irvine, Calif., is serving as bankruptcy counsel to Riverside, Calif.-based Fleetwood.

Laura Jones, an American Lawyer Dealmaker of the Year in 2002 and name partner at bankruptcy boutique Pachulski Stang Ziehl & Jones in Wilmington, is serving as Chapter 11 counsel to Coburg, Ore.-based Monaco Coach along with partner Robert Orgel in Los Angeles.

So far, neither firm has filed billing information with their respective bankruptcy courts.

Philadelphia plaintiffs firm Berger & Montague filed a class action suit against Monaco Coach on Friday for allegedly failing to give advance notice to 2,600 employees that they would be laid off in December.

National Sports Attraction LLC

Back in June 2008 we reported on the role that Proskauer Rose's Robert Freeman--the former head of Thelen Reid's sports practice--had played in helping the Sports Museum of America set up shop in downtown Manhattan.

But the grand plans for America's first museum for all sports, which the New York Daily News likened to the "Smithsonian, drenched in sweat," sputtered amidst the onset of the economic downturn. An ill-fated marketing campaign and an inability to reorganize led the museum to close its doors in late February.

Seyfarth Shaw finance partner David Warburg has been advising the museum's owners on its attempts to restructure its debt obligations. But on March 13 the operator of the $100 million museum located just off Wall Street, New York-based National Sports Attraction LLC, filed for Chapter 7 liquidation in bankruptcy court in Manhattan.

NSA LLC listed assets of $55.6 million and $177 million in debt in its Chapter 7 filing. Sanford Rosen of New York's Sanford P. Rosen & Associates is listed as bankruptcy counsel. Arent Fox's Roy Babitt has been appointed trustee for NSA LLC. The museum is hoping to sell its assets to a new buyer who will reopen the facility.

In its bankruptcy filing, NSA LLC listed Sonnenschein Nath & Rosenthal as the firm handling its IP and trademark work associated with museum memorabilia.

Primus Telecommunications

McLean, Va.-based Primus Telecommunications, a leading provider of long-distance phone and Internet service, found itself disconnected on Monday when the company filed for Chapter 11 protection in Delaware.

Skadden, Arps, Slate, Meagher & Flom partners Eric Davis in Wilmington and George Panagakis in Chicago are serving as bankruptcy counsel to Primus. Bankruptcy court records show that the firm has billed the company for roughly $2.3 million so far.

Primus paid Skadden $700,814 for prepetition work done between December 1 of last year and January 31, 2009. The firm received an initial retainer of $750,000 from Primus "to be applied against anticipated professional services and expenses" along with additional retainers in the amounts of $500,000 and $350,000 on February 26 and March 13, respectively.

Skadden partners are billing Primus between $730 and $1,050 per hour, counsel between $695 and $835, and associates between $360 and $680.

On The Brink

Not all of the billables are coming through bankruptcy assignments these days. Out-of-court restructuring work is also providing a boon to firms during these tough economic times. Some significant hires include:

--Kirkland reportedly has been advising Blockbuster and Reader's Digest on their restructuring endeavors. While the Pleasantville, N.Y.-based publication has denied that it plans to file for bankruptcy, Dallas-based Blockbuster has boosted its chances of skirting Chapter 11 by agreeing to sell a 5.7 percent equity stake to Hollywood Video founder Mark Battles.

-- Bloomberg reported on Tuesday that a prominent hedge fund manager looking to join the board of Chicago-based retail REIT General Growth Properties expects an imminent bankruptcy filing by the nation's second-largest shopping mall operator. Back in January we reported that General Growth had dropped Sidley Austin as restructuring counsel in favor of Weil, Gotshal & Manges.

-- The second-largest theme park operator in the world behind Walt Disney, New York-based Six Flags is seeking to restructure its debt obligations as a means of averting a bankruptcy filing. A firm spokeswoman confirmed that Paul, Hastings, Janofsky & Walker is serving as restructuring counsel to Six Flags. Bankruptcy and insolvency partner Paul Harner, finance and restructuring partner Michele Cohen, and global securities and capital markets cochair William Schwitter are leading the  team from the firm.

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