January 26, 2012 7:17 PM

The Bankruptcy Files: Europe, Energy, and Beyond Oblivion

Posted by Brian Baxter

As negotiations aimed at addressing the Greek debt crisis begin anew, many turnaround professionals are eyeing Europe for the next wave of corporate restructurings.

The New York Times's DealBook reported this week that with the pace of defaults in the United States still lagging behind their 2009 peak, much of the conversation at an annual luncheon hosted by the Turnaround Management Association’s New York chapter centered on the sovereign debt situation in Europe.

And as some private sector creditors face the prospect of suffering major losses on their positions in Greek debt, some hedge funds are reportedly threatening years of litigation against the Hellenic Republic in order to push back on a potential haircut and press the nation's government to cut them a good deal on bond payments.

Thursday saw debt talks resume in Athens, with private bondholders pushing back on a plan that would have them forgive up to half their Greek debt. Two men with law degrees are representing the private sector in talks with Greek officials: Charles Dallara, managing director of banking lobby the Institute of International Finance, and Jean Lemierre, a former president of the European Bank for Reconstruction and Development, who now serves as a senior adviser to French banking giant BNP Paribas.

As steering committee cochairmen of the private creditor-investor committee to Greece, Dallara and Lemierre have the power to advocate on behalf of the private sector, but not to ink a binding deal. (Allen & Overy and White & Case are also advising the steering committee.)

As The Am Law Daily has previously reported, Greece is being advised by a team of lawyers from Cleary Gottlieb Steen & Hamilton led by corporate and international finance partner Lee Buchheit, a veteran of sovereign debt battles in Argentina, Chile, Iceland, and Mexico. Greece's bankers are from Lazard, which earlier this month named former Skadden, Arps, Slate, Meagher & Flom partner David Kurtz its new head of restructuring. (Kurtz left Skadden for Lazard in 2002.)

Writing for investment Web site Seeking Alpha, financial journalist Felix Salmon notes that Lazard's Greece team includes Mark Walker, Cleary's former managing partner, who joined the investment bank last summer. Like his erstwhile partner Buchheit, Walker is also a veteran adviser to sovereigns.

"Bondholders, in general, have a lot of experience going up against Walker, Buchheit, and Cleary generally," Salmon writes. "And whenever that's happened, the sovereigns have won, and the bondholders have lost."

While Greece's ongoing debt woes continue to hang over Europe, some companies that operate there could soon head to the U.S. in search of restructuring solutions.

Bloomberg reports that Gregory Petrick, the managing partner of Cadwalader, Wickersham & Taft's London office, said at a conference in London this week that European shipowners specifically will increasingly seek Chapter 11 protection in the U.S. in order to retain control of their fleets while negotiating with lenders.

Petroplus Holdings, Europe's largest independent oil refiner, also filed for bankruptcy this week in Switzerland. Munich-based restructuring firm Jaffé Rechtsänwalte has been been appointed administrator for Petroplus' subsidiaries in Germany, while PricewaterhouseCoopers has taken the lead on the Zug-based company's U.K. administration. Linklaters and SNR Denton are advising PwC, according to U.K. publication The Lawyer.

Other Am Law 100 firms landing overseas restructuring roles this week were DLA Piper and Hogan Lovells, which picked up work related to the collapse of British fashion retailer The Peacock Group, according to U.K. publication Legal Week. Squire Sanders grabbed roles related to the administration of two other British retailers, Barratts Priceless and Past Times Trading, Legal Week reports.

Below are some of the latest notable corporate bankruptcies and restructurings to cross our desk:

Beyond Oblivion

Founded in 2008, it didn't take long for Beyond Oblivion to fade into, well, oblivion. The New York–based music and technology company, which is partly backed by Rupert Murdoch's News Corporation, was shuttered in December after failing to break into the competitive digital media market.

Beyond Oblivion filed for Chapter 11 protection in Manhattan on January 24, listing assets of less than $10 million against debts ranging from $100 million to $500 million. Duane Morris bankruptcy partner Gerard Catalanello is representing the debtor. The firm has not yet submitted billing statements in the case. (Beyond Oblivion's general counsel is Gene Rhough.)

According to a list of Beyond Oblivion's 20 largest unsecured creditors, the company owes $126,732 to Chadbourne & Parke, $84,139 to Greenberg Traurig, $40,559 to Japanese firm Blakemore & Mitsuki, and $31,510 to White Plains, New York–based Kurzman Eisenberg Corbin & Lever.

Buffets Holdings

Buffets found itself back in bankruptcy court in Delaware on January 18 when the Eagan, Minnesota–based company, one of the largest buffet-style restaurant chains in the U.S., entered Chapter 11 protection for the second time in four years.

Paul, Weiss, Rifkind, Wharton & Garrison corporate reorganization chair Jeffrey Saferstein, along with Pauline Morgan, chair of the corporate restructuring group at Delaware's Young Conaway Stargatt & Taylor, are serving as bankruptcy counsel to the debtor. Both firms, as well as Duane Morris, advised Buffets the last time the company filed for bankruptcy in January 2008.

Court records show that Paul Weiss received at least $1.2 million for its work handling Buffets's previous bankruptcy case. Neither Paul Weiss nor Young Conaway has yet filed billing statements with the bankruptcy court this time around.

Buffets emerged from Chapter 11 in April 2009, but the operator of 494 franchises under names like Fire Mountain, HomeTown Buffet, Old Country Buffet, and Ryan's Grill Buffet has suffered from a weak economy that has seen such other restaurant companies as Star Buffet, Sbarro, Perkins, and Friendly’s seek the solace of Chapter 11.

Buffets intends to close about 16 percent of its existing eateries under a prepackaged bankruptcy plan. It hopes to exit Chapter 11 within six months, relying on a strategy similar to the one employed by Friendly's, which emerged from bankruptcy earlier this month. Scott Irwin serves as general counsel of Buffets, which is controlled by lenders led by affiliates of Credit Suisse and JPMorgan Chase.

Catalyst Paper

Canadian newsprint maker Catalyst Paper, one of the largest producers of mechanical printing paper in North America, filed for Chapter 15 protection on January 17. Like many paper companies, Catalyst has been grappling with the rising cost of raw materials and dwindling demand, Bloomberg reports.

Skadden restructuring partner Van Durrer II in Los Angeles is advising Catalyst in the Chapter 15 case. The Richmond, British Colombia–based company is being represented in Canadian bankruptcy proceedings by Blake, Cassels & Graydon litigation partners William Kaplan and Sean Boyle in Vancouver. Neither firm has yet filed billing statements with the bankruptcy court in Delaware.

Four lawyers serve on Catalyst's board of directors: Harvard Law School graduate Benjamin Duster IV, the board's chair and son of the late Chicago civil rights lawyer of the same name; former Lawson Lundell partner and of counsel William Dickson; Weil, Gotshal & Manges senior business finance and restructuring counsel Alan Miller; and Heenan Blaikie partner Geoff Plant, the former attorney general of British Colombia. David Adderley serves as Catalyst's general counsel.

Corporate restructuring partners Melaney Wagner and Robert Chadwick from Canadian firm Goodmans in Toronto are representing a group of unsecured Catalyst noteholders. John Sandrelli, the managing partner of the Vancouver office at Fraser Milner Casgrain, is advising a steering committee of noteholders. Frasner Milner restructuring partners Christopher Ramsay and Ryan Jacobs are also working on the matter.

Akin Gump Strauss Hauer & Feld restructuring partners Michael Stamer and Stephen Kuhn and counsel Meredith Lahaie in New York have been retained as U.S. counsel to noteholders, along with Eric Schwartz of Delaware’s Morris, Nichols, Arsht & Tunnell.

Ener1

Three months after being dumped by Nasdaq, electric car battery maker Ener1 has parked itself in Chapter 11 in Manhattan. The New York–based company, which received $118.5 million through a stimulus grant from the Energy Department, specializes in manufacturing lithium-ion batteries and battery packs for energy storage.

But like solar panel manufacturer Solyndra and some other companies (see below) that have also received government loan guarantees, Ener1's financial problems have forced it into insolvency. Reed Smith's U.S. commercial litigation cohead Edward Estrada and restructuring partner Michael Venditto are representing Ener1. Court records show that Reed Smith has agreed to cap its postpetition fees in the Chapter 11 case at $225,000 unless it is contested.

Nicholas Brunero serves as Ener1's general counsel. Former Federal Energy Regulatory Commission commissioner Nora Brownell, a visiting scholar at Vermont Law School, serves on the company's board. Ener1 is seeking $81 million in equity funding to continue operations, according to news reports.

Evergreen Energy

Denver-based alternative fuel developer Evergreen Energy filed for Chapter 7 liquidation on January 23 in Delaware, listing debts of $25 million against assets of $240 million. Evergreen foundered after private banking shareholder Stanhill Capital Partners backed out of a $30 million deal to buy the company's "K-Fuel" coal-refining technology, according to the Denver Business Journal.

Cooley and Mark Collins, chair of the bankruptcy group at Delaware firm Richards, Layton & Finger, are serving as bankruptcy counsel to Evergreen. Court records show that Collins and his firm have received $7,500 for their work so far in the case. Evergreen's general counsel is William Laughlin.

According to a list of Evergreen's 20 largest unsecured creditors, the company owes $136,313 to Denver firm Moye White for corporate, SEC, and litigation legal services, $76,689 to Cooley for counsel to its special committee, $68,706 to Sherman & Howard for litigation counsel, and $39,943 to Harness, Dickey & Pierce for IP legal counsel.

Mohegan Tribal Gaming Authority

After struggling with debt and a weak economy that's put a damper on customers looking to drop extra change in their slot machines, the parent company of the Mohegan Sun casinos in Uncasville, Connecticut, and Pocono Downs, Pennsylvania, is asking bondholders to refinance up to $1.1 billion in bonds as part of a deal to restructure a credit line maturing in March, Bloomberg reports.

The gaming and entertainment company, owned by the Mohegan Tribe of Connecticut, and many of its competitors across the country have been hit hard by the economic recession.

Wachtell, Lipton, Rosen & Katz is advising the tribal authority on its restructuring, according to a press release announcing the move. Mohegan Sun's general counsel is Marcia Seligman.

The Quiznos Master

The nation's second-largest sub sandwich chain behind market leader Subway, The Quiznos Master has managed to avoid a stop in bankruptcy court, thanks to a debt restructuring deal that will see billionaire Marc Lasry's Avenue Capital Group take control of the company.

The Am Law Daily reported last year on the decision by Quiznos to hire Paul Weiss to advise it in negotiations on reducing an $850 million debt load. Quiznos, which at its height had almost 5,000 restaurants in more than 20 countries, will now convert Avenue Capital's debt into equity, giving the New York–based private equity firm a 70 percent stake in the Denver-based sandwich chain.

Vinson & Elkins is providing finance counsel to Quiznos, according to a press release announcing the restructuring deal. Akin Gump advised Avenue Capital, which will inject $150 million in capital into Quiznos. Willkie Farr & Gallagher represented first lien lenders on the agreement.

Quiznos had previously been owned by the family of cofounder and former CEO Richard Schaden and private equity firms CCMP Capital and Cervantes Capital. The past two top in-house lawyers for Quiznos were Jeffrey Stahlhut and Pat Meyers, the latter of which spent more than a decade at the company in a variety of roles.

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