Delaware, NY still attract biggest bankruptcies

By Emily Chasan - Analysis

NEW YORK (Reuters) - In the newest wave of corporate bankruptcies, courts in New York City and Delaware are still proving the most attractive places for companies to wade through troubling times.

Half of all public company bankruptcy cases this year have been filed in Delaware and the Southern District of New York, as tougher bankruptcy rules and tight credit markets have put a premium on getting through the bankruptcy process more quickly, lawyers say.

The two courts have been increasingly popular for most of the last two decades and while some courts in other regions, like Chicago, have tried to attract more cases, most attorneys find they would still rather rely on the experience of judges in New York and Delaware, where they have better expectations of what kind of decisions will be made.

"The two preferred venues are New York and Wilmington and it is hard to say if one has an advantage over the other," said David Heiman, a bankruptcy attorney at Jones Day in Cleveland.

The choice of judge and court is often seen as particularly important in bankruptcy cases where there are no juries and limited ability to appeal the decisions made by that judge.

On top of that, the credit crisis has made it more difficult to get bankruptcy exit financing and the bankruptcy law reforms that took effect at the end of 2004 have pushed companies to get out of court sooner, making it crucial for lawyers to find judges used to handling complex cases.

"If you're going to do a pre-negotiated, or pre-packaged bankruptcy, you've got to go to an experienced court," said Roger Frankel, a bankruptcy attorney at the Orrick law firm in New York.

In the informal process, often called "forum shopping," lawyers try to select a court venue that could provide the most beneficial outcome for their clients, usually basing their choice on the track records and reputations of judges.