Bankruptcy lawyers grappled with heavier competition for fewer and smaller bankruptcy filings last year, as the number of corporate filings dropped by half, to 106 from 211, according to ­Total prepetition assets held by companies entering bankruptcy protection came to $89 billion, less than a sixth of the previous year’s total.

Many companies on the edge were able to refinance at favorable rates in 2010, pushing the day of reckoning out another two or three years. “The credit markets gave them breathing room,” notes Kramer Levin Naftalis & Frankel’s Kenneth Eckstein.

Kirkland & Ellis cemented its lock on the debtor side; it was tapped to lead three filings in the top 20 by prepetition assets.

Some debtor-side heavyweights were not as visible last year. Weil, Gotshal & Manges, which led three of the largest emergences in 2009, was tapped by just one company with more than $1 billion in assets, Blockbuster Inc. Sidley Austin, another ­perennial contender, had no new billion-dollar-plus matters last year, though it guided R.H. Donnelley Corporation and Smurfit-Stone Container Corporation out of Chapter 11.

Morrison & Foerster led the creditor side. It was tapped by the creditors committees of Ambac Financial Group, Inc., Innkeepers USA Trust, and Mesa Air Group, Inc.

Financial services companies represented nine of the ten largest petitioners, a big shift from 2009. The largest nonfinancial company to file in 2010, A&P, was less than a tenth the size of the previous year’s largest petitioners. And size matters. Lawyers say that smaller companies have ­neither the complexity nor the capacity to pay the fees that larger companies do.

What’s in the pipeline? Bankruptcy lawyers say that 2011 is already looking a lot like 2010, with relatively few filings for companies with more than $1 billion in assets. But there is one legal market with potential for growth: municipalities in default of their debt.


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Illustration by Eva Vazquez