Bankruptcy - The Best Path to Restructuring?
The worldwide economic recession has triggered many questions about how to most productively address issues of bankruptcy and restructuring. Professor Edward R. Morrison, whose research focuses on theoretical, empirical, and policy-related issues in bankruptcy and corporate reorganization, led this panel of three distinguished experts. Morrison, who joined the Law School in 2003, recently testified on the foreclosure crisis before the Financial Services Committee of the U.S. House of Representatives, and his scholarly work has been published in leading journals and books.
Panelist Robert D. Drain became a U.S. bankruptcy judge in the Southern District of New York in 2002 after a distinguished career as a partner in the Bankruptcy Department of the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison. He represented debtors, trustees, secured and unsecured creditors, official and unofficial creditors committees, and buyers of distressed businesses and distressed debt in Chapter 11 cases, out-of-court restructurings and bankruptcy-related litigation. He also was actively involved in several transnational insolvency matters.
James Gadsden is the head of the Bankruptcy and Creditors Rights Practice Group of Carter Ledyard & Milburn LLP. His practice in bankruptcy, workouts, and structured finance frequently involves representing corporate trustee in originating new transactions and in defaults, workouts and bankruptcies. He has published widely on the issues of bankruptcy and insolvency and serves on the Committee on Bankruptcy and Corporate Reorganization and the Committee on Structured Finance of the Association of the Bar of the City of New York and the American Bankruptcy Institute.
Lewis Kruger, co-chair of Stroock & Strook & Lavan's Financial Restructuring Practice, has more than 40 years of experience as an insolvency lawyer and has played a major role in many of the significant reorganization proceedings in the U.S. He has been lead counsel representing banks such as JP Morgan Chase, Bank of America, HVB, Barclays, ABN Amro, National Westminster Bank, Deutsche Bank, Royal Bank of Scotland, BNP Paribas and financial institutions including Bear Stearns and Salomon Smith Barney. A fellow of the American College of Bankruptcy, he has acted as special counsel to the U.S. Senate Committee on the Judiciary with respect to reorganizations, and as Special Counsel to the Governor of New York and the Urban Development Corporation.
Harvey Miller is a partner in the New York City based international law firm of Weil, Gotshal & Manges LLP, where he had been a member of the firm’s management committee for more than 25 years and created and developed the firm’s Business Finance & Restructuring department specializing in reorganizing distressed business entities. The 76-year-old Brooklyn native has worked on Chapter 11 bankruptcy filings from oil giant Texaco Inc. to steel giant Bethlehem Steel to banking giant Lehman Brothers. Each was a landmark case at the time. Miller and his firm currently represent GM in the company’s bankruptcy proceedings.
Comments
"Preserving value" was the catch phrase of this presentation. The question is, are creditors preserving value when they use official committees to stiff frequently unrepresented equity constituencies. Judging from many of the recent bankruptcies mentioned by the panel, I would argue that not only have these businesses not been saved but that many are dangerously close to entering Chapter 11 again. Shareholders and individual investors have figured out how the game is played in the Southern District of New York. Equity financing for these companies is becoming less and less viable as a means of providing needed funding. As someone who sat on the Loral Equity Committee, I can say without equivocation, that Loral's "value" was preserved for creditors by hiding it from the Court. This is widely known and Loral's equity value since emergence has suffered because of it. This did not preserve "long-term" value for creditors and other constituencies, it squandered it. However, it did generate large fees and notoriety for graduates of Columbia Law School - a dubious distinction.
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