February 10, 2012 6:41 PM
The Bankruptcy Files, Fashion Week Edition: Barneys Tries Kirkland on for Size
Posted by Brian Baxter
As Fashion Week envelops New York, Barneys New York has tapped Kirkland & Ellis for restructuring counsel. The assignment is the latest in a batch of Chapter 11 roles landed by Kirkland, a list that includes the recent bankruptcies of United Retail Group and Global Aviation Holdings (more on those below).
Kirkland has also been retained by aircraft manufacturer Hawker Beechcraft, according to The Wall Street Journal. A spokeswoman for Wichita, Kansas–based Hawker Beechcraft, which has not filed for bankruptcy or begun a restructuring, has declined requests for comment on the WSJ's report. Alexander Snyder serves as general counsel for the aerospace company.
As for Barneys—a luxury department store chain considered an institution by fashionistas everywhere—the company is struggling with a $200 million debt load connected to a $942.3 million takeover in 2007 by Dubai-based private equity firm Istithmar. The deal saddled Barneys with $500 million in debt, a large part of which is currently held by billionaire Ronald Burkle’s Yucaipa Companies, according to the WSJ.
(A Kirkland spokeswoman did not immediately respond to a request for comment on which of the firm's lawyers are advising Barneys and Hawker Beechcraft.)
The financial woes rocking Barneys underscore one the main predictions contained in an annual restructuring outlook for 2012 recently released by Weil, Gotshal & Manges, namely that the retail sector is at the greatest risk for distress this year.
Elsewhere on the insolvency beat, Bloomberg reports that a Manhattan bankruptcy judge has approved a request by the trustee for MF Global Holdings to hire six outside law firms. The Am Law Daily reported last week on the specific lawyers from those firms—led by Skadden, Arps, Slate, Meagher & Flom and Magic Circle firm Slaughter and May—working on the case, as well as on the rates at which those lawyers are billing.
The hires comes as the trustee for MF Global's defunct brokerage, Hughes Hubbard & Reed bankruptcy cochair James Giddens, announced a $1.6 billion shortfall in customer cash. Former Federal Bureau of Investigation director and federal judge Louis Freeh of Freeh Sporkin & Sullivan is serving as trustee for MF Global's New York–based parent company.
A company that has kept its bankruptcy attorneys busy for more than a decade, W.R. Grace & Company, could finally be set to exit Chapter 11 after a bankruptcy judge in Delaware confirmed a reorganization plan that should help the buildings materials maker resolve its asbestos liabilities, according to the Daily Deal.
Also in the First State, Saab North America has turned to Stevens & Lee and Butzel Long to help it try to fend off an involuntary bankruptcy petition filed last month that seeks to force the U.S. subsidiary of the Swedish automaker into Chapter 11. The Daily Deal reports that Saab North America wants the case moved to Michigan. Polsinelli Shughart is counsel to the petitioners seeking to force the company into Chapter 11, while Hinshaw & Culbertson is representing one of Saab's largest secured lenders, Ally Financial.
Ally Financial, meanwhile, has its own financial problems, which bring us back to Kirkland. Formerly known as GMAC, the company reportedly hired the firm last year to provide restructuring advice for its embattled mortgage unit, Residential Capital. Now Ally is considering a prepackaged bankruptcy for ResCap, according to Bloomberg.
Some other recent bankruptcy filings that have crossed our desk of note:
The Connaught Group
Like Barneys, high-end fashion retailer The Connaught Group—whose direct sales fashion brands include the Carlisle, Etcetera, and Per Se collections—has struggled with a fall-off in consumer spending linked to the global economic downturn. The New York–based company filed for bankruptcy in Manhattan on February 9, listing assets of up to $50 million against liabilities of up to $100 million.
Fulbright & Jaworski bankruptcy partner David Barrack, corporate and banking cochair Paul Jacobs, and corporate partner Warren Nimetz are leading a team from the firm serving as bankruptcy and general counsel to New York–based Connaught.
Court filings by Fulbright show that partners from the firm are billing between $505 and $955 per hour, counsel between $375 and $775, and associates between $300 and $675. Fulbright was paid $21,180 in September for work related to a capital raising by Connaught, as well as a $150,000 retainer in December for restructuring advice. In total, the firm had been paid $879,515 by Connaught through February 8, according to court records.
Barrack states in an affidavit that Fulbright has also provided trusts and estates counsel to Connaught founder, CEO, and chairman William Rondina, for which the firm was paid $20,622 for services rendered between June 2007 and June 2010. Barrack notes that Rondina has signed a waiver allowing Fulbright to represent Connaught and that Rondina has hired separate counsel from New York's Halperin Battaglia Raicht to advise him in the company's Chapter 11 case.
Eastman Kodak, which filed for bankruptcy last month with Sullivan & Cromwell at its side, has announced that it will no longer produce cameras. What the Rochester, New York–based company will continue to produce is fees for its bankruptcy lawyers. A recent declaration by Andrew Dietderich, the head of S&C's bankruptcy and restructuring group, shows that the firm was paid nearly $6.7 million by Kodak in a series of nine payments between December 2 and January 18.
As we have previously reported, the Kodak case is the first debtor's counsel assignment for S&C, and the firm's application for employment last week states that while it doesn't normally bill by the hour, S&C will submit hourly bills for Kodak as required under Chapter 11 protocol.
S&C partners are billing between $990 and $1,150 per hour, counsel and special counsel between $990 and $1,050, and associates between $395 and $875. S&C also states that it will give Kodak a reduced flat hourly rate of $990 for partners, counsel, and special counsel on some matters.
The firm, which was paid a $1 million retainer to serve as bankruptcy and restructuring counsel to Kodak, has also agreed to waive $221,076 it is owed by the debtor for IP work. Besides Dietderich, S&C of counsel John Jerome, special counsel Michael Torkin, and associate specialist Mark Schneiderman are also advising Kodak.
Torkin's S&C bio and LinkedIn page shows that he joined S&C last August from Shearman & Sterling, where he had been a partner. S&C's Kodak filings, which can be viewed in full here and here, contain more details on the firm's billing practices and outside clients.
Global Aviation Holdings
The decision by the U.S. government to curtail its military's operations in Iraq and Afghanistan has been bad for business for Global Aviation Holdings. The Peachtree City, Georgia–based company, which helps transport troops to far-flung locales, filed for bankruptcy in Brooklyn on February 5 amid efforts to shed more than half of its aircraft leases.
Kirkland restructuring partners Jonathan Henes and Ryan Bennett and litigation partner Michael Slade are representing Global Aviation in its Chapter 11 case. Private equity firm MatlinPatterson, a Kirkland client, owns more than 90 percent of Global Aviation. Kirkland has not yet filed billing statements with the bankruptcy court.
Brian Gillman was hired last year as general counsel of Global Aviation, which filed court papers listing assets of $589.8 million against debts of $493.2 million. McKenna Long & Aldridge and Haynes and Boone are representing Delta Air Lines and ATA Airlines, respectively, in Global Aviation's bankruptcy case, according to court records.
TBS Shipping Services
An affiliate of Hamilton, Bermuda–based shipping company TBS International filed for bankruptcy in White Plains, New York, on February 6 as part of a prepackaged plan to restructure debt with a group of lenders. Yonkers, New York–based TBS Shipping Services has asked for a hearing on March 12 at which it hopes its reorganization plan will be approved, Bloomberg reports.
Gibson, Dunn & Crutcher business restructuring and reorganization cochair Michael Rosenthal is leading a team from the firm advising TBS in its Chapter 11 case. The firm has not yet submitted billing statements with the bankruptcy court.
William Harrington, chair of the executive committee at White Plains–based Bleakley Platt & Schmidt, serves on the board of directors for TBS. Harrington, who is head of Bleakley Platt's litigation and toxic tort practice, also chairs the nominating and corporate governance committee for TBS.
Dow Jones Newswires reports that TBS has secured $42.8 million in debtor-in-possession financing. The company lists assets of $143 million against debts totaling $220 million, according to court records.
United Retail Group
United Retail Group (URG) caters to female customers seeking large or plus-sized apparel and other accessories. Now the Rochelle Park, New Jersey–based company is seeking to slim down and sell itself in bankruptcy to an affiliate of private equity firm Versa Capital Management.
URG entered Chapter 11 on February 1 and plans to close 14 stores it operates under the Avenue brand by the end of the month before stalking horse bidder Versa pays $37 million to take control of the company.
Kirkland restructuring partners Marc Kieselstein ($995 per hour), Nicole Greenblatt ($795), and Paul Basta are advising URG in its bankruptcy case. Court filings by the firm reveal that other Kirkland partners are billing between $670 and $1,045 per hour, of counsel between $560 and $1,045, and associates between $370 and $750.
URG has paid retainers totaling $500,000 to Kirkland in the run-up to its Chapter 11 filing. That retainer has been continually replenished since late November. All told, court filings show, the debtor has made payments of more than $2 million to Kirkland.
Court records also show that S&C's Dietderich, Torkin, and partners Hydee Feldstein and Alexandra Korry are representing Philadelphia-based Versa in its effort to acquire URG, which was last bought in 2007 for $198.9 million by an affiliate of French retailer PPR.Make a comment