Rising costs, decreasing tax revenues and tightening credit markets are forcing a number of debt-laden cities, towns, districts and other public entities throughout the United States to attempt negotiated workouts with their creditors and, in the absence of a successful deal, to consider a seldom-invoked means of restructuring—Chapter 9 of the Bankruptcy Code.
Sheppard Mullin represents municipalities, public entities, indenture trustees, secured and unsecured creditors, creditors' committees, and other constituents in public entity workouts and bankruptcies.
We are one of only a handful of firms with extensive experience in proceedings under Chapter 9 of the United States Bankruptcy Code, having represented various parties in Chapter 9 municipal bankruptcies. When Orange County, California suffered huge losses in its multi‑billion dollar investment pool and filed for bankruptcy protection—at the time, the largest municipal bankruptcy ever—we served as co-counsel to the Official Pool Participants Committee. The Committee contained over 200 public entity members (cities, schools, local utilities, public transit, etc.) who were collectively owed over $4 billion from the investment pool. We also served as counsel to the Schools Subcommittee, whose 40 plus constituents were owed $1.1 billion from the investment pool.
Following confirmation of Orange County's Chapter 9 plan, we also served as co-counsel to the County in litigation brought by the Estate against parties causing the investment losses. These litigation efforts resulted in over $870 million in recoveries against various high profile defendants. Ultimately, there was close to a 100% recovery for our constituencies.
Our attorneys' public finance experience exceeds 30 years and has involved more than 250 bond issues and $10 billion of bonds, certificates of participation and debentures and over 100 default or potential default situations. Representative bond default matters include numerous defaults occasioned by the takeover of failed savings and loan associations, both with respect to their own corporate debt and various tax exempt bond programs supported by a letter of credit or other form of credit enhancement provided by the savings and loan; nursing or retirement homes and hospital defaults; the Richmond Unified School District COP default; and the exercise of remedies (including foreclosure and ultimate sale) of real estate projects supporting defaulted revenue bonds.
When necessary, our attorneys also represent clients on bankruptcy appeals in the district courts, before the Bankruptcy Appellate Panel, the Circuit Courts of Appeal and the Supreme Court of the United States. Our proven track record and deep expertise in bankruptcy appellate matters has allowed us to offer the best possible solutions to our clients.
Sheppard Mullin is one of the preeminent bankruptcy firms in California. The Finance and Bankruptcy practice group has been a cornerstone since the firm was founded more than 80 years ago, and remains a key area of strength. Sheppard Mullin has the resources to respond to the time sensitivity of financial crises and the depth to provide whatever size team is required. And, as part of a large, broad based commercial law firm, we are able to draw on all of the resources necessary to solve the multidisciplinary problems presented by distressed public entities, including expertise in areas such as workout negotiations, bankruptcy, labor, public finance, tax, litigation, real estate, government contracting, and securities law.
Lawyers in our firm are listed as municipal bond attorneys in The Bond Buyers Municipal Directory (the "Red Book"). Many team members are fellows of the American College of Bankruptcy, hold leadership positions in bankruptcy and insolvency-related bar and other organizations, and are nationally well known to, and highly regarded by, public sector officials.
Representative Chapter 9 Municipal Bankruptcy Matters
- County of Orange. Successfully represented the Orange County Investment Pool Committee as co-counsel (with over $4 billion in claims) and the Schools Subcommittee (with over $1 billion in claims). Our representations included extensive work in, among other things, issues concerning Chapter 9, tax, litigation, municipal finance, government contracts, insurance and legislative issues. Since these Chapter 9 proceedings concluded, we have added attorneys who represented a large group of holders of the county's tax and revenue anticipation notes.
- Coalinga Regional Medical Center. Successfully represented indenture trustee in connection with outstanding bonds which were paid in full.
- Desert Hot Springs. Successfully represented the indenture trustee for various debt issues in conjunction with a Chapter 9 municipal bankruptcy proceeding.
- Lassen Community College District. Successfully represented the accommodation lessor under a COP lease financing in a Chapter 9 bankruptcy and related state court litigation following a cogeneration project failure.
- Richmond Unified School District. Successfully represented the indenture trustee in the Chapter 9 proceeding and successfully litigated constitutional issues regarding COP (“certificate of participation”) lease financings.