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August 20, 2010 12:27 PM

The Bankruptcy Files: Power, Petroleum, and Electronics

Posted by Brian Baxter

The latest round of law firm billings connected to the Lehman Brothers bankruptcy have come and gone, once again with much hullaballoo, while the legal costs tied to the Chapter 11 cases of what's left of Chrysler and General Motors also continue to creep upward, though at a much slower rate.

Despite the hefty fees charged by top-notch restructuring counsel, even some cash-poor municipalities are seeking to bring their mounting debt under control with the aid of outside lawyers. The City of Harrisburg, Pa., for instance, hired Bracewell & Giuliani this week as part of a financial advisory team meant to help Pennsylvania's capital shed a heavy debt load caused in part by a troublesome municipal incinerator that’s $300 million in the red.

“This city faces challenges that confront municipalities across the country,” Bracewell financial restructuring partner Kurt Mayr said in a statement. “Our team will bring all its resources to bear to achieve the correct comprehensive solution that will stand as a model for others.”

Of course, not all restructuring counsel is effective counsel. Earlier this month, Crain’s Chicago Business reported on the criminal bankruptcy fraud charges filed in federal court in Salt Lake City against former Kaye Scholer partner Stephen Garcia, who allegedly concealed his relationship with a major creditor while representing Geneva Steel Holdings in its Chapter 11 case.

Crain’s reports that Garcia resigned from Kaye Scholer in 2005, only four years after he and several other lawyers defected from now-defunct Hopkins & Sutter to open Kaye Scholer’s Chicago office. Last year Kaye Scholer settled malpractice claims brought by a court-appointed trustee for the steel mill, Crain’s reports, refunding $1.7 million of the $2.7 million it received in the case. The firm also agreed to pay an additional $2 million and waive its right to several hundred thousand dollars in unpaid legal fees, according to Crain’s.

Kaye Scholer admitted no wrongdoing in the civil settlement and the firm has not been charged in the criminal case against Garcia, who refuted the charges when contacted by Crain’s.

“I am very disappointed that these charges were brought, which I deny,” Garcia said in an e-mail to Crain’s. “I offer my sincerest apologies to my family, my current and former clients, and my friends for any negative repercussions that they may suffer as a result of these matters.”

In other recent bankruptcy news of note:

EBG Holdings

EBG Holdings, a subsidiary of U.S. Power Generating Co., filed for bankruptcy in Manhattan on Thursday after reaching a $1.1 billion deal to sell certain assets to Constellation Energy, according to the Daily Bankruptcy Review. Completion of the section 363 sale is expected within 120 days, the DBR reports, although the deal is subject to higher bids at a bankruptcy auction. Reuters notes that EBG and the six units that filed the petition are collectively known as Boston Generating.

D.J. “Jan” Baker, the global cochair of the insolvency practice at Latham & Watkins, is serving as lead debtor's counsel to EBG along with former insolvency cochair Robert Rosenberg. Brown Rudnick is providing regulatory counsel to the company and several of its subsidiaries, while Anderson Kill & Olick is serving as conflicts counsel. None of the three firms has yet made billing information available to the bankruptcy court.

According to a list of EBG’s largest unsecured creditors, the company owes Dechert $85,000 for legal services.

Caribbean Petroleum

The explosions that rocked a fuel storage facility owned by Caribbean Petroleum in Puerto Rico last October eventually forced the facility's owner into bankruptcy court. Bloomberg reports that Caribbean Petroleum filed for Chapter 11 in Delaware on August 12 after the Environmental Protection Agency ordered the company to clean up environmental hazards stemming from damaged fuels storage tanks.

Cadwalader, Wickersham & Taft financial restructuring partner George Davis is representing Caribbean Petroleum in its bankruptcy case. Mark Collins, chair of the bankruptcy and corporate restructuring department at Richards, Layton & Finger, is serving as local debtor's counsel. Neither firm has yet filed billing statements with the bankruptcy court.

According to a list of Caribbean Petroleum’s largest unsecured creditors, Puerto Rican firm Landron & Vera is listed as being owed $500,000. Another San Juan shop, McConnell Valdes, is owed $150,000.

Apex Digital


The Los Angeles Business Journal reports that Walnut, Calif.-based Apex Digital, a manufacturer of low-cost televisions, DVD players, and other electronic products, filed for bankruptcy in Los Angeles on August 18. Apex founder and CEO David Ji was once involved in a bizarre payment dispute with a Chinese supplier six years ago, which resulted in him being taken hostage and interrogated by civil authorities.

Ron Bender, a name partner at Los Angeles bankruptcy boutique Levene, Neale, Bender, Yoo & Brill, is advising Apex in Chapter 11 proceedings along with partner Juliet Oh. The firm has not yet filed billing statements with the bankruptcy court.

According to a list of Apex’s largest unsecured creditors, the company owes $2,471.76 to Covington & Burling. The firm has handled litigation matters for Apex.

nCoat

Reuters reports that Whitsett, N.C.-based nCoat, a maker of special nanotechnology coatings, filed for bankruptcy on August 16 in Greensboro, N.C. Bankruptcy partner John Northen and litigation partner Vicki Parrott from Chapel Hill, N.C.-based Northen Blue are serving as lead Chapter 11 counsel for nCoat. Bankruptcy court records show that the firm has been paid a $75,000 retainer.

According to a list of nCoat’s largest unsecured creditors, the firm owes more than $530,000 to three law firms. Memphis firm Bourland Heflin Alvarez Minor & Matthews is listed as being owed $3,084.34, Portland firm Bullivant Houser Bailey another $4,300.50, and the remaining $526,671 is due to Salt Lake City firm Durham Jones & Pinegar.

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