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September 29, 2010 6:45 PM

The Bankruptcy Files: Harrisburg Is Looking for Some Lawyers

Posted by Brian Baxter

Saddled with debt thanks to a troublesome $300 million municipal incinerator, Harrisburg, Pa., has been pushed to the brink of bankruptcy as it faces $43 million in bond payments before year-end.

Harrisburg needed state aid two weeks ago to avoid becoming the second-largest borrower to default on a major bond payment this year, Bloomberg reports. The fiscal crisis facing Pennsylvania's capital is dire. The Patriot-News of Harrisburg reports that the city has only $1.2 million in its coffers, which it will use to make one more round of payroll.

On top of everything else, Harrisburg need to find new lawyers. J. Gregg Miller, bankruptcy of counsel with Pepper Hamilton in Philadelphia, had been advising the City Council on its options, but recused himself late last week.

The Patriot-News reports that Miller was blocked from representing Harrisburg when a bank suing the city refused to sign a standard conflict-of-interest waiver freeing his firm. Toronto-based TD Bank and bond insurer Assured Guaranty filed separate suits against Harrisburg earlier this month seeking to force the city to pay up on its debts.

Miller, who declined to comment when contacted by The Am Law Daily, told The Patriot-News that he was "looking forward to representing Harrisburg" because he felt his "unique expertise" could help the city in its financial plight. But that won't be happening.

"My firm is conflicted out of helping Harrisburg by TD Bank," Miller said. "I knew they were a client of ours...I didn't think it would be a problem. Banks usually give waivers."

The Am Law Daily previously reported that Bracewell & Giuliani had won a role as counsel to a financial adviser hired by Harrisburg with state funds to aid the city in debt negotiations. But now it looks like Bracewell's role is on the skids as well.

The Bond Buyer reports that the Harrisburg City Council rejected a contract backed by the state to hire Scott Balice Strategies because of questions about how the initial contract was awarded. That means both Balice and Bracewell must now submit new RFPs if they want the Harrisburg work. (Bracewell restructuring partner Kurt Mayr was traveling on Wednesday and unavailable for immediate comment.)

Chuck Ardo, communications director for Harrisburg mayor Linda Thompson, says that the city council voted this week to hire new bankruptcy counsel. He also confirmed that Pepper Hamilton and Bracewell were no longer actively involved for Harrisburg, and said the city is reviewing its options as to all outside advisers.

Should Harrisburg not pursue a Chapter 9 filing, it would likely be forced to drastically increase taxes to cover its debts. (The Bond Buyer reports that other Pennsylvania cities are facing similar financial difficulties.) But raising taxes is a scenario that some public officials want to avoid at all costs, even if doing so means turning to the courts.

"I'm not going to have that $210 million payment on the backs of taxpayers," city councilor Brad Koplinski told Bloomberg. "Bankruptcy, I don't think, would kill our city. I think the tax increases would kill our city."

Below are several other bankruptcy filings that grabbed The Am Law Daily's attention. As usual, hourly billing rates are listed in parentheses, when available.

Coast Crane

Citing an ongoing decline in construction, Seattle-based Coast Crane filed for bankruptcy on September 22 and announced plans to sell its assets at auction. The company, which rents and sells cranes, forklifts, and other types of construction equipment, listed debts ranging from $100 million to $500 million against assets of between $50 million and $100 million, according to the Puget Sound Business Journal.

K&L Gates insolvency partner Michael Gearin ($425) in Seattle is serving as lead counsel to Coast Crane in its Chapter 11 case. Bankruptcy court records show that K&L Gates was paid a retainer of $26,785.83, and that employees from the firm will bill between $75 and $750 per hour. According to a declaration by Gearin, the firm has obtained conflicts waivers from Coast Crane and several of the company's creditors in order to handle the case.

Thompson Publishing

Thompson Publishing, a Washington, D.C.-based publisher of books for professionals in the health care and human resources industries, filed for bankruptcy in Delaware on September 21. The Associated Press reports that Thompson has reached an agreement with stalking-horse bidder PNC Bank to acquire the company's assets and provide $3 million in debtor-in-possession financing.

Choate Hall & Stewart partners John Ventola and Lisa Herrington are serving as Chapter 11 cocounsel to Thompson along with restructuring partner Derek Abbott of Delaware's Morris, Nichols, Arsht & Tunnell. Neither firm has yet filed billing statements with the bankruptcy court. (Sidley Austin's Jennifer Hagle and Blank Rome's Bonnie Fatell and Regina Kelbon are advising PNC Bank in the case.)

Thompson owes nearly $30,000 to three firms. Washington, D.C.'s Brustein & Manasevit is owed $12,052.34, Hunton & Williams another $10,621.50, and Jackson Lewis $5,936.24.

Ultimate Escapes

Destination travel club Ultimate Escapes filed for bankruptcy in Delaware on September 20 as a result of a decline in membership and slowdown in fundraising, Bloomberg reports. The Kissimmee, Fla.-based company is the latest in the destination travel industry to succumb to financial difficulties in recent months.

Greenberg Traurig business reorganization partners Nancy Mitchell, Scott Cousins, David Cleary, and Joseph Davis III are serving as lead debtors' counsel. The firm has yet to file billing statements with the bankruptcy court.

Gordon & Rees bankrutpcy and restructuring chair Peter Ito ($500) and Polsinelli Shughart partner Christopher Ward ($425), the head of the firm's Wilmington office, are serving as counsel to the official committee of unsecured creditors. Michael Richman, the chair of the restructuring practice at Patton Boggs, is representing Ultimate Escapes's largest post-petition secured lender along with Connolly Bove Lodge & Hutz bankrutpcy chair Jeffrey Wisler.

According to a list of the debtors' 20 largest unsecured creditors, Ultimate Escapes owes $400,561 to Atlanta's Weinstock & Scavo and $375,000 to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo.

Urban Brands

Bloomberg reports that women's clothing company Urban Brands, owner of the Ashley Stewart clothing line, filed for bankruptcy in Delaware on September 21 after three consecutive years of losses. Owned by private equity firm Trimaran Capital Partners, Urban Brands plans to continue operations in bankruptcy and has entered into an agreement with stalking-horse bidder and retail investor Gordon Brothers Group, Reuters reports.

Mark Collins ($675), director of the bankruptcy and corporate restructuring practice at Delaware's Richards, Layton & Finger, is serving as lead Chapter 11 counsel to Secaucus, N.J.-based Urban Brands along with partners Paul Heath ($525) and Michael Merchant ($525). Bankruptcy court records show the firm has been paid a $360,000 retainer.

Sonnenschein Nath & Rosenthal restructuring partner Peter Wolfson and Charlene Davis of Delaware's Bayard are advising Gordon Brothers, while Curtis, Mallet-Prevost, Colt & Mosle private equity chair Lawrence Goodman and restructuring and insolvency partners Timothy Barnes and Steven Reisman are representing Trimaran. William Bowden, head of the bankruptcy and insolvency practice at Delaware's Ashby & Geddes, is serving as local counsel to Trimaran.

According to a list of the Urban Brands's 20 largest unsecured creditors, the company owes $329,873 to Texas firm Gardere Wynne Sewell.

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