Demand for Talent Continues as Bankruptcies Extend into 2009
Bankruptcies of large U.S. companies are expected to extend into 2010, according to a new study released by Bain Corporate Renewal Group (Bain CRG). Meanwhile, the American Bankruptcy Institute (ABI) said U.S. consumer bankruptcy filings jumped nearly 40% in November compared to the year before. And there is no end in sight. “We expect the alarming rate of personal bankruptcies to continue well into 2009,” said ABI Executive Director Samuel J. Gerdano.
Executive search firm, A.E. Feldman, says the surge in bankruptcies is creating opportunities for candidates with expertise in underwriting, restructuring, valuation and loan workouts. The firm says bankruptcy accountants are also in strong demand. Amid the onslaught of bankruptcies, law firms are also seeing a steady increase in need for legal services. As a result, A.E. Feldman says legal jobs are opening up for candidates with excellent academic credentials and a demonstrable track record as top firms bet that bankruptcy and restructuring work will be one of their most promising avenues of growth.
The aftershocks of the current recession are likely to be felt well into 2010, according to Bain CRG. The Bain CRG Fall 2008 Default Outlook finds that bankruptcies of U.S. companies with $100 million or more in assets will approach 100 in 2010. “The body blows to industry supply chains will keep on coming into 2010,” said Sam Rovit, author of the study and managing partner for Bain CRG. “Because of the lag time between macroeconomic factors and defaults, our study finds that a painful business shockwave will extend further into the future than originally thought.”
According to Bain, two underlying factors extending corporate defaults and bankruptcies through 2010 include an approximately $500 billion reallocation of consumer expenditures to savings to rebuild lost wealth, and a $200 billion decrease in debt servicing. The study concludes that companies with weak balance sheets are most at risk. Bain warns that companies with weak balance sheets and weak competitive positions are not likely to survive the current downturn unless drastic actions are taken to restructure the business.
Meanwhile, U.S. consumer bankruptcy filings increased 39.2% nationwide in November from the same period a year ago, according to the ABI, relying on data from the National Bankruptcy Research Center (NBKRC). Chapter 13 filings constituted 32.7% of all consumer cases in November, a slight increase from October. Additionally, the overall November consumer filing total of 99,925 represented a slight decrease from the October total of 106,266.
“While new bankruptcies dipped slightly in November from the yearly high reached last month, we are still on track for nearly 1.1 million new cases this year, the highest figure since Congress changed the bankruptcy laws in 2005,” said ABI Executive Director Samuel J. Gerdano. “We expect the alarming rate of personal bankruptcies to continue well into 2009.”
Bankruptcies Likely to be More Litigious
The current wave of bankruptcies is likely to be much more litigious, according to Reuters. This comes as creditors of bankrupt companies seek to recover money in more innovative ways, the report states, citing a top bankruptcy and restructuring expert. Reuters quotes Lisa Donahue, Co-Head of the Turnaround and Restructuring Practice at business advisory firm AlixPartners, as saying a big uptick in litigation over bankrupt companies’ collapses could continue for years.
Amid the trend, a number of law firms facing fewer billable hours are shifting resources to an area of law that seems to thrive in a downturn - bankruptcies and workouts.
Among the firms eyeing opportunity amid the surge in bankruptcies is Haynes and Boone. The firm announced in November it has expanded its bankruptcy and business reorganization practice to meet growing demand for attorneys who can deal with complex legal matters associated with business reorganizations and bankruptcies in today’s volatile economic climate. Haynes added 10 attorneys to it bankruptcy practice group over the past 20 months.
“Our group is busy now, and we’re expecting a very active 2009,” said Steve Pezanosky, head of Haynes and Boone’s bankruptcy and business reorganization practice.
Law firm, Crowell & Moring, also announced it is expanding its distressed group. The firm says it added three financial services and bankruptcy attorneys in order to deepen its ability to handle the full range of debt restructuring and corporate reorganization matters. Crowell & Moring says its Financial Services Group has seen significant growth and is among its fastest growing practices.
“The credit crisis means that our clients will have an increased need for sophisticated restructuring counsel over the next several years. Our new bankruptcy attorneys enhance our ability to meet the full range of client needs on the most complex matters,” says William M. O’Connor, chair of Crowell & Moring’s Financial Services Group.
Are you working in underwriting, restructuring, loan workouts, bankruptcy accounting or bankruptcy law? If you want to grow your career or your company’s bottom line, contact A.E. Feldman’s President, Mitch Feldman today!
