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From Financial Week:
The counter-cyclical practices of bankruptcy lawyers are thriving amid the worst business collapse since the Great Depression. Their firms are buried in an avalanche of Chapter 11 filings and those represent only half of the workload as troubled companies attempt to restructure their finances outside of court supervision. But the unprecedented lack of financing seen so far in this recession is putting a crimp on things…
Bankruptcy filings by businesses climbed 61% in the third quarter to 11,504… . Chapter 11 business filings soared by 76% to 2,485. The 29,960 business bankruptcies posted in the first three quarters of this year have eclipsed the 28,137 filings for all of 2007. …
While it’s lucrative work for sure, the current round has presented a new level of complexity and distress. Because the credit markets are frozen, there isn’t the traditional debtor-in-possession lending available – there isn’t even financing for potential acquirers… Replacing traditional lenders are vulture investors such as hedge funds, which are buying distressed debt and hope to become equity owners on the cheap…
The largest corporate filings are handled by an elite group of a dozen or so large law firms. Most consider the dean to be Harvey Miller, partner at Weil, Gotshal & Manges in New York who is representing Lehman and is expected to lead a General Motors filing if that comes to pass. Richmond, Va.-based Circuit City tapped heavyweight Skadden, Arps, Slate, Meagher & Flom LLP, whose restructuring practice is headed by Chicago-based John “Jack” Butler and New York-based J. Gregory Milmoe. Tribune Co. under the real estate vulture investor turned media mogul Sam Zell, chose white shoe firm Sidley Austin whose bankruptcy practice is co-headed by James Conlan and Larry Nyhan in Chicago. …
The severity of the current recession means that bankruptcy attorneys will be busy for years. It may be profitable, but not particularly joyous.
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