Ethan Jeffery
D. Ethan Jeffery
Title: Shareholder, Murphy & King
Age: 49
Experience: 24 years
Ethan Jeffery got into bankruptcy law because – in his words – he needed to “get the heck outta New Hampshire.” After he finished college in his home state, he headed to Villanova for law school and it was there that one of his professors sparked his interest in the discipline. “My experience is when you have somebody who’s good, they make the topic more interesting,” he said. When Jeffery isn’t working with debtors and creditors to find creative solutions to their financial woes, he’s spending time with his teenage children in Andover.
Q: What kind of trends or patterns do you see in bankruptcy filings during and after a recession? Is there anything that makes this most recent recession particularly unique?
A: Commercial practice versus consumer practice in bankruptcy is a little bit odd. They’re counter-cyclical – when the economy’s bad, there’s more bankruptcy. When the economy’s good, there’s less bankruptcy.
Consumers always run. When the recession hits, the consumer practice spikes. The commercial practice usually lags behind it; when the economy starts to come out of the recession is when the companies that have been bumping along with problems end up filing or doing workouts and restructurings.
One of the simplest explanations is that a lot of commercial bankruptcies are driven by banks pushing the companies into a liquidation or a restructuring, and most banks don’t like to push their collateral, their assets, when the prices are at the bottom.
This recession is different from prior recessions because of the interest rates. Interest rates right now have been held artificially low for a long time. Without an interest rate increase, there’s less pressure on companies that have financial problems because money is so cheap. They have adjustable rate loans or their interest rate is low, so that eases up on their cash flow. If the interest rates were higher, it does a couple of things. It makes it harder to refinance out of financial problems and it also increases the strain on cash flow. Those are things that also tend to impact filings.
Q: So if you’re a financially distressed company, this low interest rate environment is probably a good thing for you, right?
A: Absolutely.
Q: You were also recently involved in a bankruptcy case with Turner Construction, right?
A: That was a creditor representation. We didn’t represent the debtor in that case. (He points out the window.) See that tan, round building over there? That’s the Liberty Mutual world headquarters.
Turner Construction built that building. I didn’t have a lot of experience with building high-rise office towers before this one, not that I had anything to do with the actual construction, but the structural steel is the skeleton of the building, and the [subcontractor] that was doing the structural steel for that building filed bankruptcy about 40 days after they signed the contract. So this is early on in the project and this is the skeleton that you need to start doing the project, and the [sub] that was manufacturing and supplying that steel is now in Chapter 11 up in New Hampshire.
The goal and the key was to try to get the structural steel completed, get the fabrication done and make sure that you can get Turner Construction through that Chapter 11 process to get the steel out and keep them on track to open the building, because if they don’t complete the building on time, they have problems.
We were able to do it. One thing I like about bankruptcy is there’s a lot of creativity to it. The business aspects are sometimes more important than the legal aspects – if you don’t have a business solution that works, the legal really is irrelevant, because the company’s going to fold.
We were able to reach an agreement with the debtor up there and the various credit constituencies to keep the company open to complete the Turner contract, among others, and they were able to get it out, get it done and finish the building on time.
As a lawyer, you don’t generally see something tangibleto what you do, but I like that one; every time I look out the window, I can see it from my office.
Jeffery’s Top Five Vacation Spots:
- Lake Sunapee
- Avalon, New Jersey
- Santa Cruz, Calif.
- The White Mountains in New Hampshire
- Washington, D.C.
