What the influx of bankruptcy filings from large state-owned companies in Houston means for Texas restructuring lawyers
Move to Delaware. There is a new bankruptcy venue of choice for large public companies.
Based on data from UCLA-LoPucki Bankruptcy Database, large public company bankruptcy filings more than doubled from 25 to 57 from 2019 to 2020, and Houston was the most popular location for newly filed bankruptcies.
According to the database, which tracks deposits in cases where the debtor has declared assets of more than $ 100 million in 1980 dollars in government securities deposits in the run-up to bankruptcy, the bankruptcy court of Houston has seen bankruptcy filings for large state-owned companies drop from 11 in 2019 — the most U.S. bankruptcy courts for the year — to 27 in 2020.
The total number of cases filed last year in Houston more than doubled the 13 bankruptcies of large public companies filed in Delaware, the preferred location for perennial bankruptcies. Delaware was the most popular location in all but one of the last decade, until Houston became the busiest bankruptcy court in 2019.
Lynn LoPucki, the UCLA Law School professor behind the database, who has long been critical of how debtors and some lenders can choose where to file, said the rise deposits in Houston are more likely a bigger deal for Delaware than it is. is in Houston. It points out in particular the one day delay from filing to plan approval in the Chapter 11 case involving department store chain Southern Belk Inc.
“You don’t have to have an office in Houston to handle a case that’s there for a day,” LoPucki said in a telephone interview. He added, however, that the rise in large bankrupt stocks stands in stark contrast to where the venue was in 2001, when Enron Corp. chose to file for bankruptcy in New York.
Bill Wallander, co-lead of Vinson & Elkins’ restructuring and reorganization practice with offices in Dallas and New York City, said the Southern District of Texas has a fairly simple reason for getting an influx of business: “ The great bankruptcy judges who preside over a sophisticated, commercial and due process oriented bankruptcy process, ”he said in an email.
Robin Russell, Houston-based bankruptcy partner at Hunton Andrews Kurth and deputy managing partner of the company, agreed that the increase in deposits in Houston was due to the quality of the bankruptcy bank and simplified procedures they set up to handle complex cases. Complex cases include those where the total liabilities of debtors and their non-reporting subsidiaries exceed $ 10 million, where there are more than 50 interested parties; or when claims or interest on debtors are listed on the stock exchange. U.S. Chief Bankruptcy Judge David Jones and his colleague Judge Marvin Isgur currently manage complex assignments in the Southern District of Texas.
“Judges efficiently manage their respective cases, scheduling hearings and rendering decisions quickly, while allowing parties sufficient time to attempt to resolve disputes consensually out of court,” said Russell. She said that while the firm has benefited in terms of revenue, the “quality and quantity” of the work has also given associates and junior partners opportunities to hone their skills.
“I believe that a constant flow of interesting and challenging work leads to professional growth and the rise of Texas has proven it,” she said.