Law Firms Hiring Bankruptcy Attorneys, Restructuring Specialists
As the economy continues to slow, a number of experts anticipate a virtual flood of bankruptcies and restructurings in the coming months. U.S. consumer bankruptcy filings already jumped nearly 31% last month versus a year ago, according to the American Bankruptcy Institute (ABI), citing data from the National Bankruptcy Research Center (NBKRC). Moreover, ABI says the total number of U.S. bankruptcies filed during the first three months of 2008 increased almost 27% over the same period in 2007 in all bankruptcy court districts, according to data released by the Administrative Office of the U.S. Courts. “At current trends, we project that new bankruptcies will exceed the milestone of one million cases this year,” said ABI Executive Director Samuel J. Gerdano. “This would be the first year reaching a million filings since Congress restricted access to bankruptcy in 2005,” he adds.
Law firms around the country are gearing up for the increase in bankruptcy filings. Legal Times says the legal fees generated for firms helping to clean up the mess could reach into the hundreds of millions. The report goes so far as to suggest that billable hours in subprime litigation will surpass those accumulated during the accounting scandals of recent years. As a result, many law firms have already begun expanding their ranks, hiring bankruptcy attorneys and restructuring specialists. Executive search firm, A.E. Feldman, says legal jobs are opening up for qualified candidates.
Bankruptcies Surging
The ABI reports that the first quarter 2008 bankruptcy filing total represents a staggering 110% increase from the 116,771 total filings recorded during the first calendar quarter of 2006 (the first full quarter following the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.) Of that total, consumer filings increased 26.5% to 236,982 from the first quarter of 2007. Meanwhile, ABI reports that business filings for the first quarter of 2008 totaled 8,713- a 38.7% jump from a year ago.
Amid the onslaught of bankruptcies, law firms are seeing a steady increase in demand for legal services. Looking ahead, top firms are betting that bankruptcy and restructuring work will be their most promising avenue of growth.
Legal Fees on the Rise
Legal fees are already going up, according to Bloomberg. The report states the peak so far is $975 an hour, citing court filings. That’s one-third higher than the $700 high point during Enron’s restructuring. Chicago firm, Kirkland & Ellis, is handling six of the 12 largest U.S. bankruptcies by debt. That includes the $2.43 billion restructuring of casino operator Tropicana Entertainment LLC. Bloomberg quotes Joseph Doherty, Director of the Empirical Research Group at the University of California at Los Angeles Law School, as saying, the firm stands to make about $70 million on the six cases, based on the companies’ reported assets and previous fees. Bloomberg notes that’s 5.3% of the firm’s 2007 revenue as reported by the American Lawyer.
Complicating matters, however, restructuring professionals say increasingly complex capital structures and a larger number of stakeholders will make struggling business more difficult to save if the economy continues to worsen, according to Dow Jones Private Equity News. The report states that private equity execs expect increased litigation, harder negotiations, and longer recovery times for struggling portfolio companies in the coming years – a trend that will place even more pressure on legal teams.
Law Firms Expanding Their Ranks
A.E. Feldman reports a number of top firms are currently accelerating their recruitment of bankruptcy attorneys and restructuring specialists.
Loughlin Meghji + Company recently announced five senior staff appointments, expanding the firm’s senior-consulting expertise to meet dramatically increased demand from distressed and turnaround situations this year. In addition, the firm announced a move to new, larger offices in New York City - almost tripling the size of its headquarters facility.
“We are seeing a tremendous increase in distressed situations. With the addition of these new senior-level appointments, Loughlin Meghji + Company will be prepared to meet this heightened demand,” said James J. Loughlin, Jr., Founding Principal of LM+Co.
Mohsin Y. Meghji, Founding Principal of LM+Co adds that, “Now more than ever, companies and their lenders – as well as private equity sponsors and hedge funds – are turning to firms like LM+Co for counsel and assistance in today’s unusually volatile economic climate.”
Meghji adds that the firm has had an ongoing hiring program, at all levels, through the first half of the year, resulting in a 50% net staff increase. “Given the level of demand for our services, we are continuing to augment staff and expect to more than double the size of our team by the end of 2008,” he says.
Florida law firm, Ruden McClosky, also recently announced a significant expansion. Seven attorneys of the Elk, Christu & Bakst, LLP (EC&B) law firm have joined the firm, expanding the firm’s practices in the areas of bankruptcy, litigation, real estate, and trusts & estates law in Palm Beach County.
Polsinelli Shalton Flanigan Suelthaus PC says it is continuing its national growth, expanding to Delaware to service the burgeoning bankruptcy, financial restructuring business. The firm has opened a new Wilmington, Delaware office to bolster its presence on the East Coast and provide counsel to Polsinelli’s current clients involved in bankruptcy and financial restructuring challenges.
“Delaware is a leader in corporate law and one of the most important markets in the U.S. to practice bankruptcy and financial restructuring law today. This strategic addition to our rapidly growing firm will allow us to better serve existing and future clients,” said James E. Bird, chair of Polsinelli’s Bankruptcy and Financial Restructuring Group.
