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Bob Rosenberg found his niche 25 years ago in the rough-and-tumble world of bankruptcy. Take, for example, the time back in 1989, during the closing days of the Eastern Airlines Chapter 11 case. Rosenberg, now 54, was representing Peter Ueberroth as a potential buyer of the now-defunct airlines, while Harvey Miller of Weil, Gotshal & Manges was lead debtor counsel. Judge Burton Lifland was hearing the case in the Southern District of New York in lower Manhattan. “There was a lot of pressure, and we were getting very little sleep towards the conclusion of a case,” Miller says. The result: Two top-billed bankruptcy lawyers engaged in a round of impassioned fisticuffs. Even after all these years, Rosenberg refuses to comment. “It should never have happened,” Miller says. This was an unusual incident for Rosenberg, a former law professor who has been the head of the bankruptcy group in the New York office of Latham & Watkins for the past 16 years. But it was one that is indicative of the determination he brings to cases in and out of the courtroom. “I had some fierce battles with him when he represented the asbestos committee in Johns-Manville and I was debtor counsel [in 1982],” said Steve Case, partner at Davis Polk & Wardwell in New York. “But I learned to admire his professionalism and skills as a lawyer. He’s not afraid to tangle with people for his clients, and we did indeed fight like cats and dogs, but I learned that he’s one of the ablest lawyers in the restructuring field.” UNCERTAIN FUTURE Currently, Rosenberg is involved in bankruptcies involving National Airlines Inc., the Las Vegas carrier that could exit Chapter 11 early next year; Aladdin Casinos, one of Vegas’ newest gaming halls; and Safety-Kleen Corp., a bankruptcy in Delaware that’s been enmeshed in issues ranging from conflicts-of-interest involving advisers to changes-of-venue proposals for the bankruptcy of Laidlaw Inc., its parent. Representing bankrupt airlines and casinos wasn’t necessarily in the plan for Rosenberg in 1970. Just out of Harvard Law School, he was groping his way into an uncertain legal future when he joined Weil Gotshal, and began defending the New York Stock Exchange against suits by customers of faltering NYSE brokerage houses. “I learned how to liquidate brokerage firms,” he said. “And dozens were liquidated after NYSE members’ clients charged that the exchange should be liable for their losses due to its generic advertising.” While the daily give-and-take of restructuring was initially interesting, Rosenberg in the early 1970s hungered for a more contemplative perspective on the law, so he jumped into legal scholarship as a full-time professor at Ohio State University School of Law. By his own account, he wrote two articles during his two-year stretch that distinguished him from the pack of other young lawyers, one on fraudulent conveyance in a commercial context, the other on the use of collateral in a commercial context. “It addressed the statutory basis and constitutionality of a debtor using cash or property as collateral without the consent of secured lenders. It wasn’t at all clear you could do that prior to the 1978 Bankruptcy Code.” CONSENSUAL RESTRUCTURING While the Uniform Commercial Code, since its inception in the early 1960s, began to make it relatively easy to use collateral from a secured creditor, secured commercial lending was not very widespread until the concept of a consensual restructuring and a fresh start were built into the Bankruptcy Code at the end of the 1970s. That was before the old Chapter 10 statute was married with Chapter 11 in the 1978 Code to tie the absolute priority rule to the goal of a consensual reorganization. Bankruptcy practice began to change forever. It took Rosenberg just two years to decide that the legal academic life “was too passive as a full-time occupation” and that he missed practicing. Still, he went on to teach part time at Rutgers University at Newark in New Jersey and at New York University. He feels strongly that the scholarly life has given him the ability to look at many restructuring issues from multiple angles. “Lawyers typically sit around and say ‘We’ll do it this way because we always have,’ while students and professors usually look at first principles and ask why something is done this way and not another way,” Rosenberg said. “I think my teaching experience has made me more creative in finding different solutions to restructuring so I could help companies keep out of Chapter 11.” Rosenberg plunged back into bankruptcy in 1975 with Cole & Dietz (now Winston & Strawn), then joined Moses & Singer in New York in 1980 as “head of a bankruptcy group of one.” He built that practice to 10 attorneys before moving over in 1985 to lead the bankruptcy team at Latham & Watkins. “Bankruptcy practice began to change fairly dramatically due to the 1978 Code, and I covered a lot of secured lenders at the time before I found in the ’90s that I was very good at out-of-court restructurings. I now work both the debtor and creditor side.” THE SUB-PRIME WORLD Deborah Hicks Midanek was the restructuring adviser to management at subprime lender Cityscape Financial when she turned to Rosenberg a week before Christmas in 1997 because he was one of just a handful of attorneys at the time who understood the sub-prime world. “My client thought Bob was the most responsible and the most instructive, and I quickly learned that he has the ability to handle complex things and then explain to others how we need to do it this way and not that way because of this, this and this,” says Midanek, principal in charge of the New York office of Glass & Associates Inc. Midanek says Rosenberg was one of the few attorneys with the financial knowledge and experience to handle such a complex case for the debtor. She sought out Rosenberg again to represent bondholders on the other side of a subprime lender’s bankruptcy when she was the interim CEO of United Cos. of Baton Rouge, La. For Rosenberg, what distinguishes the U.S. bankruptcy process from the rest of the world and fosters the continuity that makes it possible for management to retain control of their companies is “the God-given American concept of debtor-in-possession. “The DIP is a business concept, not a legal concept,” he says. It’s based on the premise that businessmen know best how to run their business rather than creditors or a court-appointed administrator.” DIFFICULT FINANCING Trade creditors are typically reluctant to deal whenever business operations are taken out of the hands of management and put in the hands of a court-appointed administrator, he stressed. But when lenders provide a loan to the DIP, it’s a signal to suppliers, creditors and others that a financial institution is confident in the ability of existing management to bring the company out of bankruptcy. While DIP loans are still relatively easy to get for investment-grade debtors such as W.R. Grace & Co., it has become difficult to get such a financing commitment in some struggling industries because the debtors often don’t have sufficient assets to give lenders a first lien, he said. The continuing deterioration of the telecom and high-tech industries is primarily responsible for creating the novel situation over the past eight months where once highly valued DIP loans are trading for as little as 50 cents on the dollar, Rosenberg said. “I just got a DIP proposal at essentially 700 points over LIBOR in an out-of-favor industry when 300 or 400 over LIBOR was probably the highest in the past,” he says. “I expect that pricing increase to accelerate in certain industries that have been deteriorating so rapidly.” Rosenberg says his proudest moment came when he was lead counsel for Musicland in 1996-97 with an out-of-court restructuring for the large, Sam Goody’s-owned Minneapolis music retailer. STAYING OUT OF COURT “That turnaround was based on sheer determination and doggedness by doing our homework and making credible analyses of every single lease despite overwhelming sentiment that the company had to file for bankruptcy,” he said. “Musicland has become a point of honor with me because we went lease-by-lease and individually convinced the landlords what their recovery rate would be and then offered them just $1 more. Musicland had both bank and public debt and more than 500 leases. We kept them out of court when nobody thought we could.” Rosenberg was an official adviser for the American Bar Association to the National Conference of Commissioners on Uniform State Laws in the mid-1980s in a project aimed at modernizing fraudulent conveyance laws to make them uniform. “That project succeeded when about 40 states adopted our proposals,” he said. Rosenberg says procedures must be more standardized from one district to another because districts often have “different styles, philosophies and points of view” and an unexpected judicial twist can throw a filing into disarray if the multiple parties involved aren’t prepared for it. The U.S. Trustee’s Office is an institution in need of uniformity in its watchdog role. “Bankruptcy courts have to be imbued with some discretion, under bankruptcy law, and trustees too often try to apply some abstract, ‘public-good’ concept when, in fact, these cases are all so different and require people who know both the cases and the marketplace.” Debtor preference for filing in Delaware that has built up over the past 10 years is primarily due to the district’s “predictability.” That hasn’t disappeared, he said, but the court’s enormous overcrowding and many visiting judges has eliminated that once-high predictability level. WILLING TO COMPROMISE Hillsborough Holdings was Rosenberg’s most disappointing case. Bondholders in the asbestos-related case in the early 1990s made a deal to settle, despite three courts having ruled that the Tampa, Fla.-based building materials company had no asbestos liability. “We were vindicated three times by the courts,” he said. “But the senior creditors wanted out and literally gave away the equity value of the company.” Despite his reputation for doggedness — and that lone, one-round bout in front of a judge — lawyers who have worked with Rosenberg also see a man who knows how to be conciliatory. Bettina Whyte, a principal at turnaround specialist Jay Alix & Associates Inc. in New York, who advised Musicland while she was at PricewaterhouseCoopers, sees Rosenberg as a tough lawyer but one who is willing to compromise. “He’s extremely practical and knows how to use the law to get a practical solution,” Whyte said. “He’s dogged and determined all right, but he’s not stubborn, and that’s a big difference. “Some lawyers are dealbreakers,” she added. “But Bob’s a dealmaker.” Copyright (c)2001 TDD, LLC. All rights reserved.

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