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Bankruptcy battles don’t suffer shrinking violets. But even among the most outspoken and aggressive in the bankruptcy bar nowadays, the head of the bankruptcy and restructuring practice of Chicago-based Kirkland & Ellis, James Sprayregen, 41, stands out for his candor. “I always say, ‘It’s better to stab someone in the heart than in the back,’” he says. “It’s the best policy to get things out front and on the table so you know where you stand and you can then work the issues out together.” As the negotiations within increasingly complex bankruptcies get more heated, the former Glencoe, Ill., high school wrestler is hot. Sprayregen has been juggling multiple cases as debtor counsel, from Harnischfeger Industries Inc.’s two-year Chapter 11 stay to the Chiquita Brands International Inc. bankruptcy involving operations in 60 countries. He represented Trans World Airlines in its most recent complicated bankruptcy, which ended with the airline being acquired by AMR Corp., the Fort Worth, Texas-based parent of American Airlines. His work as counsel for Zenith Electronics Corp.’s bankruptcy included insolvencies in the U.S., Mexico, Japan and Brazil. Now he’s trying to carve out a new legal strategy for dealing with asbestos-related reorganizations as the counsel for both power plant-builder Babcock & Willcox and specialty chemical company W.R. Grace Inc. “Jaimie Sprayregen is probably handling more debtor cases than anyone in the business because he’s a very deal-oriented lawyer that debtors feel comfortable with and believe he’s going to get the job done,” says a financial adviser who worked alongside Sprayregen in the Harnischfeger filing. “He works very aggressively at getting results and has been able to win debtors’ trust because they feel that he’s going to get the results they want.” INTRICATE BANKRUPTCIES With the Babcock & Willcox and W.R. Grace cases, Sprayregen is hoping to establish Chicago-based Kirkland & Ellis as a law firm for intricate bankruptcies. “Asbestos-related cases are an opportunity for creatively applying the law in the proper way and we think people are watching our involvement in this with great interest,” he says while on a recent trip to New York. “Our team seeks out the most complex cases because we try to add value by adding creativity, hard work and the willingness to run through a brick wall in a professional way to get the result we need.” About 28 companies have declared bankruptcy since 1982 to gain protection from asbestos-related claims. But since Section 524 (g) of the Bankruptcy Code was created in 1994, such filers have had another onus to bear. The amendment bars all future asbestos claims against a post-bankruptcy debtor. However, when a company enters Chapter 11 it must relinquish at least 51 percent ownership to a trust. Often, the trust controls much more when it’s created. In the Babcock & Willcox and W.R. Grace cases, Kirkland & Ellis is trying to redirect the handling of asbestos-related claims by using the bankruptcy court to determine the validity of claims before a majority owning trust is even created, Sprayregen says. The idea here is to slash what could be millions of dollars in claims from the filings before a trust is created. “We don’t want to eliminate the trust, but want only unresolved claims in the trust,” he explains. “We’re not willing to turn over control of the company unless the company is determined, via the plaintiffs’ claims, to already be insolvent.” Thus, Sprayregen is leading an aggressive charge to force asbestos plaintiffs to prove the legitimacy of their claims even before a trust is created. If Sprayregen gets his way, weeding out dicey claims before the trust is created could give a debtor a chance to prove that it’s solvent. TIME WILL TELL “We’re saying that a debtor’s liabilities ought to be resolved, through a court order or settlement by the parties, prior to creation of the trust so that we don’t have to turn over control of the company unless it’s determined to be insolvent,” he notes. “This is, in essence, a new approach in a very complex process that we’re using and only time will tell how it will work out.” Richard Cieri, chairman of the restructuring unit at Cleveland law firm Jones, Day, Reavis & Pogue, couldn’t comment on whether Sprayregen’s approach was novel, but he indicated it’s being closely watched. “They’re blocking and tackling to perfection under Jaimie’s direction, and it may be long overdue,” he says. For Sprayregen, well-regarded by company officials and Wall Street financial advisers he’s worked with to navigate debtors out of Chapter 11, the challenge is captivating. “We’re the first to take this approach with these two cases and we think that using the bankruptcy process to define liability in the asbestos area is the only viable means for companies with large asbestos exposure,” he says. “We also think it’s appropriate for the bankruptcy court to determine the extent of the liability since it proves to be totally impossible to determine liability outside of court.” Because Sprayregen likes to operate in the gray areas of the law, he seeks to frame the basis for negotiations in black and white. Spelling out the ground rules in advance, he says, avoids the second-guessing that can fester and undermine trust among parties over the length of a restructuring. LINING UP TO HIRE It’s a style others appreciate. “Jaimie Sprayregen is an ultra-smart, straight shooter with a tremendous work ethic who says what he means and means what he says,” says William Repko, managing director of restructuring at J.P. Morgan Chase, who worked side by side with Sprayregen on the Harnischfeger and Babcock & Willcox filings. High-profile debtors have been eagerly lining up to hire Sprayregen because “he has an uncanny ability to understand the needs of all the parties in a case and knows when to negotiate and when to shoot the enemy,” said Ronald Rittenmeyer, who was hired as CEO and president at AmeriServe Food Distributors Inc. after it filed for Chapter 11 bankruptcy. “He’s very bright, very aggressive and very hard-nosed and I never met anyone who was more committed to coming up with a solution for all the constituencies in a case.” Indeed, Rittenmeyer says that within 20 minutes of his first meeting with Sprayregen, he knew exactly where his company — and he — stood. “We never left the room if we had issues until those issues were fully resolved and we could start over without any lingering enmity,” Rittenmeyer recalls. “He laid out the risks and the costs and the time it would take to get the results we wanted and we knew exactly where we all stood right from the start.” Such communication and trust-building will be key to forging a new path in asbestos, which is rife with uncertainties. “You have to be clear and candid because bluntness and directness are critical for building the trust you always need among the professionals and clients you’re working with,” Sprayregen said. “One’s word and handshake are still important to cement relationships between counsel and debtor and also among professionals and that means reputation is very important if you’re a long-term player in the game.” REPUTATION FOR INTEGRITY Others agree that Sprayregen’s trust mantra is vital to often contentious Chapter 11 proceedings. “Trust and communication are so vital in restructurings because the conflict level can be very, very high, so you have to know where you stand with the people you’re working with,” Repko says. “I trust him, and others trust him, because he’s proven that he has an absolute level of integrity and has developed a reputation for integrity that has helped him get results.” But Sprayregen also knows how to play bankruptcy politics. Chapter 11 is as much a game of chess as it is a rugby scrum. And while he can be brusque, Sprayregen can just as deftly conduct negotiations with the diverse constituencies involved in a reorganization. “He is a tenacious, 24/7, true-blue type of guy who wins the hearts and minds of all the parties through hard work and intelligence with the capacity to clearly lay out the key restructuring issues,” said Richard Vitkus, former senior vice president and general counsel at Zenith. “He’s also very skilled at dealing with boards, judges, local counsel and opposing counsel because they seem to quickly grasp that he is always aware of what he wants to achieve in a case.” One of the things he’d like to achieve is keeping his client out of court, if possible. Workouts are almost always preferable to filings, Sprayregen says, because the bankruptcy court imposes a large transactional cost. There’s also more uncertainty and less control once you bring a restructuring into bankruptcy court. “A simple rule of thumb is: ‘If all the parties that you need to make a deal are in a conference [together], then you should work it out outside of court,’” he says. VIVID LEGAL IMAGINATION If a Chapter 11 filing is unavoidable, having a vivid legal imagination is a strong weapon. “You have to guard against rote thinking in bankruptcies because the law is very flexible and situations vary on a case-by-case basis,” Sprayregen notes. “You need leadership, you need a quarterback so you can develop the teamwork and the vision needed to keep your eye on the ball and to think not just about entry [into bankruptcy] but also the longer-term exit from a case,” he says. Case in point: Korean-owned Zenith, a pre-packaged Chapter 11 filing with insolvency issues in the U.S., Mexico, Korea, Japan and Brazil. It’s a case Sprayregen is particularly proud of. The complex, multinational restructuring transformed Zenith from the last fully integrated television maker in the U.S. into a TV sales and marketing company. After emerging from Chapter 11 in late 1999, the company in 2000 had sales of $1 billion and had losses of only $5 million. “Zenith was very difficult both operationally and financially and needed a financial restructuring in multiple jurisdictions that could easily have lapsed into liquidation,” Sprayregen says. “The case had everything: operational and financial issues, a cramdown in its confirmation and equity and bondholder issues. I’m proud that we were able to successfully litigate its emergence in bankruptcy court for what was a very difficult case.” GOOD LISTENER Curiously enough, for all his mantra about leadership and candidness, it’s Sprayregen’s ear that impresses people such as Kurt Hall, the president and CEO at United Artists Theatre Circuit Inc. He worked alongside Sprayregen to bring the Denver-based company out of Chapter 11 March 2, and was not just struck by his ability to quickly grasp the key issues in the filing and develop equally fast solutions, but also his attentiveness. “He’s unusually clever, but his greatest skill is listening to the company, and he’s extraordinarily good at molding and framing the case,” Hall says. “He listens to management concerns and that can be very unusual for lawyers.” Copyright (c)2001 TDD, LLC. All rights reserved.

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