The Work

January 20, 2010 2:55 PM

The Bankruptcy Files: Fly the Kirkland Skies

Posted by Brian Baxter

UPDATE: Jan. 20, 5:22 p.m. The tenth paragraph of this post has been updated with new information regarding Morrison & Foerster's role in the Japan Airlines bankruptcy.

If a recent report by Euler Hermes is any indication, the next few months will be a mixed bag for bankruptcy lawyers. Euler Hermes, the world's largest credit insurer, says the world economy has "staged a technical exit from recession" by piggybacking on the positive performance of the Asian markets. But that doesn't mean the economic forecast is all rosy.

While economic indicators show the U.S. economy well on the way to recovery, there are still warning signs. A huge budget deficit that is pushing the value of the dollar down and the price of commodities up, coupled with an unemployment rate over 10 percent are cause for concern, Euler Hermes reports.

A similar report Euler Hermes issued a year ago predicted a worldwide bankruptcy wave was about to hit. Although 2009 was a banner year for bankruptcy lawyers and their firms, it remains to be seen whether the good times will continue in 2010.

Here are the latest filings (hourly billing rates in parentheses, when available):

Japan Airlines

Japan Airlines (JAL), Asia's largest carrier by revenue, filed for bankruptcy protection in Japan and the U.S. on Tuesday. The long-awaited filing came after months of negotiations between JAL and the Enterprise Turnaround Initiative Corporation (ETIC), a Japanese government-backed fund overseeing a restructuring plan for the Tokyo-based airline.

According to its Chapter 15 filing in U.S. bankruptcy court in Manhattan, JAL's total debt load is $28 billion, even higher than the $25 billion debt figure being bandied about in Japan.

Kirkland & Ellis restructuring partners James Sprayregen, Ryan Bennett, and David Seligman, along with litigation partners Chris Heck and Terrence Dee are serving as U.S. counsel to JAL. As we previously reported, JAL is also receiving U.S. regulatory counsel from Steptoe & Johnson's William Karas.

On Tuesday our chief Asia correspondent, Anthony Lin, interviewed JAL's Japanese counsel at Nishimura & Asahi on how the airline's bankruptcy case would proceed in Japan. (One interesting tidbit: don't expect big bankruptcy fees for the six partners, two counsel, and nine associates from Nishimura & Asahi advising JAL.)

Eiji Katayama and Naho Ebata from Tokyo's Abe, Ikubo & Katayama are advising the ETIC, which has been appointed trustee for JAL. Katayama and Ebata both made declarations with the bankruptcy court, including a list of JAL litigation parties in the U.S. and their respective counsel.

American Airlines and Delta Air Lines have retained Jones Day and Hogan & Hartson, respectively, in their battle for a stake in JAL. American has vowed to fight any strategic alliance between Delta and JAL. The Am Law Daily has learned that Morrison & Foerster partner Kenneth Siegel, the managing partner of the firm's Tokyo office, is advising JAL on its proposed tie-up with Delta along with partners Randy Laxer in Tokyo and senior counsellor Ko-Yung Tung in New York.

Uno Restaurant Holdings

The Am Law Daily admits to being crustfallen, er...crestfallen, upon hearing the news that Uno Restaurant Holdings, the parent company behind the deep-dish, Chicago-style Pizzeria Uno chain, filed for bankruptcy in Manhattan on Wednesday.

Citing falling sales and rising food costs, Uno announced it had agreed to a restructuring plan that would give bondholders a controlling stake in the Boston-based company, which was taken over by private equity firm Centre Partners Management in 2005.

Weil, Gotshal & Manges restructuring partners Jeffrey Tanenbaum and Joseph Smolinsky are serving as lead debtors' counsel. The firm has not yet submitted billing information with the bankruptcy court.

A $52 million DIP facility will allow the chain to continue operations during the reorganization process. The company, which hopes to exit Chapter 11 in the spring, also expects to eliminate a substantial amount of its debt through a $142 million debt-for-equity deal.  

Morris Publishing / MediaNews Group / Village Voice Media

The bad news roiling the newspaper business seems destined to continue in 2010.

Affiliated Media, the holding company for Denver-based MediaNews Group, announced it would file for Chapter 11 this week to reduce debt and revamp its business plan. MediaNews is one of the leading newspaper publishers in the U.S., owning more than 60 daily papers--such as The Denver Post, The Detroit News, and San Jose Mercury News--with a total circulation of 2.5 million.

Joining MediaNews on the bankruptcy bandwagon is Morris Publishing Group, an Augusta, Ga.-based company that owns a portfolio of smaller papers like the Florida Times-Union, Savannah Morning News, and the Augusta Chronicle.  

Mark Berkoff ($645), Deborah Gutfeld ($460), and Nicholas Miller ($410) from Neal, Gerber & Eisenberg in Chicago are serving as debtors' counsel to Morris. Bankruptcy court filings show the firm received $2.3 million from Morris in the previous year.

Hull Barrett, which previously served as outside counsel to Morris, is seeking to be appointed special counsel to the debtor. Bankruptcy court records show Hull Barrett has received nearly $1.4 million from Morris in the past year and that lawyers from the firm will bill the debtor at hourly rates ranging from $135 to $270. (James T. Wilson, Jr., a solo practitioner in Augusta, Ga., is serving as local bankruptcy counsel to the debtor.)

Also getting unwanted attention on the bankruptcy beat is Village Voice Media, which Bloomberg reported over the weekend could be forced into Chapter 11 as a result of an ad fight involving a California subsidiary. The Voice vehemently denied the report, posting a rebuttal to the story from its lawyer in the dispute, Randall Farrimond from the Farrimond Law Offices in San Francisco.

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