July 7, 2010 2:30 PM

The Bankruptcy Files: Aviation, Publishers, Toll Roads, and Athletes

Posted by Brian Baxter

The latest global insolvency outlook issued by Paris-based Euler Hermes predicts a decline in business bankruptcies this year given an expected growth rate for the U.S. economy of 3 percent.

Euler Hermes, one of the world's largest credit insurers and a subsidiary of German insurance giant Allianz, reports that business insolvencies in the U.S. increased 40 percent in 2009--there were 60,837 such filings in all, the highest level in the U.S. since 1993 and six times more than 2006.

A slight improvement in the U.S. economy toward the end of 2009 led the number of new corporate bankruptcies to drop by 9 percent in the last quarter of the year, according to the Euler Hermes report. The firm predicts the number of business insolvencies in the U.S. to fall below 55,000 this year and below 50,000 in 2011.

Euler Hermes's data certainly supports a trend we've noticed--more companies are avoiding bankruptcy altogether and successfully restructuring out of court. Troubled Greek telecom Wind Hellas Telecommunications has hired White & Case and Greek firm Karatzas & Partners to advise it as the Athens-based company hired a restructuring chief and announced an agreement with lenders to postpone debt payments while it pursues a sale. (According to Dow Jones Newswires, Bingham McCutchen is advising a note holders committee and Allen & Overy represents the lenders in a revolving credit facility for Wind Hellas.)

Last week Bethesda, Md.-based private equity firm American Capital said it successfully restructured $2.4 billion in debt. Weil, Gotshal & Manges private equity partner Christopher Aidun led a team of lawyers from the firm advising American Capital, 13 percent of which is owned by hedge fund giant John Paulson.

Independent film studio The Weinstein Company (TWC) also recently completed a debt restructuring and handed over the titles of some 200 films in its library to Goldman Sachs and insurer Assured Guaranty, Reuters reports. Under the terms of the deal, TWC can reclaim ownership of the films once the studio pays off its reported $335 million in debt.

Noted Hollywood entertainment lawyer Bertram Fields from Los Angeles's Greenberg Glusker Fields Claman & Machtinger advised TWC, while Fried, Frank, Harris, Shriver & Jacobson litigation partner David Hennes and corporate partner Philip Richter--a recent American Lawyer Dealmaker of the Week--led a team from the firm representing TWC's independent directors on the restructuring. Goldman turned to Akin Gump Strauss Hauer & Feld for counsel.

Here are several recent corporate bankruptcy filings to cross our radar:

ARROW AIR

For the third time in ten years, Miami-based Arrow Air is filing for bankruptcy, but this time the cargo carrier will remain grounded. Arrow Air previously entered Chapter 11 in 2000 and 2004--it last emerged from bankruptcy six years ago. Now, the economic downturn dealt a fatal blow to the company. Arrow Air will liquidate after canceling all flights.

Haynes and Boone bankruptcy and business restructuring partners Blaine Bates, Doug Edwards, and Kenric Kattner in Houston are representing Arrow Air in its Chapter 11 case. Court filings by Haynes and Boone reveal that partners are billing between $575 and $750 per hour, while associate rates range from $270 to $535 per hour. The firm received a $528,909 retainer for prepetition legal services.

Florida firm Berger Singerman is serving as bankruptcy cocounsel to Arrow Air through business reorganization partner Jordi Guso. Guso is billing $525 per hour, according to court filings by the firm, and Berger Singerman associates are billing between $260 and $425 per hour. Bankruptcy court records show that the firm has received a $100,000 retainer for its role in the case and has been paid an additional $70,320 in fees.

TRUVO USA

Formerly known as VNU World Directories, the Delaware-based holding company of Truvo, a European publisher of directories, filed for bankruptcy on July 1 in Manhattan. Ownership of Truvo would be turned over to its lenders, Reuters reports, as a decline in print advertising decimated the company's bottom line.

Cleary Gottlieb Steen & Hamilton corporate restructuring partner Sean O'Neal and commercial litigation partner Thomas Moloney are serving as lead bankruptcy counsel to Truvo. Court filings show that the firm has represented Truvo since the summer of 2009, handling bankruptcy, restructuring, litigation, employee benefits, and corporate securities and governance matters for the Antwerp-based company. Since that time, the firm has received more than $5.5 million in fees and expenses; it's also been paid a $500,000 retainer for its role advising Truvo in its Chapter 11 case.

According to bankruptcy court records, Cleary partners in Brussels, London, and New York are billing between $765 and $1,190 per hour, counsel between $675 and $950, and associates at hourly rates ranging from $375 to $830.

Vincent Lazar, cochair of Jenner & Block's bankruptcy litigation practice, is serving as conflicts counsel to Truvo along with partner Heather McArn and associate Angela Allen.

Jenner court filings show that partners from the firm are billing between $525 and $825 per hour and associates at hourly rates ranging from $325 to $555. Court records show that Jenner has been paid a $200,000 retainer for its role in the case, including an additional $34,300 in fees and expenses.

According to Truvo's Chapter 11 filing, Simpson Thacher & Bartlett is also serving as conflicts counsel to the company. The firm had yet to file documents with the bankruptcy court as of Tuesday.

CONNECTOR 2000 ASSOCIATION

Though it sounds like a top-secret project developed by NASA, the nonprofit entity called the Connector 2000 Association was in fact set up by the South Carolina Department of Transportation to construct and operate a 16-mile toll road crossing part of the state. After suffering $22 million in losses over the past two years and an operating deficit of $173 million, Dow Jones reports that Connector 2000 filed for Chapter 9 on June 25 in Spartanburg, S.C. (Chapter 9 is used by government entities looking to restructure their debts.)

Litigation partner Stanley McGuffin and bankruptcy partner William Short, Jr., from South Carolina firm Haynsworth Sinkler Boyd in Columbia are advising Connector 2000 in Chapter 11 proceedings. The firm has not yet filed billing statements with the bankruptcy court.

According to a list of Connector 2000's 20 largest unsecured creditors, Haynsworth is owed outstanding legal fees by its client, as are attorneys from South Carolina firm Wyche, Burgess, Freeman & Parham. The amounts owed to both firms were not disclosed in the filing.

Robert Kerr, Jr., a founding partner of Mount Pleasant, S.C.-based Hagood & Kerr, is advising the South Carolina Department of Transportation in Connector 2000's bankruptcy case.

MARK BRUNELL / DERMONTTI DAWSON

Antoine Walker. Derrick Coleman. A rough year for former basketball players in bankruptcy court recently switched over to the gridiron, as football stars Mark Brunell and Dermontti Dawson sought protection from creditors in late June. Both players chalked up their bankruptcy filings to failed real estate ventures.

Dawson, a former All-Pro center for the Pittsburgh Steelers, filed for Chapter 7 on June 29 in Lexington, Ky. Dawson listed assets of $1.4 million and liabilities of nearly $70 million. His lawyers from the DelCotto Law Group in Lexington listed payments of roughly $48,000 made by Dawson, who court filings show also paid $9,063 to The Rigsby Law Group in Lexington.

Brunell, currently an NFL free agent, filed for Chapter 11 on June 25 in Jacksonville. He listed assets of $5.5 million and $24.7 million in debt. Court documents show that Brunell's lawyer, Robert Wilcox of the Wilcox Law Firm in Jacksonville, has been paid $75,469 by the quarterback. Brunell also owes $35,000 to Jacksonville firm Brennan, Manna & Diamond. Brunell's former Jacksonville Jaguars teammate, Joel Smeenge, has already filed for bankruptcy as a result of a failed business partnership involving several former players.

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