The Bankruptcy Files: Brazil's Batista a Boon to Big Firms
Brazil might be the target of industrial espionage—thanks to the reported activities of the National Security Agency—but the South American nation is also attracting the interest of Am Law 100 firms drawn to the crumbling empire of Brazilian billionaire Eike Batista.
Bloomberg reported last week that Batista, once a symbol of Brazil’s growing economic prowess, had retained Quinn Emanuel Urquhart & Sullivan to represent him after his oil company OGX Petroleo e Gas Participacoes defaulted earlier this month on a $44.5 million interest payment, triggering a 30-day period to negotiate with bondholders.
Susheel Kirpalani, who left Milbank, Tweed, Hadley & McCloy in 2007 to start Quinn Emanuel’s bankruptcy litigation practice, and complex litigation head Michael Carlinsky, another high-profile Quinn Emanuel lateral hire, are advising Batista along with bankruptcy partner Benjamin Finestone.
Davis Polk & Wardwell and Eduardo Munhoz, a restructuring partner with Brazil’s Mattos Filho, Veiga Filho, Marrey Jr, are advising OGX on its discussions over a possible restructuring of $500 million in bonds. Bloomberg has reported that Bingham McCutchen, Cleary Gottlieb Steen & Hamilton, and Pinheiro Neto—another leading Brazilian firm—are advising creditors.
This week, OGX dismissed two top executives, CEO Luiz Carneiro and chief legal officer Jose Roberto Faveret, according to sibling publication Corporate Counsel. Darwin Correa, an attorney with Paulo Cezar Pinheiro Carneiro in Rio de Janeiro, will replace Faveret as OGX’s top in-house lawyer.
OGX, which is reportedly mulling a potential bankruptcy filing in Rio de Janeiro, earlier this year turned to Herbert Smith Freehills for counsel on its $850 million sale of a 40 percent stake in two Brazilian offshore oil exploration blocks to Malaysia’s Petronas, according to sibling publication The Asian Lawyer.
Batista also relinquished control this summer of his natural gas and electricity company MPX, which is saddled with over $3 billion in debt, and in August sold a controlling stake in his LLX logistics firm for $560 million to EIG Global Energy Partners. (The Latin Lawyer reported in August that Batista’s financial pain has been the economic gain of many outside firms.)
Brazilian securities regulators opened a formal inquiry into Batista in September, as the country’s political establishment has resisted the urge to bail out the embattled billionaire, in part due to recent street protests and other societal unrest related to widespread economic disparity in the nation, which is the world’s fifth-largest by both population and land mass.
Below are some of the other recent Chapter 11 filings and their lawyers of note. As usual, hourly billing rates are in parentheses, when available.
Fresh & Easy Neighborhood Market
Seeking to complete a $126 million sale to billionaire Ronald Burkle’s Yucaipa Companies, grocery chain Fresh & Easy filed for bankruptcy in Delaware on September 30. The U.S. arm of struggling U.K. supermarket giant Tesco, Fresh & Easy couldn’t find success stateside, and now its 199 stores will be folded into Burkle’s grocery empire.
Lisa Laukitis, a Jones Day bankruptcy partner who joined the firm in 2009 with several colleagues from Kirkland & Ellis, and partner Paul Leake are leading a Jones Day team advising El Segundo, California–based Fresh & Easy. A declaration by Laukitis states that although Jones Day has done work for Yucaipa in the past, the firm is not conflicted in its role for Fresh & Easy in its Chapter 11 case.
A copy of the firm’s engagement letter shows that Fresh & Easy has waived any potential conflict and that Jones Day will be paid a $750,000 retainer for its services. Another filing by Laukitis states that the firm has drawn down that retainer and received an additional $657,044.
Mark Collins ($775 per hour), chair of the bankruptcy and corporate restructuring group at Delaware’s Richards, Layton & Finger, is serving as cocounsel to Fresh & Easy along with partner John Knight ($675). The firm has been paid a $200,000 retainer for its role in the case, according to court filings.
Pillsbury Winthrop Shaw Pittman is serving as special corporate counsel to Fresh & Easy through Los Angeles partner Christopher Patay, who has advised the company since March 2007. Pillsbury has been paid nearly $5.2 million by Fresh & Easy since that time, according to an affidavit by Patay, which notes that $2.5 million of that amount came in the year prior to the company’s bankruptcy case.
Court filings show that Pillsbury has received retainer payments totaling nearly $1 million in the 90 days prior to its Chapter 11 filing, and the firm currently holds a $330,000 evergreen retainer for its services. Pillsbury partners are billing the debtor between $590 and $1,155 per hour, as other lawyers from the firm charge hourly rates ranging from $360 to $925.
Bradford Sandler, cochair of the committee practice group at national bankruptcy boutique Pachulski Stang Ziehl & Jones, is advising an official committee of unsecured creditors in Fresh & Easy’s Chapter 11 case along with partner Jeffrey Pomerantz.
Mary Kasper serves as general counsel of Fresh & Easy, which was founded in 2006 as a Tesco subsidiary. Davis Polk global M&A cohead George “Gar” Bason Jr., restructuring head Donald Bernstein, and corporate partners John Butler and Marc Williamson are representing Tesco on the sale of Fresh & Easy to YFE Holdings, an affiliate of Burkle’s Yucaipa, which is being advised by restructuring partners Robert Klyman from Latham & Watkins and Sean Beach of Delaware’s Young Conaway Stargatt & Taylor.
New York City Opera
Many of America’s orchestras have run into financial problems in recent years, and the latest bastion of the performing arts to slip into bankruptcy court is the New York City Opera, the so-called people’s opera that filed for Chapter 11 protection on October 3, blaming its demise on declining sales and a failed fundraising initiative.
Kenneth Rosen, head of the bankruptcy and financial reorganization group at Lowenstein Sandler, is advising the New York–based opera on its restructuring efforts. The firm is handling the assignment pro bono.
According to a list of the opera’s 20 largest unsecured creditors, the debtor owes $20,336 to Proskauer Rose in outstanding legal fees. The firm has long handled IP and labor and employment work for the opera, a nonprofit whose Form 990 filing with the IRS for its 2012 fiscal year shows $224,345 in fees being paid to Proskauer.
In 2011, the opera named former Shook, Hardy & Bacon partner and retired Philip Morris general counsel Charles Wall as its new chairman. The opera, whose endowment has dwindled to a mere $4.5 million, is prepared to close its doors and liquidate its operations after failing to find a white knight. The Metropolitan Opera will continue to serve theater-hungry Manhattanites.
North Texas Bancshares
Citing a bevy of bad commercial real estate loans and declining natural gas prices, North Texas Bancshares, the holding company for Park Cities Bank, filed for bankruptcy in Delaware on October 16. Formed in 2000, the Dallas-based bank has more than $396 million in deposits as it prepares for a sale to an investor group led by Texas tycoon Darwin Deason, according to The Dallas Morning News.
Ballard Spahr bankruptcy partner Tobey Daluz ($700) and of counsel Matthew Summers ($565) are advising Park Cities Bank in its bankruptcy case. A declaration by Daluz states that Ballard Spahr has received payments totaling $145,230 since being retained by the debtor in September. The firm is holding a $50,000 retainer and Ballard Spahr attorneys are billing between $225 and $950 an hour for their services.
Bracewell & Giuliani—whose name partner Rudolph Giuliani recently sat down to breakfast with The Am Law Daily—is serving as special transactional and regulatory counsel to the debtor through finance partner Sanford Brown ($750), tax partner James Reardon ($725), and corporate partner Justin Long ($630).
A declaration by Long states that Bracewell attorneys are billing between $300 and $755 per hour and that the firm has received a mere $8,957 from the debtor in the year prior to its bankruptcy case. Court records show that Pepper Hamilton and Jackson Walker are advising the Park Cities Financial Group, a Deason-backed entity seeking to take control of the debtor.
Bridgewater, New Jersey–based Savient Pharmaceuticals, a biopharmaceutical company specializing in joint relief treatments for conditions like gout, filed for bankruptcy in Delaware on October 14 as part of a plan to sell itself for $55 million to Sloan Holdings, a subsidiary of Louisville-based US WorldMeds.
Graham Robinson, a corporate and M&A partner in the Boston office of Skadden, Arps, Slate, Meagher & Flom in Wilmington, is leading a team from the firm advising Savient that includes restructuring deputy practice leader Kenneth Ziman, restructuring partners Anthony Clark, Dominic McCahill, and David Turetsky, banking partner Steven Messina, tax partner Katherine Bristor, executive compensation partner Erica Schohn, and finance partner Richard Aftanas.
Robinson joined Skadden a year ago from Wilmer Cutler Pickering Hale and Dorr, where he headed the firm’s corporate practice and previously handled work for Savient. Skadden poached McCahill in January 2012 from the London office of Weil, Gotshal & Manges. Court records show that Skadden has received retainers totaling $1.5 million from the debtor, which has paid the firm nearly $7 million over the past year.
Skadden is using a bundled rate structure for Savient that sees partners billing between $840 and $1,220 per hour, counsel between $845 and $930, and associates at hourly rates ranging from $365 to $795. David Hurst, a restructuring partner with Cole, Schotz, Meisel, Forman & Leonard, is serving as conflicts counsel to Savient. The mid-Atlantic firm has not yet filed billing statements with the bankruptcy court.
Philip Yachmetz serves as general counsel, copresident, and chief business officer for Savient, which this year hired former Skadden associate Mathew Bazley as an assistant general counsel. Savient lists assets of nearly $74 million against liabilities of $260.4 million in its Chapter 11 filing.