Cadwalader law firm boosts hires for distressed debt

By Walden Siew

NEW YORK, Sept 20 (Reuters) - Legal firm Cadwalader, Wickersham & Taft has hired a record number of attorneys this year in its financial restructuring group and plans to increase staffing in London to handle distressed debt litigation, its chairman said on Thursday.

Cadwalader, whose clients include Bear Stearns BSC.N, Credit Suisse (CSGN.VX) and Northwest Airlines Corp NWA.N, added six new attorneys this week. The firm hired four new partners and eight associates in March, in addition to new hires in Washington, D.C., this year.

The moves come after a slowdown in the U.S. housing market has led to defaults on high-risk subprime mortgages that hit Wall Street's banks and global markets this summer. Litigation against lenders and banks stemming from subprime debt is sparking a ramp-up of legal teams girding for more bankruptcies and restructurings.

Cravath Swaine & Moore, a leading corporate law firm, also recently created a bankruptcy practice and hired a top restructuring lawyer to run it.

"We have been extremely focused on building up the bandwidth of the group," Bruce Zirinsky, chairman of Cadwalader's 60-member financial restructuring group, said in an interview. "We've also seen business pick up in the London market since July."

Last week, U.K. mortgage lender Northern Rock NRK.L sought emergency funding from the Bank of England, to alleviate the first run on a major British bank in living memory. Thousands of Britons lined up to pull their savings out of Britain's fifth-biggest mortgage lender.

Regarding the Federal Reserve's decision on Tuesday to cut benchmark U.S. interest rates by 50 basis points, Zirinsky said the move provided a psychological boost, benefiting stocks but it may have a short-term impact on new bond sales.

"What people have here is a breathing spell to sort some things out," he said. "It's going to be more expensive to do business and some companies are going to fall into distressed situations."

Karen Gelernt, a partner in the firm's capital markets group, said it was important for firms advising clients to practice proper due diligence, including checking public documents, reviewing rating agency reports and visiting the company in person.

"One of the best ways to assess a counterparty is to show up and see what's going on," Gelernt said during a briefing to attorneys and clients on Thursday. "It amazes me that some people don't think of that."

The advice doesn't come without some risk. About a decade ago, an attorney visited a company to do due diligence and somebody slashed the attorney's car tires, she said.

"Make sure you have spares," Gelernt said.