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CHICAGO-Despite what’s expected to be a 12-year low in bankruptcy filings this year, major U.S. law firms are starting to beef up their ranks of restructuring attorneys in anticipation of heavier caseloads next year. Restructuring preparation with some companies behind the scenes is already picking up, some bankruptcy attorneys said, declining to identify any. Companies in the automotive, telecommunications, retail and health care industries are most likely to encounter trouble, they said. “We’ve been very busy and we’re very bullish for the coming year as well,” said Jim Conlan, co-chairman of the restructuring group at Sidley Austin, which is representing global auto parts maker Federal-Mogul Corp. in bankruptcy, among others. Sidley, which currently has 50 attorneys in its corporate reorganization group and another 70 in the firm who work on bankruptcy cases, is recruiting a “significant number” of new associates to continue building the practice, Conlan said. He declined to say specifically how many attorneys his firm is seeking. New York-based Skadden, Arps, Slate, Meagher & Flom plans to add as many as 35 bankruptcy lawyers who will be “Skaddenized” over the next 14 months, said Greg Milmoe, a co-head of that firm’s restructuring group. Skadden currently has 85 such attorneys, down from a peak of 120 at the end of 2003. The restructuring practices of Chicago’s Jenner & Block; New York-based Weil, Gotshal & Manges; Chicago’s Kirkland & Ellis; Akin Gump Strauss Hauer & Feld; Sonnenschein Nath & Rosenthal; and New York’s Milbank, Tweed, Hadley & McCloy all said that they’re hiring or seeking to pull in more attorneys from other groups in their firms. They’re generally looking to boost the headcount by 10% to expand the practices and replace lawyers who defected to investment banks, hedge funds or smaller firms. “Midlevel lawyers are being wooed and they’re jumping,” Milmoe said. There have been seven bankruptcy filings this year for companies with more than $235 million in assets, and there is likely to be 14 for the year, which would be the lowest number since 1994, said Lynn LoPucki, a law professor at the University of California at Los Angeles. Firms responded in recent years by letting attrition reduce their restructuring ranks and by shifting bankruptcy attorneys to different work. Many of the firms are still busy pushing previously filed major Chapter 11 cases, such as Delphi Corp. and Refco Inc., through the bankruptcy process. They’re also working on restructurings outside court and readying some companies for future filings. “We live in fear that as the cases we do have run off that there’s not going to be something to replace them,” said Fred Hodara, who leads Akin Gump’s restructuring group. Still, Hodara said that his attorneys are “too busy right now,” and he wants to be ready for future needs. He’s looking to boost his bankruptcy ranks by five to 50 people. Distressed companies are skirting bankruptcy for now because of a stream of capital from hedge funds and private equity firms, several attorneys said. “There probably will be some modest increase in the interest rates and money will probably not be as free as it has been over the last couple years,” said Dan Murray, head of the restructuring practice at Jenner & Block. Murray said some firms, like Jenner & Block, see the current lull as a good time to lure restructuring attorneys from rivals to fuel growth. He plans to boost the size of his group by 15%. “We think, longer term, there is going to be growth in this area,” he said.

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