In bankruptcy and restructuring, “jobs, businesses and legacies are on the line.” When the stakes are this high, attorneys have to be comfortable in crisis mode. The team at Cleary tell us more.
What is bankruptcy and restructuring law?
Hoori Kim, associate: Bankruptcy and restructuring often involves a financial restructuring of an entity, be it a company, a municipality, or an individual, often when they are unable to meet their debt obligations. It’s an exciting practice in which multiple stakeholders are involved to achieve the best outcome for all parties involved. It’s also a practice under which lawyers develop various skills: everything happens under the auspices of the bankruptcy court, but the work still has a transactional flavor to it given that it involves a financial restructuring.
Tom Kessler, associate: Most people think of “bankruptcy law” as formal, court-supervised restructuring under the bankruptcy code (or foreign equivalents). That is definitely a large part of our practice, but it also includes advising on issues unique to companies or entities in financial distress or who may be close to insolvency, as well as legal issues that arise in the context of out-of-court debt restructurings.
Luke Barefoot, partner: Bankruptcy and restructuring encompasses a very broad range of skills and experiences – ranging from representing debtors and creditors in contested matters and adversary proceedings before bankruptcy courts, to counseling and strategy on corporate governance in situations of distress. Bankruptcy lawyers also have to understand the underlying issues and considerations driving the issues the company is facing. It provides so many opportunities to learn about different industries, and dive in to help clients in their greatest time of need.
What kind of work is involved day to day?
Kristin Corbett, associate: For some matters, a typical day might involve negotiating with various parties in interest regarding an upcoming hearing or drafting one of the several motions that are filed regularly in a bankruptcy case. For others, it might involve researching a company’s debt instruments and analyzing the impact of a potential bankruptcy filing for holders of that debt.
HK: No one day is the same because the type of work is very diverse, which makes it all the more interesting. One day, I could be diving into legal research to find the answer to a complex legal question and drafting a memo for the client about our opinion, and another day I could be fielding calls and emails to close signatures on an agreement to support a bankruptcy filing, or negotiating a payment under a contract.
TK: It’s hard to say what a “typical” day looks like, because our work is so dependent on the needs of our clients. But I try to spend some time every day catching up on what is happening out in the bankruptcy and restructuring world beyond my clients’ matters, which helps me stay on top of trends in our practice and our clients’ industries.
LB: Because restructuring is a hybrid practice that spans the litigation and corporate skill sets, every day is a different adventure. Literally today, I spent the morning preparing for and arguing at a hearing, and spent most of the afternoon assisting a client with negotiations and drafting on a key supply contract.
“There’s no feeling like winning a motion in court or obtaining bankruptcy court approval for a request.”
What are the highs and lows of the practice?
HK: The highs definitely come from the achievements we are able to obtain on behalf of our clients, often involving opportunities to interact with the bankruptcy court. There’s no feeling like winning a motion in court or obtaining bankruptcy court approval for a request. Of course, obtaining a favorable settlement for our client also can be part of the high.
KC: There are smaller moments that are very rewarding as a junior associate such as having an argument you crafted included in a motion before the court or being trusted to communicate your analysis directly to the client and play a crucial role in that process.
TK: Being near or in insolvency is a scary time for our clients, and it’s gratifying to be able to help them through a process that likely will be quite foreign to them. As for “lows,” although I have always loved the fast pace of our practice, the schedules can be very compressed. And, because most bankruptcy cases have a routine schedule for the filing of motions or objections, there is always a moment on the monthly filing date when you’re watching your inbox to see what you might have to dive into for an upcoming hearing.
“You have to remember that it is often one of the hardest and most difficult times in our client’s businesses… An empathetic ear and understanding for their position goes a long way.”
LB: There are two particular highs. First, you often are advising clients in a true crisis situation where jobs, businesses and legacies are on the line. Bringing to bear your advice and expertise on the tools available to both debtors and creditors and formulating a path forward through a difficult time is particularly gratifying. Second, because a bankruptcy case naturally lends itself to a large number of discrete, but interesting, motions or requests or relief, there are far more opportunities for even the most junior associates to get in front of the court and handle a matter. Seeing our associates shine when given these opportunities is one of the best parts of my job. On the lows, you have to remember that it is often one of the hardest and most difficult times in our client’s businesses, and brings an incredible amount of stress and pressure. But an empathetic ear and understanding for their position goes a long way.
What is a partner's typical role in matters?
LB: Particularly on large debtor-side cases, a partner is often akin to the conductor of an orchestra – relying on and coaching lawyers from different work-streams and focuses to deliver a cohesive result to the client. Partners work collaboratively with associates to formulate strategy, think big picture, and make sure everyone is coordinated and doing their best work to drive towards a shared goal.
HK: A partner typically directs associates in their various tasks, and is the key client-facing member of the team. A partner will steer the broader strategy of a matter, will most often discuss and communicate the strategy with the clients, and be the final reviewer and contributor to work products.
KC: They also are teachers and mentors who make sure the associates understand individual assignments but also the bigger picture as to the team’s goals and how to get there.
TK: On a more day-to-day level, they review work from associates on their matters, provide advice and guidance to clients, and engage in the “business” side of our work: marketing the firm and engaging in business development activities like pitches and other external presentations.
“Even as a junior associate, I have led calls with the client and negotiated substantive matters with opposing counsel.”
What do associates do?
HK: Associates are constituents of the orchestra that make the harmony come together. They take responsibility in putting together the pieces of the matter to move things forward, including drafting motions, agreements, emails, memos, and preparing for calls and hearings. The associates in the bankruptcy and restructuring group are given opportunities to take responsibility over key components of a matter. So, even as a junior associate, I have led calls with the client and negotiated substantive matters with opposing counsel.
“Associates are often given the opportunities to speak in court because there are so many motions that are filed in the course of a bankruptcy.”
KC: Because associates are the ones doing the legal research and reviewing all of the company’s financials, they are very involved in developing litigation strategy and communicating directly with corporate clients regarding the impact of a potential filing. Associates are often given the opportunities to speak in court because there are so many motions that are filed in the course of a bankruptcy.
TK: Associates are the engine of any matter. They are responsible for creating the primary work-product needed for all of our matters, whether that be transactional documents for a debt restructuring, a motion in an adversary proceeding or a plan of reorganization in a Chapter 11 proceeding. More senior associates also take a significant amount of responsibility for the overall workflow of the case, including managing the team.
What qualities make for good bankruptcy lawyers?
HK: I think good bankruptcy lawyers are intelligent and versatile. Because bankruptcy lawyers can also wear many hats – as litigators from time to time but also as negotiators of commercial agreements – good bankruptcy lawyers adapt seamlessly into different situations and solve a diverse range of issues.
KC: A good bankruptcy lawyer is also very organized, thoughtful and diligent – all qualities that are helpful when working under time pressure.
TK: They have all the qualities of a good lawyer: curious, hard-working, with excellent strategic and legal thinking. I also think it’s critical for bankruptcy lawyers to be commercially minded. It is important to remember what your client’s ultimate business goals are and to filter your analysis through that lens. One of the best pieces of advice I received from a more senior lawyer came during a negotiation of a complex agreement. I was confident that my revisions to a provision were right on the law, despite our adversary’s strong opposition. In counseling me to think like our clients, the senior lawyer encouraged me to say to myself “we’re right about this – but do we need to be?” I find myself coming back to that time and again.
“Bankruptcy matters disproportionately require out-of-the-box thinking, driven by the practicalities of the client’s situation.”
LB: Versatility. Bankruptcy matters disproportionately require out-of-the-box thinking, driven by the practicalities of the client’s situation. At least the US Bankruptcy Code provides a tremendous amount of flexibility to tailor the rights and remedies to the needs of the client’s situation. It’s a thrilling experience to harness that flexibility and tailor your advice and the strategy you take, often to push the boundaries of existing law.
What separates the Cleary Gottlieb team from its peers?
LB: First, Cleary does not typically sit on one side of the table. We represent parties on all sides. This gives you unique flexibility to anticipate issues that your adversaries might raise. Second, it tremendously contributes to the development of young lawyers. Rather than potentially being pigeon-holed into a routine of representing a single constituent, you grow and develop a broad perspective that you can bring to bear for the benefit of your clients and your own growth. Third, Cleary’s global reach and client base adds a further layer of both challenge and opportunity. You often considering the laws of multiple jurisdictions and in consultation with our colleagues abroad, formulating a comprehensive and often novel strategy.
HK: As a recent example, our representation of LATAM Airlines in its bankruptcy filing shows our excellence in managing complex cross-border matters. We also have a seamless integration with the rest of the firm, which helps us work better as a team.
“It is impossible not to see the effects of Covid-19 on the bankruptcy practice.”
What impact did the Covid-19 pandemic have on the practice?
LB: Like many other crises, the Covid-19 pandemic has been an opportunity for lawyers and other advisors to bring to bear the tools of insolvency law to address clients’ most pressing needs. Some particular sectors that have been disproportionately impacted by the pandemic have and will see an increased need for our services (retail, transportation, hospitality). But the practice will continue to evolve and stretch to accommodate the current crises of the day.
TK: It is impossible not to see the effects of Covid-19 on the bankruptcy practice. From airlines to retail, we have seen a huge uptick in clients in need of assistance as they face acute financial distress.
KC: The influx of matters has increased opportunities for associates to have a wide range of experiences, including more debtor representations.
“I think this goes for any student interested in practicing law: seek out as many opportunities as you can to hone your writing skills.”
HK: On a day to day level, the integration of technology into the practice, including court hearings conducted through videoconferences, have been an interesting development.
How do you see the market evolving in the next few years?
LB: If I knew the answer to this, I should give up law and become a trader! But I think two points are clear. First, the pandemic has underscored that the bankruptcy system has and will continue to evolve to meet the unique needs of any crisis. Second, the distressed markets will continue their evolution to become more complex as participants in the market recognize the benefits and potential advantages of distressed investing.
TK: I think as Covid-based restrictions subside, companies will reevaluate how they conduct business and whether they can better leverage technology. As a result, I think we will see several industries face tough economic headwinds as their products and services become less necessary in a post-Covid marketplace.
KC: As part of that, there will likely be a permanent shift towards handling some court hearings, depositions, and the like, remotely.
What advice would you give students interested in the area?
TK: I think this goes for any student interested in practicing law: seek out as many opportunities as you can to hone your writing skills. So much of what we do is writing – whether it’s a motion that will be heard by a bankruptcy judge or a summary of the open legal issues to a partner, client or adversary, the ability to convey information succinctly and persuasively is key.
“If you had told me when I was a law student that I’d be a bankruptcy partner, I would have scoffed.”
KC: I would highly recommend that any student interested in bankruptcy takes a course in bankruptcy and interns for a federal bankruptcy judge, if possible. This will teach you the ins and outs of the Bankruptcy Code, which is the foundation for all the work we do. I would also suggest taking a seminar from a practitioner to learn about the practical considerations of out-of-court restructuring that exist beyond the case law.
LB: Do what you love. You can’t possibly predict where the market will turn or how we can anticipate our client’s needs. Focusing on core skills like persuasive writing, concise drafting, and strategic thinking will be useful no matter where your career takes you. If you had told me when I was a law student that I’d be a bankruptcy partner, I would have scoffed. But I can’t be more enthusiastic about my practice, and the foundational skills that benefit any lawyer will carry you wherever life might take you.