Distressed Assets Team
"They're terrific - they're very reliable and extremely responsive." "They have a deep understanding of our business." "I have found their work to be incredible."
Instability in the capital markets has created opportunities, as well as risk and loss. Across a wide range of industries and businesses, the sudden shift in market values has exposed thousands of companies to the risks of investigation, litigation and bankruptcy.
On the other hand, for investors with the vision and resources to capitalize on this reversal of fortunes, buying distressed assets has become an attractive strategy, while the sale of assets by financially strapped businesses can often be an effective workout strategy. Day Pitney assists clients in maximizing both their buying and selling strategies.
Day Pitney's Distressed Assets practice group is a multidisciplinary team that offers both strategic and practical advice in sophisticated insolvencies, bankruptcies, receiverships, reorganizations, restructurings, workouts and liquidations. Clients dealing with the renegotiation and restructuring of distressed debt and securities have access to the full range of our services, including counseling, transactions and litigation, provided by an integrated team of lawyers with experience in
- Bankruptcy and Creditors' Rights
- Financial Services Regulation
- Governmental Investigations
- Institutional Finance and Structured Finance
- Intellectual Property
- Mergers and Acquisitions
- Private Equity and Hedge Funds
- Securities Law and Securities Litigation
- Tax Issues and Debt Restructuring
Our experience extends to a number of industries at the forefront of today's challenges and opportunities, including among others:
- Financial Services
- Health care
- Real Estate
Bankruptcy and Creditors' Rights
Business clients rely on Day Pitney to resolve complex financial issues. These may take the form of restructurings, bankruptcy, workouts and/or creditors' rights remedies. In situations that may be contentious or fiercely competitive, we are called upon to enforce our clients' rights and to achieve effective business solutions. Our attorneys have the understanding and knowledge to act quickly while minimizing risk and navigating the complex and convoluted logistics that characterize foreclosures, liquidations, Section 363 sales, reorganization plans, receiverships, UCC sales, assignments for the benefits of creditors and other scenarios invoked by the disposition of distressed assets. Day Pitney attorneys regularly appear in proceedings in bankruptcy courts in New York, Connecticut, New Jersey, Massachusetts and Delaware.
Financial Services Regulation
Our Financial Services Regulation practice group has significant experience working with banks, insurance companies and other financial institutions to dispose of and to acquire portfolios of distressed assets, including loan portfolios. We have helped bidders successfully acquire assets from the FDIC, when that agency was the receiver of failed commercial banks. Compounding the recent failure of IndyMac Bank, the chair of the FDIC, in testimony before the Senate Banking Committee, stated that her agency is preparing for the failure of additional banks. The FDIC is most concerned about mid-sized institutions with assets in the $1 billion to $10 billion range and high concentrations of commercial real estate loans. We currently are advising bank and non-bank clients including hedge funds regarding prospective opportunities, the procedures for registering with the FDIC as an approved bidder and related matters.
Our White Collar team has many years of experience handling all types of government inquiries and proceedings. Many of these attorneys have served as prosecutors, and others have worked for the SEC or in other law enforcement or regulatory agencies. This experience positions us to understand prosecutorial strategies from the inside out, increasing our value to clients and prospects who may anticipate or be dealing with government inquiries. We have also assisted many clients with investigating fraud or other potential wrongdoing involving their organizations. When such action is called for, we advise our clients on how best to refer such matters to the appropriate regulatory or law enforcement organizations.
Institutional Finance and Structured Finance
Our finance lawyers assist institutional lenders and investors with financial transactions of many different kinds, including private placements, secured and unsecured credit facilities, asset-based and structured finance transactions, lease transactions, real estate financings and project and acquisition financings. Our experience includes carefully structuring and documenting transactions for borrowers and others with weak credit histories and in default and workout situations. We have also represented clients in connection with transfers of whole loan portfolios and a wide variety of asset securitizations, including transactions involving defaulted receivables and other distressed assets. Our experience includes restructuring transactions, including auction rate securities, advising on tax, ERISA and regulatory matters and negotiating and resolving intercreditor issues. We have assisted with portfolio liquidations and servicer transfers and terminations, both inside and outside of insolvency proceedings. Our lawyers understand the business and accounting considerations relevant to complicated transactions and their emphasis in all cases is on the efficient realization of maximum value for our clients.
IP-driven organizations are often turnaround targets in today's uncertain economic environment. Our IP team understands that, for buyers of distressCed IP assets, two objectives are paramount: avoiding successor liability and insulating themselves from prior claims.
Day Pitney lawyers also know how to identify, evaluate and realize the untapped value of intellectual assets, using a process that includes:
- developing a complete IP inventory
- analyzing the strengths and weaknesses of each IP asset, including consideration of the associated legal rights
- prioritizing the sale of IP assets and managing the licensing strategy to generate the most cash flow at the earliest moment, without threatening the core business
- managing the sale and licensing process to achieve an orderly series of transactions
Alternatively, if a distressed business actively out-licenses its IP, our team may recommend a royalty audit as the best way to recapture lost revenue. We collaborate with outside accounting professionals to execute royalty audits in the right way at the right time.
Mergers and Acquisitions
Day Pitney M&A lawyers advise clients on the purchase or sale of assets in bankruptcies, receiverships, reorganizations, restructurings and workouts. We counsel on the unique risks and opportunities presented by the purchase and sale of distressed assets. Our representation begins with planning the structure of the transactions and either undertaking due diligence for the buyers or preparing the sellers for the buyers' due diligence. Whether representing buyers or sellers, we are experienced in managing challenging timelines and negotiations that involve multiple parties in order to minimize legal and business risk and to deliver the most successful outcomes.
Private Equity and Hedge Funds
Day Pitney's attorneys advise investment funds of all kinds, including hedge funds, private equity funds, real estate funds and venture capital funds, in connection with the purchase and sale of distressed assets, securities and real estate. We also counsel hedge funds and their managers on risks and management considerations associated with these types of transactions and companies. We represent fund portfolio companies in restructurings, reorganizations and workouts. In addition, we counsel institutional investors, fund of funds and family offices and individuals that have invested in private equity funds, hedge funds and other alternative investment vehicles adversely impacted by the recent credit crisis.
Members of our Shareholder and Securities Litigation practice group, working in a multidisciplinary fashion with members of the Distressed Assets practice group, have broad and diverse experience in representing clients principally defending claims arising from distressed asset situations. We have represented "Big 4" accounting firms, banks, governmental and quasi-governmental agencies, broker-dealers, investment advisors, underwriters and others in claims regarding negligence, fraud, professional negligence, reckless conduct, claims arising under the state and federal securities laws and claims brought by state and federal regulatory authorities arising from asset failures and depreciations; business insolvencies and bankruptcies; accounting and auditing engagements; asset-backed securities claims; public and private company shareholder claims and numerous other matters generally related to business, investment and banking failures, near failures and workouts.
Mergers and acquisitions involving financially distressed companies often present complex tax issues. The Day Pitney Tax department works with our M&A attorneys to structure transactions that yield the greatest tax benefits, especially in the case of basis adjustments and net operating loss carryovers. The Tax department also has extensive experience dealing with cancellation of indebtedness income issues that arise in debt restructurings and foreclosures.
Day Pitney Leads Holders of $4.6 Billion in Securitized Debt to Success in Conseco Chapter 11
At the time of Conseco, Inc.'s, Chapter 11 filing, the company wanted an expedited sale of its finance subsidiary, Conseco Finance Co. (CFC). This subsidiary, which provided more than half of the financing for the manufactured housing industry, was reported to be losing close to $300 million per year.
When the case began, an outcome that protected the interests of our client, the largest of a group of institutional investors holding $4.6 billion in securitized debt, was far from preordained.
"Bankruptcy is a game, and it is not a genteel game," says James Tancredi, partner in Day Pitney's Distressed Assets practice group. "The Court responds to those with position and power."
Alone, Conseco's objectors would have neither the position nor the power to make a stand. Together, our client and Day Pitney organized an Ad Hoc Securitization Holders' Committee to protect the bondholders' collective interests, with our team keeping the identities of nine of the committee's major institutional investors confidential throughout the proceedings.
While the committee represented disparate interests, Day Pitney team leadership established an atmosphere of collaboration and consensus that allowed the committee to exercise market power and compelling legal persuasion. When the winning bid, favored by the committee, was subjected to an end run by other parties, the Ad Hoc Committee and our multidisciplinary legal team remained focused, open-minded and most of all strategic. With persistence and a few carefully planned litigation and negotiation maneuvers coordinated nationwide, the committee played a significant role in selecting the winning bidder, modifying the terms of sale and ultimately gaining significant governance, price and servicing concessions.
The capital markets responded positively to the approved sale and settlement. At the completion of the proceedings, one commentator noted: "We can now safely say that this resolution has allowed a ray of sunshine to peak through the dark cloud that has hovered over this [the manufactured housing] industry during the past years."
Day Pitney attorneys have handled the following representative matters, among others:
- Representation of a group of employees of a leading insurance and financial services corporation in bonus-related inquiries raised by Connecticut and New York Attorneys General.
- Representation of the principals of a Connecticut-based hedge fund in a matter filed on behalf of a local Connecticut pension fund, which experienced significant losses in the alleged Bernard Madoff fraud scheme.
- Represented eight banks with issues related to the Troubled Assets Relief Program (TARP), including advising on the benefits and drawbacks associated with accepting TARP funding, applying for and obtaining such funding and helping several meet TARP's preferred-stock eligibility requirements. To date, we have assisted these clients in raising more than $360 million under this new federal program.
- Representation of principals and portfolio managers in employment, compensation, tax and separation arrangements in connection with the restructuring and wind down of several hedge funds.
- Representation of sponsors in connection with the formation and launch of a hybrid hedge/private equity focused primarily on long-only investment opportunities in U.S. equities.
- Represented a regional bank in the sale of equity interests in four regional jet aircraft leased to an affiliate of Delta Airlines. The sale to a financial buyer was completed under the threat of imminent foreclosure by a foreign export development finance agency.
- Representation of a strategic buyer in the purchase of all assets of a bankrupt paint sundries wholesaler in private sale under section 363 of the Bankruptcy Code.
- Representation of the receiver of a water filtration company appointed by the Delaware Chancery Court in receivership proceedings and sale of assets.
- Advise the manager of a commercial real estate fund in connection with the restructuring of the management agreement as the result of a dispute over the disposition of distressed portfolio assets.
- Representation of a receiver of a retail oil business appointed by the Connecticut Superior Court in receivership proceedings, investigation of business by the Connecticut Attorney General and sale of assets.
- Advise a maintenance repair organization in connection with the purchase of $10 million-plus spare parts from trustee of Aloha Airlines in private and public auction sales under section 363 of the Bankruptcy Code, including a three-week online auction.
- Advise a strategic buyer in connection with a bid for assets of Ascendia Brands, Inc., a manufacturer of branded bath, health and beauty care products.
- Representation of a mortgage lender in a lawsuit filed by the Connecticut Attorney General for alleged violations of consumer protection and banking laws.
- Representation of sponsors in connection with the formation and launching of a distressed commercial real estate asset fund.
- Representation of a collateral manager in connection with the recovery of monies from a hybrid collateralized debt obligation where the underlying pool of assets included Residential Mortgage Back Securities ("RMBS").
- Representation of various retailers in the strategic re-positioning and restructurings of their businesses and their recapitalization.