April 12, 2010 6:35 PM
The Bankruptcy Files: Plenty of Restructuring Work to Go Around
Posted by Brian Baxter
Mega-bankruptcies might have tapered off from their peak of a year ago, but there are still plenty of high-stakes out-of-court restructurings keeping lawyers busy.
Hilton Worldwide, the operator of the Hilton hotel chain owned by private equity firm The Blackstone Group, on Friday announced the successful restructuring of all its existing debt. The arrangement with creditors reduces Hilton's total debt load by $4 billion through the repurchase of $1.8 billion in debt and the conversion of another $2.1 billion of junior mezzanine debt into preferred equity.
Simpson Thacher & Bartlett real estate chair Gregory Ressa, real estate partner Sasan Mehrara, and corporate partner Brian Stadler led a team from the firm advising Hilton and Blackstone on the debt restructuring. Simpson was a logical choice for the assignment--the firm advised Blackstone in July 2007 on its acquisition of Hilton for $26 billion. (Ressa did not respond to a request for comment.)
Hilton is hardly alone in its efforts to reorganize its massive debt obligations out of court. The New York Post reports that Clear Channel Communications, the largest radio company in the country, faces an uncertain future if it doesn't manage to successfully restructure its debt over the next few years.
There's good reason to question whether it will do so. Clear Channel's private equity owners, Bain Capital and Thomas H. Lee Partners, and creditors broke off debt negotiations in December. No discussions on reducing the company's $18.4 billion debt load have taken place since then, the Post reports. Clear Channel was the target of a drawn-out buyout battle two years ago that finally ended after several big banks financing the deal settled litigation with Bain and THL over the terms of the transaction.
Some of Clear Channel's creditors
are hoping the company will collapse so they can pick up pieces of the San
Antonio-based radio giant, according to The Post. Sources familiar with the Clear Channel deal, which involved many lawyers from several firms, tell The Am Law Daily that the debt discussions haven't yet involved outside lawyers. Who's likely to get the work when they do?
Ropes & Gray advised both Bain and THL on their acquisition of Clear Channel. We contacted David Chapin, the lead Ropes partner advising on the Clear Channel deal, to ask if the firm has been involved in the debt restructuring talks, but Chapin did not return our call.
Another firm that might be in line for Clear Channel restructuring work is Kirkland & Ellis. Like Ropes, the firm enjoys a relationship with Bain. Given its strong restructuring practice, Kirkland figures to be in the mix.
While corporate bankruptcy filings might not be keeping up with last year's record pace, they haven't dried up. Here are some that have come across our radar in recent days (attorneys' hourly billing rates are listed in parentheses, when available):
The parent company of Pali Capital, the ailing broker-dealer and investment banking boutique earmarked for dissolution, has been forced into bankruptcy. Reuters reports that Pali Holdings filed for Chapter 11 on April Fools' Day after being unable to find a buyer for the firm that once had $200 million in annual revenue.
Pali Holdings listed a mere $716,300 in assets against roughly $31.8 million in debts, Bloomberg reports, noting that the company received $3 million in "emergency bridge financing" last November. It has lost almost $40 million over the past two years. The day before its bankruptcy filing, according to Bloomberg, JPMorgan Chase filed suit against Pali in state court in New York, seeking $4.5 million over an alleged loan default.
Mark Indelicato, a bankruptcy partner with New York's Hahn & Hessen, is serving as debtor's counsel. Court records show that the firm has been paid a $150,000 retainer.
Arnold & Porter, Baker & McKenzie, Caplin & Drysdale, Jenner & Block, Kramer Levin Naftalis & Frankel, New York's Driscoll & Redlich, and Beverly Hills firm Ervin Cohen & Jessup appear on a list of Pali's largest creditors. The specific amounts owed to the firms are not detailed.
Gems TV does exactly what you might expect--sell jewelry on TV. Struggling to remain profitable and service its debt obligations, the Reno-based company filed for bankruptcy in Delaware on April 5, Reuters reports.
Robert Brady, chair of the bankruptcy and corporate restructuring practice at Delaware's Young Conaway Stargatt & Taylor, is serving as local debtor's counsel along with associates Kenneth Enos and Robert Poppiti, Jr.
The rising price of gold has hurt Gems TV's bottom line, Reuters reports, as has a civil suit against the company filed by DirecTV seeking $25 million in damages over the alleged breach of an affiliation agreement. DirecTV also appears on a list of Gems TV's largest creditors--it is owed more than $2.6 million for "broadcast fees."
ROCK & REPUBLIC
Rock & Republic's trendy jeans are a bit out of our price-range--and waste size. But we're evidently not the only ones not paying up $200 a pop for high-end denim. The Culver City, Calif.-based denim designer filed for bankruptcy in New York earlier this month, citing a need to decrease costs and a move to refocus on its core apparel and footwear businesses. The brand, founded eight years ago, is known for its collaborations with celebrities like Victoria Beckham.
Partners Alex Spizz ($520) and Arthur Goldstein ($495), and counsel Jill Makower ($405) of New York's Todtman, Nachamie, Spizz & Johns are advising Rock & Republic in its bankruptcy proceedings. Newport Beach, Calif.-based Manderson, Schafer & McKinlay is serving as special counsel to the company.
Rock & Republic has obtained $7.5 million in debtor-in-possession financing from CIT Group, which recently took its own dip in Chapter 11. Reuters reports that Geoffrey Lurie, who previously headed a turnaround at The North Face, has been hired as Rock & Republic's new chief restructuring officer.
As an unabashed sports fan and Syracuse alum, The Am Law Daily would be remiss if we didn't include the Chapter 7 filing by former basketball star Derrick Coleman. The Wall Street Journal reported late last week that Coleman, a standout at Syracuse 20 years ago, filed for bankruptcy on March 2 in Detroit.
Coleman becomes the latest talented former NBA star--following the likes of Kenny Anderson and Antoine Walker--to run into financial trouble despite the millions he earned as a pro with four different NBA teams. Coleman listed nearly $4.7 million in debt against $1 million in remaining assets.
One of Coleman's bankruptcy lawyers, Mark Berke of Michigan's Gold Lange & Majoros, told The WSJ that his client's desire to invest in his hometown of Detroit contributed to the ex-basketball star's financial troubles. Several local ventures are listed on Coleman's bankruptcy filing. Coleman even owes $50,000 to current Detroit mayor and former Syracuse basketball star Dave Bing.Make a comment