BBA CLE Course Centers on Real Estate Bankruptcies

NEW YORK CITY-Wednesday night in the wood-paneled meeting hall at the Brooklyn Bar Association, roughly 30 lawyers showed up for a continuing legal education course on real estate law--specifically unusual issues encountered while practicing in this area. The discussion centered on Chapter 11 bankruptcy and debtor-in-possession financings.

Spencer Compton, SVP and special counsel at First American Title Insurance Co., took the group through the intricacies of these transactions. This included why they are attractive to work on in the first place. “There is often a profit to be made, and it’s really a very entrepreneurial decision,” Compton said of structuring DIP financing.

“The DIP loans,” he said, “can be profitable due to the debtor’s immediate need for working capital.” Plus, he added, the lender in the transaction can be more certain because of protections inherent in the bankruptcy code and the debtor’s attorney is also protected due to a super-priority claim over administrative expenses. 

According to the Administrative Office of the US Courts, there were 14,191 chapter 11 bankruptcy cases filed in the US in 2010, a slight decrease from the previous year, but up from just 6,003 in 2006.

Compton spoke to GlobeSt.com following the course, and says that the number of real estate bankruptcies seems to have actually slowed. “What was terrible was the nuclear winter--that period of about nine months,” he says. “It’s unfrozen now so there is a steady inconsistent stream. It will be quiet… then another deal.”

The biggest advantage, he says, for real estate attorneys to stay up-to-date on DIP financing and bankruptcies is simply to broaden their knowledge and the types of cases they can handle. “If that’s where the work is, you should be able to do it,” he says. “The real estate attorney needs to understand what bankruptcy colleagues are doing.”

Michelle Stern, the BBA’s director of continuing legal education, tells GlobeSt.com that courses offered at the BBA vary, as does attendance. “We usually get about 40 people,” she said. “But we offer a three-part bankruptcy course that draws about 180. We take the chairs out and pack them in here--there will be people standing at the door.”