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Bankruptcy MVP: Kirkland & Ellis' Anup Sathy

Kirkland & Ellis LLP's Anup Sathy was one of the lead attorneys representing nearly 400 General Growth Properties Inc. affiliates in their monumental and novel restructuring, laying the groundwork for similar special purpose entities and landing him a spot on Law360's list of Bankruptcy MVPs.

The Chicago- and New York-based bankruptcy partner is a nationally recognized practitioner in matters related to corporate restructurings, workouts and Chapter 11 reorganizations, and his work on the GGP restructuring, though just one of the achievements he racked up in the past year, stands out as the most important in his mind, he says.

"I think of the General Growth Properties matter as being the most significant because it involved some novel and unique areas of restructuring law that had not been previously tested, in particular the application of general Chapter 11 principals to special purpose entities and our ability to negotiate almost $15 billion of project-level restructuring debt without any litigation, to do it consensually, and to set up a road map for similar structures," Sathy told Law360.

The case involved overcoming several significant hurdles, including its sheer size — Kirkland represented 382 affiliates of GGP, which owns more than 200 regional shopping centers and other properties in 44 states and cited $29.6 billion in assets and $27.3 billion in liabilities in its December 2008 Chapter 11 petition.

Crucially, Sathy and his team also had to find a way to convince creditors that there was no benefit in their waiting to see what deals other parties made before reaching their own agreements, he said.

Finally, "it was novel — in some ways we were kind of making it up as we were going through it because it was sort of a new area of restructuring that had not really been tested before," he said. "Having those kinds of [special purpose] entities in Chapter 11 and then trying to restructure them" was part of the challenge, and he and his team were able to reach consensual resolution that saved their client significant time and money in litigation.

The restructuring of the project-level debt catalyzed the confirmation of the reorganization plan, and all creditors received 100 percent recovery on their claims. It was the largest Chapter 11 case undertaken by a real estate investment trust in U.S. history.

"We negotiated equally and treated [all the creditors] fairly and equally, and we were able to build consensus among a large group of creditors and use that momentum to reach agreement with the remaining creditors," Sathy said of his strategy in the GGP case. "In doing so, we stayed with the core principal of being transparent with the creditors, treating each one equally in ensuring that the last deal we reached was no better than the first deal we reached, so that everyone knew there was no benefit in waiting for the end" to deal.

The GGP restructuring was completed in November 2010, and several months later Sathy was one of the lead Kirkland attorneys who helped conclude YRC Worldwide Inc.'s nearly two-year-long out-of-court restructuring.

The case involved a landmark, comprehensive financial restructuring that refinanced more than $1 billion in secured debt, converted deferred fees and interest under YRC's senior credit facility into equity, provided for a $100 million injection of funds, and extended the maturity of YRC's refinanced debt obligations and deferred pension obligations.

That restructuring had the support of YRC's primary union, the International Brotherhood of Teamsters, after Sathy and Kirkland helped negotiate a groundbreaking modification to the debtor's collective bargaining agreements that included wage concessions and its temporary withdrawal from various multiemployer pension funds.

"Each case is different, and each situation is different, but you start with giving the client clear, direct advice, being credible with all of your constituents in a matter, and being creative in the way you think and approach situations, because in the restructuring world, you're just limited by creativity, in our view," Sathy said, citing the importance of "the ability to bring to difficult situations unique solutions" as key to achieving the kind of agreements he has reached in the past year.

Sathy is currently on a Kirkland team representing Innkeepers USA Trust, the owner and operator of an extensive portfolio of extended-stay hotels, in its Chapter 11 reorganization, in which the debtors are seeking to restructure about $1.4 billion in debt obligations and complete crucial capital investments in their hotel properties.

The Innkeepers Chapter 11 was one of the largest bankruptcy filings of 2010.

Asked what it takes for an attorney in his field to take on such cases and bring about successful resolutions in complex bankruptcies that require pleasing scores of parties seeking different ends, Sathy cited having a good reputation, intelligence, creativity, transparency and, above all, the ability to build consensus as a necessary starting point.

Trying to please as many parties as possible is crucial, but it must be balanced with an eye always toward bringing the case to a satisfactory conclusion, he said.

"It's easy to get into a litigation kind of mindset" in this field, he said. "But I think it's important to be aggressive when you need to be aggressive, and to be consensus building at all times."