The signs that the economy is improving are notwithstanding, the number and the size of large corporate bankruptcies has the possibility to be double in this new year.
It has been predicted that the corporate bond defaults are going to hit 3 percent this year–which is more than double last year’s 1.4 percent and 2010’s 1.3 percent. The middle market companies valued between $200 million and $1 billion are at particular risk because of the difficulty they face in trying to refinance and restructure the outside of the court, this is according to the ratings agency.
No less of an authority that Weil, Gotshal & Manges bankruptcy heavyweight Harvey Miller concurs with that assessment.
Meanwhile, 2011’s bankruptcy filings–including the ones like American Airlines, Boarders Group, MF Global, and The PMI Group–could soon be joined on the Chapter 11 docket by such big household names as Sears Holdings and Eastman Kodak. Both of them have recently taken fresh steps to cutting costs and raising revenue in an effort to shore up the sagging bottom lines.
For its share, Kodak reshuffled their lineup of outside legal counsel from last month, hiring Sullivan & Cromwell to be put in place of Jones Day as the company’s chief restructuring adviser. The move was most noteworthy because S&C hardly ever handles Chapter 11 cases, instead of trying to serve as special counsel on certain restructuring initiatives. Jones Day, on another hand, is well-versed in guiding debtor’s through bankruptcy proceedings.
Andrew Dietderich, who is the head of S&C’s restructuring group, did not respond to the request for comment about the firm’s work for Kodak. While refusing to confirm or deny the restructuring counsel switch, Kodak announced publicly that is has completely relied on S&C for various matters since 1974. In the recent months, Kodak has also turned to Rochester-based Harter Secrest & Emery for a patent licensing deal with IMAX and the sale of their big image sensor unit to a private equity buyer.
While Kodak keeps their plans unclear, the other companies–and the lawyers that were advising them–have pressed on with the major restructuring plans.
Bracewell & Giuliani financial restructuring chair Even Flaschen, for an example, led a team from the firm advising the senior lenders of Australia’s Centro Properties Group on a mammoth restructuring deal in December designed to wipe out badly $3 billion in debt. The restructuring plan has won the support of the investors and will create a new listed property trust for Australia’s second-largest mall owner in the country, which sold nearly 600 U.S. malls to The Blackstone Group last year in a &9.4 billion deal.
Also over in Europe, Clearly Gottlieb Steen & Hamilton may have landed the coveted role in advising the Greek government on its sovereign debt initiatives, but other firms–including White & Case and Allen & Overy–are now representing some of Greece’s creditors on the possibility of restructuring those obligations.