Business owners probably don’t want to meet Peter McGlynn. As a trial attorney who focuses on bankruptcies in construction-related businesses, ending up in his office is probably a bad thing. But while bankruptcies are spiking, McGlynn emphasizes that lawyers like him do whatever they can to renegotiate loans and keep both parties out of court – and in this environment, lenders and borrowers are usually willing to do whatever they can to make that happen.
Peter McGlynn
Title: Attorney, Bernkopf Goodman
City: Boston
Age: 60
Experience: 32 years
It’s pretty safe to assume these are busy times for bankruptcy courts, but exactly how busy are they?
Last year in Massachusetts, for the entire year of 2008, there were approximately 170 chapter 11 business bankruptcies filed. In the first quarter of 2009, according to the most recent statistics I got from a bankruptcy judge about two weeks ago, the filings for the quarter are about 90. So you’ve got a little over half of chapter 11 filings in Massachusetts … in the first quarter.
Do you end up in court very much?
It’s busy [for us right now] … but if you’re counseling your clients, the best thing you can do is to keep them out of bankruptcy. Try to work things out with your creditors, with your lenders to keep them out of court. Why? Because it costs so much money to try a bankruptcy these days. The rules, the regulations, everything has to be done with a notice and a hearing and an opportunity for people to come in and object, and of course all of that costs a lot of money.
I’m not at all suggesting that it is abusive or improper, it’s just that’s the way the law is written … given the way things are today, especially the state of the law, there is virtually no guarantee that all of those fees, all of those expenses, are going to result in a successful exit from bankruptcy.
How do you work with lenders on this? Are most of them willing to cut some kind of deal?
I think so. Let’s face it, it’s no deep secret as to the economic conditions that we’re faced with. And, for example, when we’re trying to negotiate with a landlord on behalf of a tenant who needs some rent relief, the landlords are very savvy about what’s going on, and recognize that if they fight too hard and the tenant either goes out of business or files chapter 11 bankruptcy, they might not have a tenant. So something might be better than nothing.
Banks also are willing to go to the table?
Banks are not in the business of loaning money to lose money, so they expect to get repaid. And they go into it with the understanding and expectation that they’re going to get paid, but in an economy like this, when the value of their collateral is probably depressed from the time the loan was created, the reality sets in and they try to negotiate the best deal they can. If they can’t get the deal they want, they’re going to start foreclosure, and that may prompt the foreclosure filing, but it also may prompt both sides to recognize that they’re going to have to give a little bit and meet somewhere in the middle.
But for some borrowers, I assume that’s just not an option.
You’ve got to be able to look at a company and, even before you start filling out the paperwork to file, you’ve got to go through and make an honest assessment as to what the chances are of this company surviving in bankruptcy, what it’s going to be like coming out of it. If it has, for example, no credit, its business is down, it has no game plan as to what they’re going to do to turn the business around, then bankruptcy is probably not going got help it too much. If it’s simply a case of filing and hoping that there’s some white knight that we haven’t identified yet that’s going to swoop down and help this poor business, that’s not going to be the case. … It’s not for the faint of heart, because you can spend a whole bunch of time, as a lawyer, in a bankruptcy case, and not get paid.
Top Five memorable cases:
1.) Norfolk, Va.: McGlynn discovered the other side’s lawyer was pals with the judge – they sang in a men’s choir together. Still, McGlynn won the case.
2.) A gamble over a paper mill bankruptcy: McGlynn’s firms fees added up to about $1.5 million – if they could sell the assets. If not, they’d get maybe 1/3 of that payout. Fortunately, the deal went through and the firm could collect.
3.) McGlynn served as special counsel to litigate a breach of contract case against Eastern Edison Co. – now National Grid – on a power plant construction issue.
4.) Non-bankruptcy – a RICO case, where McGlynn defended an individual sued for $8 million or $9 million dollars. McGlynn’s side won on all counts.
5.) Cases in Las Vegas – not really the cases, perhaps, but the city sure does stand out.
