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December 26, 2000, Tuesday, Late Edition - Final

SECTION: Section C; Page 1; Column 5; Business/Financial Desk

LENGTH: 939 words

HEADLINE: For Lawyers, Is Boom Near In Insolvency?

BYLINE: By JONATHAN D. GLATER

BODY:
For the last several years, lawyers have overseen an incredible spate of public offerings, mergers and acquisitions. Now that the economy is slowing, they are quietly preparing to play another role for their clients -- by building up their bankruptcy departments.

Both partners at law firms and legal recruiters say that demand for lawyers with experience in bankruptcy is soaring. And while firms indicate that they are already busy, many foresee a sharp increase in bankruptcy filings in the near future, because companies that are not yet in critical financial trouble -- but expect to be soon -- have begun to reserve lawyers in advance. "A huge wave is coming, and we want to make sure that we catch the wave," said Luc A. Despins, who joined the New York office of Milbank, Tweed, Hadley & McCloy in 1998 to build up its bankruptcy practice.

Legal recruiters say that although statistics are hard to come by, the demand for bankruptcy lawyers at all levels, including partners, has been rising for several months now, and has increased sharply since mid-October. Because experienced lawyers invariably have jobs already, that means that law firms have been poaching experienced bankruptcy lawyers from rivals, executive placement specialists say.

"In the last two months, I have definitely noticed much greater interest in immediate hiring in bankruptcy groups and an interest in staffing up even if the departments aren't exceedingly busy yet," said Jeff Schneider, president of Schneider Legal Search in New York.

Mr. Schneider said that his company was looking to fill more than 50 positions at firms for bankruptcy lawyers and recently helped several bankruptcy lawyers switch law firms.

"Nobody wants to be caught short-staffed," he said.

Firms also want to recession-proof themselves by building up a practice that can pay the bills when the pace of merger-and-acquisition activity slows, said Renee Berliner Rush, a partner at Corrao, Miller, Rush & Wiesenthal, another legal placement company in New York. "They're really working at doing what they can to protect themselves from the inevitable downturn," she said.

Part of the reason for the scramble for lawyers with bankruptcy experience is scarcity: not that many lawyers have honed bankruptcy skills in recent years. "There are not a lot of strong midlevel associates who have that training," said Peter J. Goldfeder, managing director at PeterSan Group, a New York legal recruiter.

Mr. Despins agreed. "The competition for associates right now is ferocious," he said.

The total number of corporate bankruptcy filings has been falling, to 8,211 in the three months ended Sept. 30, compared with 9,243 in the previous three months and 8,986 in the third quarter of 1999, according to the American Bankruptcy Institute. But lawyers say that the statistics hide the fact that more large companies are seeking protection from creditors.

Among the more prominent bankruptcy filings recently are those of Lernout & Hauspie, a maker of voice recognition software; TSR Wireless, which bills itself as the nation's sixth-largest wireless carrier; and ICG Communications, which sells telephone and Internet services to businesses.

"There has been a real shift in what is going on in the world," said Harvey R. Miller, a partner who heads the business financing and restructuring group at Weil, Gotshal & Manges. Mr. Miller should be an expert at recognizing the symptoms of an incipient bankruptcy boom: he has represented such well-known filers as Continental Airlines, Texaco and Eastern Air Lines.

Since midsummer, he said, the pace of restructuring work has picked up notably.

"It's just a reflection of the softening economy," Mr. Miller explained. "Financing alternatives are narrowing." His firm, already widely recognized as a leader in the field, has hired more than a dozen bankruptcy specialists this year.

The pickup in the pace of business does not mean simply that more companies will be filing and will need legal help to do it. Bankruptcy lawyers are also retained to represent creditors, investors, employees -- anyone who stands to be affected by a company's filing.

Frequently, lawyers are brought in before a company files for bankruptcy protection, to advise on ways either to restructure the business to prevent a filing or to make the proceedings themselves as smooth as possible.

The upstart technology companies that have been crashing this year are not necessarily a gold mine for bankruptcy lawyers. Often, they lack hard assets of substantial value in bankruptcy proceedings, said Larry G. Engel, a partner at Brobeck, Phleger & Harrison in San Francisco.

But the companies that did business with failed dot-coms, he said, typically need help from bankruptcy lawyers to try to recover anything that is owed to them.

"What we spend our time doing is the actual transaction, the purchase of the failing company's assets," he said.

In some industries, evidence is mounting that a variety of companies will be in need of restructuring soon, said Peter J. Antoszyk, a partner at Brown, Rudnick, Freed & Gesmer in Boston.

In retail trade, for example, the lenders that his firm typically represents were calling even before the weak holiday shopping season to express concerns about borrowers' financial performance, Mr. Antoszyk said.

Rising costs, particularly for energy, are exposing signs of weakness in the health care industry, he added.

Lawyers said that bankruptcy reform legislation like the measure vetoed last week by President Clinton would not have a significant impact on corporate filings.
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GRAPHIC: Graph shows Business Bankruptcy Filings from 1994-2000. (Source: ABI World)(pg. C6)

LOAD-DATE: December 26, 2000