It’s official: Federal bankruptcy filings have fallen to their lowest levels since 2008, according to data released last week by the Administrative Office of the U.S. Courts.
The number of business bankruptcies for the 12-month period ending September 30, 2012, plummeted 16 percent when measured against the same period last year, marking the third straight year of decline. While that may be an encouraging sign for the U.S. economy, the numbers are grim for the debt relief industry, which could soon see another large restructuring assignment end.
Reuters reports that Rochester-based Eastman Kodak, which filed for bankruptcy in January, is poised to exit Chapter 11 proceedings in the first half of 2013 after securing $793 million in financing. (Reuters also notes that the bankruptcy court in Manhattan overseeing Kodak’s case is just coming back online after being closed for two weeks due to flooding and other damage from Hurricane Sandy.)
The Am Law Daily reported earlier this year that the Kodak case gave Sullivan & Cromwell—another firm dealing with Sandy-related issues—its first-ever debtor’s counsel role. Court filings show that since Kodak filed for bankruptcy earlier this year, S&C has billed the company, which has been a client of the firm since the late 1800s, for more than $23.4 million in fees and expenses. S&C has agreed to reduce its fees by $300,000, per a report in the Kodak case by Luskin, Stern & Eisler, a New York firm that has so far billed $155,584 for its services as fee examiner.
The news hasn’t all been bad for bankruptcy lawyers. Chapter 11 filing fees are set to increase at the end of the month thanks to a law signed by President Barack Obama earlier this year, according to sibling publication Texas Lawyer. And the U.S. Trustee Program has also narrowed a proposal for disclosing law firm bankruptcy fees, notes sibling publication the New York Law Journal.
Then there’s the looming fiscal cliff, which, according to some restructuring observers who spoke with legal newswire Law360, could set off an avalanche of new business bankruptcy cases. Until that happens, Am Law 200 restructuring pros will have to content themselves with advising on several recent filings of note, some of which are detailed below. As usual, hourly billing rates for attorneys are listed in parentheses, when available.
Aletheia Research and Management
Aletheia Research and Management filed for bankruptcy in Los Angeles this week amid an SEC investigation into the Santa Monica-based investment adviser’s trading practices. News of the probe into Aletheia chairman and CEO Peter Eichler Jr. comes on the heels of months of regulatory problems that have plagued the money manager, which has suffered a wave of client and employee defections following a $400,000 fine levied by the SEC last year.
Eichler and Roger Peikin, who cofounded Aletheia in 1997, have sparred for years in court over control of their firm. That legal history is hinted at in a list of the money manager’s 20 largest unsecured creditors, which shows the debtor owing $730,000 to Bingham McCutchen, $320,427 to Jones Day, $120,666 to California’s Nossaman, $130,000 to Stroock & Stroock & Lavan, and $118,686 to Los Angeles’s Freedman & Taitelman.
The legal unrest has caused turmoil in Aletheia’s executive ranks, according to Pensions & Investments, which reported last year on a spate of departures from the firm. Former general counsel J. Jorge DeNeve, for one, left to rejoin O’Melveny & Myers as counsel in September after spending a little more than a year at Aletheia.
DeNeve followed former O’Melveny partner Steven Olson, who resigned as president of Aletheia last December to become deputy chief of staff and senior adviser at the U.S. Department of Commerce under former Secretary John Bryson. (Bryson resigned earlier this year, according to our previous reports.) Ann Marie Swanson currently serves as Aletheia’s chief compliance officer.
AMF Bowling Worldwide
Mechanicsville, Virginia-based AMF Bowling Worldwide—the world’s largest lane operator with roughly 260 locations in 30 states—filed for bankruptcy in Manhattan on Tuesday. AMF intends to continue operations as it attempts to restructure in bankruptcy and has already reached agreement with a majority of its secured first lien lenders and the landlord for most of its bowling centers, according to The Richmond Times-Dispatch.
Kirkland & Ellis restructuring partners Patrick Nash Jr. and Joshua Sussberg and McGuireWoods restructuring and insolvency chair Dion Hayes and partner John Maddock III and counsel Sarah Boehm are acting as general bankruptcy cocounsel to the debtor. Neither firm has yet filed billing statements with the bankruptcy court.
Court records show that lawyers from Stroock in New York and Kutak Rock in Richmond are advising an ad hoc group of AMF’s first lien term lenders. (As it happens, Stroock is subletting office space from Kirkland in New York while its downtown Manhattan headquarters are being purged of Hurricane Sandy’s adverse affects.)
Daniel McCormack serves as general counsel for AMF, which is backed by Chicago-based private equity firm CHS Capital. Reuters reports that AMF previously filed for bankruptcy in July 2001. Willkie Farr & Gallagher and McGuireWoods represented AMF in that proceeding, which ended in 2002 and saw CHS take control of the company the following year.
Big Island Carbon
Big Island Carbon, a Hawaii-based company backed by private equity firm Denham Capital that specializes in extracting carbon from the shells of macadamia nuts, filed for Chapter 7 in Delaware on November 5, according to Law360.
Michael Nestor, a bankruptcy partner at Delaware’s Young Conaway Stargatt & Taylor, is advising Big Island Carbon in its liquidation. The firm has not yet filed billing statements with the bankruptcy court.
Charles Stanziale Jr., a bankruptcy partner at McCarter & English in Newark, is serving as Chapter 7 trustee for Big Island Carbon. Jeffrey Testa and Katharine Mayer, both of whom are McCarter & English partners, are serving as counsel to Stanziale in the case.
Homer City Funding
The Wilmington-based special purpose vehicle behind the $1.6 billion purchase of a power station an hour outside Pittsburgh filed for bankruptcy in Delaware on November 6. Bloomberg reports that the bond issuer for the power station, a unit of public utility Edison International called Homer City Funding LLC, has reached a deal with bondholders under which it agreed to transfer control of the plant to General Electric Capital and its affiliates.
Court records show that Weil, Gotshal & Manges business finance and restructuring partner Debra Dandeneau and William Bowden, head of the bankruptcy group at Delaware’s Ashby & Geddes, are advising GE Capital on the agreement. (Weil is a longtime legal adviser to GE.)
Kirkland restructuring partner Paul Wierbicki and Womble Carlyle Sandridge & Rice bankruptcy partner Mark Desgrosseilliers are representing EME Homer City Generating in the Chapter 11 case, according to court filings, while Richards, Layton & Finger is serving as lead counsel to Homer City Funding. The Delaware firm has not yet filed billing statements with the bankruptcy court.
Asbestos product liability claims have once against forced Metex Manufacturing into bankruptcy. The Great Neck, New York–based tile maker, which was initially founded in Brooklyn as Kentile Floors back in 1898, lists assets and liabilities in excess of $100 million and more than 6,000 active asbestos claims against its predecessor company, according to Bloomberg.
Reed Smith bankruptcy partners Paul Singer ($750), Michael Venditto ($715), and Gregory Taddonio ($505), and insurance recovery partner Paul Breene ($685) are representing Metex in its bankruptcy case—the company’s second since Kentile Floors filed back in 1992 and emerged from Chapter 11 six years later with a new name in Metex.
A declaration by Breene reveals that Reed Smith has served as counsel to Metex on insurance coverage issues since 2008. During the past year, Reed Smith has received nearly $1.8 million in legal fees and expenses for work done on behalf of Metex, with the bulk of that sum coming from insurance companies. Reed Smith partners are billing between $410 to $1,005 per hour and associates at rates ranging from $260 to $600.
A formidable array of plaintiffs’ firms well versed in asbestos litigation, such as New York’s Weitz & Luxenberg and Levy Phillips & Konigsberg, are representing clients with claims against Kentile Floors, according to a list of Metex’s 20 largest unsecured creditors. The debtor also owes $650 in legal fees to New Jersey’s Riker Danzig Scherer Hyland Perretti, according to court records.
Monitor Company Group Ltd.
More than a year after apologizing for its ties to late Libyan dictator Muammar el-Qaddafi, Cambridge, Massachusetts–based strategic consulting firm the Monitor Company Group filed for bankruptcy in Delaware on November 7, according to The Boston Globe.
Founded by Harvard Business School professor Michael Porter, Monitor helped Qaddafi burnish his image through pieces penned by some of its paid consultants. Now Monitor, which lists assets and debts of between $100 million and $500 million, plans to sell its assets to a subsidiary of New York–based global accounting firm Deloitte Touche Tohmatsu.
Ropes & Gray restructuring partners D. Ross Martin and James Wilton are providing lead bankruptcy counsel to Monitor. David Stratton, cochair of Pepper Hamilton‘s corporate restructuring and bankruptcy practice, and of counsel James Carignan are serving as Delaware counsel to the debtor. Neither firm has yet filed billing statements with the bankruptcy court.
The recently married J. Gregory Milmoe, a veteran bankruptcy and restructuring partner at Skadden, Arps, Slate, Meagher & Flom, and partner Mark Chehi and counsel Robert Weber are leading a team from the firm representing Deloitte on its proposed acquisition of Monitor.
According to a list of Monitor’s 30 largest unsecured creditors, the firm owes $210,964 to Bryan Cave, $44,684 to Seyfarth Shaw, and $41,917 to Goodwin Procter.
New Energy Corporation
The owner of Indiana’s oldest ethanol plant filed for bankruptcy on November 9 in South Bend, Indiana, listing assets of at most $50 million and liabilities of up to $100 million. Bloomberg reports that New Energy owes $33 million under a loan from the U.S. Department of Energy, which is seeking a sale of the company in bankruptcy.
Jerald Ancel ($535), cochair of the business restructuring and bankruptcy practice at Taft Stettinius & Hollister in Indianapolis, is leading a team of lawyers from the firm serving as lead counsel to New Energy in its Chapter 11 case. The South Bend–based company cited reduced demand for ethanol and the high price of corn—a key source of ethanol—as the primary reasons for its bankruptcy filing.
Other Taft Stettinius partners working on the matter include bankruptcy cochair Timothy Hurley ($495), Marlene Reich ($475), Michael O’Neil ($475), George Molinsky ($445), Jeffrey Graham ($380), John Humphrey ($380), and Andrew Kight ($370). New Energy has paid the firm $428,316 during the past year, and Taft Stettinius currently holds a $90,000 retainer on behalf of the debtor, according to a declaration by Graham.
Omtron USA / Zacky Farms
The U.S. unit of a company controlled by Ukrainian billionaire Oleg Bakhmatyuk, who has made his fortune in eggs, filed for bankruptcy in Delaware on November 9. Omtron USA, which bought bankrupt chicken and egg farm operator Townsends out of Chapter 11 last year for almost $25 million, now also finds itself insolvent. Bloomberg reports that Georgetown, Delaware–based Omtron, whose parent company Avangardco Investments Public is the Ukraine’s largest egg producer, lists assets and debts of between $10 million and $50 million in its Chapter 11 filing.
Fox Rothschild partner Ely Goldin and counsel Martha Chovanes are serving as lead counsel to Omtron in its bankruptcy case. The firm has not yet filed billing statements with the bankruptcy court.
According to a list of Omtron’s 20 largest unsecured creditors, the debtor owes $170,000 to Benesch, Friedlander, Coplan & Aronoff and $117,000 to Parker Poe Adams & Bernstein in outstanding legal fees.
Omtron’s bankruptcy filing follows that of a leading turkey producer, Fresno, California-based Zacky Farms, in early October. Zacky’s, like Omtron, cited escalating prices for corn feed as being behind its bankruptcy.
Thomas Willoughby, a name partner at Sacramento’s Felderstein Fitzgerald Willoughby & Pascuzzi, is representing Zacky’s in its Chapter 11 case. Bloomberg reports the company plans to sell itself to repay creditors owed about $100 million.
ThinkEquity is getting ready to dissolve. The San Francisco–based investment banking and investment management firm filed for Chapter 7 in Delaware on November 6, listing debts of $3.2 million against roughly $7 million in assets. Bloomberg reported last month on ThinkEquity’s decision to close its stock-trading unit, and this week the company formally shuttered its equity research division.
Tobey Daluz, a bankruptcy partner at Ballard Spahr in Wilmington, is leading a team from the firm representing ThinkEquity in its liquidation. Court records show that the firm received payments totaling $75,000 from ThinkEquity in the month leading up to its bankruptcy filing.
John Carroll III, cochair of the bankruptcy, insolvency, and restructuring practice at Cozen O’Connor, is serving as counsel to ThinkEquity’s Chapter 7 trustee Alfred Giuliano of West Berlin, New Jersey–based Giuliano, Miller & Company.
According to a list of ThinkEquity’s 20 largest unsecured creditors, the debtor owes $65,240 to Ballard Spahr, $44,221 to Keesal, Young & Logan, $31,987 to Seyfarth Shaw, $15,778 to Crowell & Moring, and $1,190 to San Francisco’s Commins & Knudsen. Financial statements filed by ThinkEquity also show that the firm has paid $136,324 to Debevoise & Plimpton, $43,496 to Keesal Young, $43,239 to Bracewell & Giuliani, $34,780 to Bingham McCutchen, and $31,420 to Commins & Knudsen.
Eliza Sporn Fromberg serves as ThinkEquity’s general counsel. She received roughly $176,610 in compensation in the year between November 1, 2011 and October 31, 2012, according to court filings.