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|Articles - September 2010|
|Friday, August 20, 2010|
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The view is sweet when sunlight floods through the 6-foot-high, 30-foot-wide across wall of windows that decorate the tasteful 16th-floor offices of TonkonTorp in downtown Portland. But economically speaking the skyline outside of these windows is a troubled one, badly wounded from two years of recession and a crisis in commercial real estate.
Yet business has been booming for Tonkon Torp. The firm has 84 lawyers, many of whom specialize in different aspects of financial law, and they have had so much work that they have hired seven members over the past year, including associates, laterals (lawyers who worked for other firms), and two senior advisers.
“Our practice is busier now than it’s ever been,” says 59-year-old Albert Kennedy, an attorney at Tonkon Torp. Kennedy specializes in insolvency and bankruptcy law and has been a partner at Tonkon Torp for 24 years. Kennedy’s clients are mostly corporate debtors unable to make good on what they have borrowed. “In insolvency you’re doing corporate law, real estate law, secured transactions and commercial transactions,” says Kennedy. “All of this comes together in restructuring. It’s fascinating because of the level of involvement that you get as a lawyer doing more than simply lawyering.”
Kennedy considers himself more of an insolvency lawyer than a bankruptcy expert, explaining that his group steps in when a business is in distress and cannot pay its bills. “That may or may not ultimately involve a Chapter 11 proceeding. Quite often it does not,” Kennedy says. “It involves out-of-court negotiations and restructurings with the parties and interests, which almost always includes a bank, other key creditors, maybe landlords.”
Many Oregon-based businesses have turned to Kennedy and others at Tonkon Torp because of financial distress. Though not able to share the details about current cases, Kennedy represented Columbia Aircraft Manufacturing based in Bend in a high-profile sale several years ago. Columbia Aircraft made a four-seater composite aircraft that was so fast and handled so well it was considered the Porsche of aircraft. Despite having an excellent product, Columbia was unable to pay its bills.
“In that instance we used Chapter 11 to sell the company to Cessna Aircraft, who bought it in late 2007. That’s one example where you don’t reorganize the business and keep it going; the better thing to do is to sell it. There we actually had an auction with a couple of active bidders and were able to generate sufficient money to pay the secured creditors and to generate a significant distribution to unsecured creditors.”
Not everyone was happy with the outcome of that case, given that Cessna shut down its plant in Bend shortly after buying Columbia Aircraft, laying off hundreds of people. But the business of bankruptcy is rarely pretty.
Part of the reason Tonkon Torp has done so well in the downturn is that it has diversified its business, emphasized the customer service aspect of law, and found new ways to help companies and individuals feeling the crunch of the recession. Even lawyers at the firm who do not specialize in bankruptcy have been keeping busy. So busy, in fact, that there is hope that the current financial crisis may be slowly, finally, coming to a close.
Over one recent span of eight days, Sherrill Corbett, a partner at Tonkon Torp, clocked 100 hours of work. Corbett works with corporate clients to come up with different ways to finance the growth of their businesses through mergers and acquisitions. Her office walls are covered with visual representations of the cases she is currently handling: a complicated diagram of squares, triangles and circles, interlaced with arrows. Corbett likes to literally draw out the deals she is working on, color-coding the structures she helps to form, and creating a visual representation of the financial implications of her clients’ ventures.
The 39-year-old Corbett has seen signs in her practice that suggest the Oregon economy may be coming out of its slump. “There has definitely been more activity in joint ventures,” Corbett observes. Over the past year or so her clients frequently talked about doing transactions but hesitated, often deciding not to move forward. Now investors are actually completing transactions and initiating joint ventures.
“Recently people have been coming together and doing deals, partnering with others who have different resources to bring,” she says. “One person has the cash and the other has the expertise or intellectual property, and we put the two together. Those deals have been picking up since the end of last year.”
Wada also sees some sectors of the market experiencing relief. Although he is expecting the number of foreclosures to increase, he remains cautiously hopeful. “In some sectors we’re starting to see some recovery,” Wada says. “I see retail and high tech improving, but it’s going to take a while to trickle down and have people feel their personal situations are recovering as well.”
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