Law Firms Bolstering Subprime Practices
The subprime mortgage meltdown has resulted in a loss of liquidity in the debt markets. Now, in an attempt to address the needs of clients facing a liquidity crisis or those searching for value opportunities, law firm are staffing up subprime teams. According to a recent Crain’s article, “Not since the savings and loan crisis two decades ago have so many law firms moved so fast to create a whole new discipline.” The report simply states that amid the credit mess, law firms are following the money. With millions at stake, hundreds of attorneys are being assigned to bolster subprime practices.
Executive search firm, A.E. Feldman, is already seeing a surge in demand for attorneys from practices in structured finance, bankruptcy, corporate restructuring and distressed debt as law firms seek to establish or expand these subprime groups.
The lion’s share of the work thus far involves the investment houses that packaged and sold subprime debt, according to Crain’s. The report contends that law firms are being hired to sue or defend Wall Street behemoths, like Citigroup, J.P. Morgan Chase, Merrill Lynch and Bear Stearns. The number of fraud actions is also rising as insurers and other institutional investors absorb huge losses from holdings in subprime debt.
Law firm, Brown Rudnick, recently formed a Structured Resolution Group, which will analyze the issues surrounding the subprime market collapse. The team has been assembled to help clients identify and execute on arbitrage and repackaging strategies. The group’s services will be made available to underwriters and structuring agents, proprietary trading desks, hedge funds, and private investment funds that are positioned on either the buy or sell side of the subprime crisis.
“We are filling a significant gap in the marketplace. While other law firms are focused on the upsurge in litigation related to the sub-prime lending crisis, our firm is setting its sights on helping clients to extract value from these distressed situations,” says Edward Weisfelner, Chair of Brown Rudnick’s Bankruptcy and Finance Department and Head of its Bankruptcy and Corporate Restructuring Practice Group.
Legal firm Cadwalader, Wickersham & Taft has also hired a record number of attorneys this year in its financial restructuring group and plans to increase staffing in London to handle distressed debt litigation, according to Reuters.
Bernstein Litowitz Berger & Grossman’s also established a subprime group in December, after months of being approached by three to four potential clients a week, according to Crain.
