Letter from the President

In my column at the end of 2009 I wrote about the comments of Thomas R. Keene of Bloomberg, who spoke at the National Conference of Bankruptcy Judges at the end of October. He told the audience that GDP numbers were about to be issued that would reflect a boom economy in which unemployment would remain at a high level. He described this structural unemployment and indicated that notwithstanding strengthening in the economy, there would be a permanent and higher level of unemployment.

Mr. Keene appears to have been accurate in his views. The Department of Labor reported that in February and March, 2010, unemployment remained high at 9.7% or 15.0 million persons, which was only slightly lower than the 10% levels in October through December, 2009. The rate was highest among blacks and Hispanics, at 16.5% and 12.6% respectively. http://www.bls.gov/news.release/pdf/empsit.pdf. Significantly, as Mr. Keane had indicated would occur, revised statistics showed that U.S. gross domestic product rose 5.9% at a seasonally adjusted annual rate in the fourth quarter of 2009.

During March, 2010, various Wall Street Journal reports have indicated that U.S. consumer spending rose 0.3% in February even though personal income did not improve, while inflation stayed benign. In January, the U.S. trade deficit narrowed to $37.29 billion with the Commerce Department reporting a 1.7% decline in imports and a 0.3% drop in exports as the volume of oil imports hit its lowest level in more than a decade. Current oil price increases indicate a growing demand for oil reflecting increased economic activity. This 5.9% level of growth of GDP noted above was said to have accelerated to the strongest pace in more than six years in late 2009 as businesses slowed inventory reduction and boosted spending even though consumers spent less than initially believed. Of course, the continued rebound of the Dow Jones Averages to just below 11,000 indicates a core improvement in investor confidence in business performance.

Does this mean that the growth in our mid-market restructuring practices have declined since the mega-cases have slowed? It appears that the answer is dependant on the industry at issue. Anecdotally, there continues to be an active restructuring practice in many industries around the country. There was a reported slowdown in the fourth quarter and first quarter, but as financial institutions deal with reporting requirements, the pressure for resolution of defaulted debts appears to be on the rise as the desire to clear out unperforming loans increases.

The foregoing discussion does not even mention the changes that are occurring with the passage of health care legislation.

In summary, economic stresses have not abated yet, though as Mr. Keane indicated, the economy is stronger.

Where will this leave us as restructuring professionals? The AIRA's 26th Annual Bankruptcy & Restructuring Conference to be held June 9-12, 2010, in beautiful San Diego will answer many of these questions. Our keynote speakers, former U.S. Senator William H. Frist, Roger Grabowski of Duff & Phelps, Fred Crawford of AlixPartners, Professor Valery Ramey, PhD. Economics Professor at the University of California, San Diego, and Professor Jack F. Williams of Georgia State University, BDO Consulting, and the AIRA’s Scholar in Residence, along with the other programs and panelists in San Diego, will help us explore and understand the significant changes and opportunities we are facing. We look forward to seeing you in June.

Author Bio:

Grant Stein is a partner in Alston & Bird’s Bankruptcy, Reorganization and Workouts Group. His diverse practice includes the representation of debtors, secured and unsecured creditors, creditors’ committees, and fiduciaries in complex and difficult out-of-court workouts, debt restructurings, bankruptcy cases, and financial transactions throughout the United States and internationally. He also regularly represents officers, directors, and other parties in bankruptcy litigation of all kinds. His restructuring experience includes manufacturing, real estate, wholesale, retail, distribution companies, health care, communications, technology and intellectual property issues.

Mr. Stein is a Fellow of the American College of Bankruptcy and is identified as a top practitioner in Chambers USA: America’s Leading Lawyers for Business, The Best Lawyers in America and Super Lawyers magazine. He serves as a director and president-elect of the Association of Insolvency and Restructuring Advisors (AIRA). He also is a director and president-elect for the Southeastern Bankruptcy Law Institute. He recently served as a Member of the executive committee of Emory University’s Board of Visitors. He has written numerous articles on bankruptcy and workout issues and regularly lectures around the country. Mr. Stein served as law clerk to The Honorable W. Homer Drake, the senior judge of the United States Bankruptcy Court for the Northern District of Georgia, following his graduation, with honors, from the University of Georgia School of Law in 1981. He received his B.B.A., with high honors, from Emory University in 1978.