Hedge Funds, Creditor Control, and Restructuring
The fourth Deals Roundtable, on "Hedge Funds, Creditor Control, and Restructuring," was held October 27, 2006. The Roundtable brought together leading attorneys, investors, and academics to discuss recent changes in the restructuring and reorganization process.
Topics of discussion included historic trends in corporate reorganization, reforms in bankruptcy legislation affecting derivatives markets, changes in credit markets that have made it more difficult to predict returns to distressed debt claims, and the increasingly aggressive strategies employed by hedge funds and banks in the reorganization process.
Harvey Miller ‘59, a Vice-Chairman at Greenhill & Co. and former senior partner of Weil, Gotshal & Manges, LLP, provided the luncheon address, which surveyed the history of reorganization practice and policy and offered cautionary observations on the current state of bankruptcy law.
Edward Morrison (Columbia Law School) presented his articles, "Derivatives and the Bankruptcy Code: Why the Special Treatment?” (co-authored with Franklin R. Edwards) and “Financial Contracts and the New Bankruptcy Code: Insulating Markets from Bankrupt Debtors and Bankruptcy Judges” (co-authored with Joerg Riegel). Comments were provided by Hal Novikoff(Wachtell, Lipton, Rosen & Katz).
Edward I. Altman (Stern School of Business, New York University) presented his article “Are Historically Based Default and Recovery Models in the High-Yield and Distressed Debt Markets Still Relevant in Today’s Credit Environment?” Comments were provided by Hydee Feldstein ‘82(Sullivan & Cromwell).
The day concluded with a panel moderated by Stephen Case ‘68 (Cohen & Co.) and featuring David Tepper (Appaloosa Management), Stephen Cooper (Kroll Zolfo Cooper), Lisa Donahue (AlixPartners), Hon. Robert Drain ‘84 (U.S. Bankruptcy Court, SDNY), Stuart Gilson (Harvard Business School), Marcia Goldstein (Weil, Gotshal & Manges), and Frederic Ragucci (Schulte Roth & Zabel). The panelists discussed the growing importance and evolving strategies of hedge funds in the restructuring and reorganization process. Topics of discussion included the challenges created by increasingly complex capital structures, the growth of credit default swaps and other techniques for hedging bankruptcy risks, conflicts of interest faced by creditors who use these techniques, and the complexity of a bankruptcy process in which the participants are constantly changing as creditors and equityholders trade into, out of, and hedge claims against the distressed corporation.
Roundtable Agenda (PDF Format)
Roundtable Papers (PDF Format)
Speaker Biographies (PDF Format)