Leading Lawyers Feature Article, Web Version

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By Air, By Hog, Bankruptcy
CARMEN LONSTEIN Chair Leads the Pack
by David Conway
For Carmen H. Lonstein of Baker &
McKenzie, the more things change, the
more they stay the same. “I was extremely
enthusiastic when I started practicing
corporate bankruptcy law more than 23
years ago and, three recessions later, I’m
still just as enthusiastic.”
In the high-stakes field of corporate
bankruptcy law, Lonstein has developed a
well-earned reputation among bondholders,
distressed investors and private equity
funds for being a tough, aggressive
advocate who brings not only enthusiasm
but a wide range of skills to the table, from
top-notch courtroom skills to a sharp eye
for solving complex transactional matters.
Always a quick study, over the years she
has developed experience in a wide range of
industries to meet her clients’ needs: airlines,
telecommunications, manufacturing, hotels,
commercial real estate and others.
“I love the courtroom work and love the Lonstein laughs, referring to the more than treatments, including TMJ operations and specialized type of work within bankruptcy.
transactional aspects of my practice,” says 40 portraits, still-lifes and modern paintings physical therapy to repair extensive nerve Clients want their lawyers to be strategic,
Lonstein. “The notion of having to choose hanging on her walls. “I’m too attached to damage. Yet, she made her way back to the aggressive, creative, and focused, but at
one over the other has always been them to ever consider parting with them,” she career she loved just in time for the 2001 the same time diplomatic. It takes a careful
anathema to me.” says. She is also an amateur photographer recession when her top-notch skills were in balance of these traits to get the right results.”
She typically stays involved in all aspects working on assembling a collection of high demand again. Typically, senior secured lenders are
of her representations at the urging of clients stunning photographs of the Indiana Dunes Today, Lonstein continues her corporate above the fulcrum point and Lonstein does
who find her strategic and execution skills in various seasons, which she is preparing bankruptcy practice with Baker & McKenzie, a fair amount of work for senior secured
indispensable. When asked if being a woman for a note card collection to give away as where she has the unique opportunity to use lenders as well. “This type of work is pretty
in the male-dominated field of corporate gifts to close friends and clients. “Both her fluent Spanish in traveling to far-flung straightforward given that secured lenders
bankruptcy law has been an obstacle, she activities help me relax and think creatively,” places to lecture on distressed transactions, have significant protections under the
quips “not for enlightened clients.” In fact, it she says. cross-border insolvencies and strategic Bankruptcy Code,” she says. Her clients in
is her direct, no-nonsense style that clients, Although you might never make a opportunities in complex Chapter 11 cases. this arena include large U.S. institutional
both male and female, appreciate. connection between commercial bankruptcy Most recently she has spoken to the lenders in markets including New York,
She has a reputation for being highly law and painting, don’t tell that to Lonstein. Chamber of Commerce in Guadalajara, Chicago and Florida.
demanding. “There are some downsides,” “You have to focus on what you see, and you Mexico, and to firm clients and partners in “I also represent buyers who are
Lonstein admits. “Sometimes people have to see things intensely. I think there’s Madrid and Barcelona. Very few elite law firm interested in purchasing assets from
confuse intensity and focus in women with a connection between my work and painting. attorneys have her level of experience and distressed companies,” says Lonstein. In
aggressiveness.” For large, complex cases, Corporate restructuring is above all a very accomplishments in corporate bankruptcy such cases, she typically advises buyers on
Lonstein has been known to assemble creative field. I felt that way 23 years ago work and the ability to communicate with the best strategies for structuring and
teams that must match her same level of and still feel that way,” she explains. “It’s clients at the highest levels of business and purchasing assets from a distressed
intense focus and dedication, or risk being amazing how you can view complex cases law in their native Spanish. company within a short time frame at an
left off the team on short notice. differently after a painting session.” “For the past several years, my practice optimum price with minimal exposure to
After two decades, it seems the job has focused on bond holders, equity undesirable liabilities.
manages to change enough to stay fresh. Lonstein’s Current Practice investors, statutory committees for
“No two representations are the same. It is Lonstein decided to come to Chicago in creditors or official equity committees, An International Team
never boring. I can seriously say that after the early 1990s to join Sonnenschein, Nath lenders and more creditor-side work,” Lonstein is the chair of Baker &
23 years. It truly is one of the most creative & Rosenthal after 6½ years at Greenberg Lonstein says. “Some people call this McKenzie’s financial restructuring, creditors’
fields in law.” Traurig in Miami where she first represented fulcrum work,” which she explains refers to rights and bankruptcy practice group in
debtors and secured lenders in the the point where a constituency of creditors North America, with 23-plus attorneys in
Creative Muscles Always at Work commercial real estate arena following the or equity holders may be “in or out of the New York, San Diego, Dallas, Chicago and
To stay in shape in this demanding field, ’89-’91 recession. money” depending upon the valuation of Toronto. “We have been pretty busy
Lonstein says she works on her “creativity On the way to Chicago, she was involved the company and the strategy pursued in throughout this past year. Many of our recent
muscles” with photography and painting. in a strange car accident in which 55 tons of Chapter 11—liquidation or reorganization. large transactions involve representations of
Indeed, she epitomizes the term concrete fell off a truck moving at high “In these types of representations, my job creditors, bondholders, asset purchasers
“renaissance woman.” In her “spare time,” speeds in a turn known as “dead-man’s is to make sure the fulcrum point and distressed investors,” she says. “My
she is dedicated to amateur oil painting, a curve” in Tennessee. She survived, although stakeholders are heard and value is not colleagues have also been involved in
pursuit she has followed since college as her car melted. She keeps a piece of the car wiped out by more senior stakeholders,” advising large corporate debtors in the
evidenced by the extensive paintings on her desk as a paperweight. she says. Lonstein says many investors and automotive, manufacturing and real estate
hanging in her home. The accident caused her to interrupt her creditors find themselves in need of advice industries with debt restructurings and out-
“I’m the only one collecting my art,” career for three years of intensive medical at this crucial fulcrum point. “This is a of-court workouts.”

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Baker & McKenzie has more than 170 estate projects in the late ’80s and early
insolvency practitioners in its global group ’90s,” she says.
including in the United Kingdom, Hong As a result, she spent her early years as a
Kong, Singapore, Australia, Munich and bankruptcy lawyer “cutting her teeth” on
Paris. “We do a fair amount of cross-border commercial real estate reorganizations,
work,” she says. including highly litigious, single-asset real
“Most recently, I’ve been involved in cross- estate cases involving office, hotel and
border matters involving U.S./Canada and shopping center projects; she also worked
U.S./Mexico issues. My colleagues in Europe on the largest residential merchant builder
were involved in significant international Chapter 11 cases pending in South Florida
automotive insolvency transactions while at the time.
others in San Diego have recently confirmed Almost 10 years passed before
a plan of reorganization in a cross-border commercial real estate made a strong
matter involving a Japanese company with rebound from the late ’90s to mid-2008.
U.S. subsidiaries.” “Today, even though the economic factors
Lonstein doesn’t hesitate to travel affecting commercial real estate are eerily
grueling hours to make presentations to similar, the proliferation of structured
clients and partners around the country or financing, including CMBS [commercial
in far-off jurisdictions. Domestically, she is mortgage-backed security] structures, has
busy handling matters for secured lenders dramatically changed the players in the
owed millions on failed commercial real restructuring landscape,” she says.
estate projects. She is also the lead lawyer “We are just starting to see the tip of the
for the Official Committee of Unsecured iceberg in real estate restructurings,” she
Creditors of MIG, Inc., formerly known as says with a smile. “It feels very familiar.”
Metromedia International Group. In that The second recession occurred in 2001
Chapter 11 case, pending in Delaware, the when the so-called dot-com “tech bubble”
debtor owns 46 percent of the largest burst. By the end of this period, most of
mobile telephone provider in the Republic these businesses had burned through their
of Georgia. The case is pending so Lonstein venture capital. “The tech bubble was brief
doesn’t comment except to say “we are and the market recovered relatively quickly,
engaged in vigorous litigation disputes on but we did see a fair amount of liquidations This photo of Lonstein is part of a traveling black and white photography exhibit by Jerry Kykisz, National Vietnam
behalf of creditors.” litigation and restructuring work in the Veterans Art Museum. He titled the photo “The Ceremony of Confidence” and wrote a short poem about it similar to
the theme for the other photos in the exhibit which feature “The Ceremony of Wisdom” and related themes.
It is an important time for attorneys immediate 18-month period.
practicing corporate bankruptcy law, and “The current recession is historic in depth
Lonstein’s clients need representation now and scope, sprouting from the residential reorganized in Chapter 11 were unable to as a wave of debt-to-equity conversions,”
more than ever. “Today’s economic climate sub-prime crisis that spread through the do so. Without any financing from lenders, she explains, while trying not to sound too
is one of the most interesting I have ever banking system and bloomed into a full- they had no choice but to liquidate their gleeful about the potential for restructuring
seen for corporate restructuring,” Lonstein fledged global crisis. In the United States, assets almost overnight,” Lonstein explains. work that would keep her and her team
says. “During the historic economic crisis in this recession has been a ‘triple whammy’ “This was the fate of Circuit City, Sharper busy for years.
October 2008, government bailouts and affecting the three major sources of domestic Image, Linens & Things and other household
corporate liquidations were the norm even economic growth: housing, consumer name retail companies. If there is a complete Philanthropic Activities
for the largest companies.” spending, and the automotive industry.” and utter lack of post-bankruptcy financing, Despite the hectic schedule, Lonstein
Eighteen months later, Lonstein says, In the restructuring field, headlines companies cannot afford the administrative continues to make time for the arts, one of
“Not only are there many strategic featured mega-companies filing for expense of the Chapter 11 process. The her true passions. “It’s Carmen Hernandez
opportunities for distressed investors to bankruptcy from the fall of 2008 to the end traditional model for Chapter 11 standalone Lonstein,” she emphasizes, “but that’s a
realize value, but [there are also] so many of 2009, including Lehman Brothers, reorganizations just about disappeared mouthful in bankruptcy court, so I shortened
over-leveraged companies [that] have Chrysler and GM, as well as government during this timeframe,” she says. it years ago and it stuck.” Born of Puerto
merely deferred their problems with bailouts of banks and companies posing So far, economists are still debating Rican parents, she is on the board of the
extensions, that a new wave of systemic risks (AIG, Bear Stearns). whether the current Great Recession ended Institute of Puerto Rican Arts and Culture,
restructurings is likely in our near future.” “Lending virtually disappeared in the in the first half of 2010 or whether the the only museum of its kind in the continental
second half of 2008 and the first quarter of country is in the midst of a sluggish United States. “It’s right here in Chicago at
The Three Recessions 2009, resulting in a broad range of recovery. The first half of 2009 included a the historic Humboldt Park Stables. It is
Lonstein has seen three recessions during companies facing liquidity crises and the surge of high-yield debt refinancings for about 75 percent complete, and we hope to
the course of her 23-year practice, and each inability to refinance their debts or meet large companies with access to debt have a grand opening this year,” she says
recession has brought different challenges working capital needs,” says Lonstein. markets. Many, however, especially in the with pride.
for her clients. The first recession was from Without working capital or lending, middle-market sector, are still struggling “It is a showcase for Puerto Rican arts and
1989 to 1991, marked by the infamous companies were left in dire straits with with overleveraged balance sheets. culture, as well as educational programming.
Black Monday stock collapse in October nowhere to turn. “The lack of credit in turn No one questions that repercussions will For me, it is a way to stay connected to my
1987, where the stock market took a 22.6 resulted in a rash of bankruptcy liquidations remain for a long time as the effects of the roots and make a contribution to the Puerto
percent plunge. Even though the stock and a contagion of section 363 sales for Great Recession continue to reverberate Rican community in Chicago.” She later
market rebounded rather quickly, the lasting many companies unable to obtain debtor- throughout the housing, auto, commercial adds, “Anybody who is Latin or supports
effects were felt elsewhere. in-possession financing. It also led to the real estate and banking sectors. Latin American art and is reading this article
“That recession was brought about by rise of the pre-packaged bankruptcy for the “Companies are still highly over-leveraged should please send IPRAC a check,” she
the crisis in the savings and loan segment lucky few companies able to reach deals in the United States with more than $700 smiles. It is clear she takes her responsibility
of the banking sector,” Lonstein explains. with their creditors to restructure their debts billion in leveraged debt extended to 2012 to give back seriously.
“There were substantial downward pressures quickly,” says Lonstein. and later,” says Lonstein. Her love for the arts extends to theatre,
on commercial real estate values, and a “Unlike prior recessions, where a Chapter “If the economic recovery remains and she is a big fan of the Goodman
pullback from foreign lenders in the U.S. 11 filing was the worst fate a company could sluggish with tight liquidity, there may be a Theatre’s biennial Latino Theatre Festival.
market at the time, causing a lack of face, in late 2008 and early 2009 many steep rise in corporate bankruptcies for “The Goodman is terrific and I just love their
liquidity for many large commercial real companies that would have previously private-equity-backed companies, as well work. I’m proud to say I’ve talked Baker &

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McKenzie into supporting the Goodman Neville, were both role models for me. I was
as well.” lucky to have their support and
But it seems her true love is all chrome encouragement in applying to law schools
and leather. Lonstein lights up when she across the country.” They seemed to have
begins to talk about riding her motorcycle, correctly surmised that the hard-working,
a shiny, silver and black 2003 “100th straight-A student volunteering in their
Anniversary Edition” Softail Harley Davidson office had some potential.
Heritage Classic, with chrome-studded Lonstein admits she was actually
black saddlebags. When I tell her it looks considering another career for a long while—
ready for some long road trips, she gushes, in broadcasting. She was majoring in
“The bags and the windshield come off and communications and wanted to become a
it becomes a sportier version — so it’s like broadcast journalist, but she was also being
two bikes in one.” encouraged to explore the law school
She has been riding motorcycles since the option. “While working in the D.A.’s press
mid-’90s. “It’s fun and I enjoy it immensely,” office, I told them I was going into
says Lonstein. “The Midwest is so beautiful, broadcasting, and people thought I should—
and being on a motorcycle is a great way to surprise, surprise — go to law school
see it up close.” instead.” Law school remained on the back
Lonstein has explored a good chunk of burner at the end of her senior year.
the Midwest already, typically logging 3,000 “I actually got an offer (for $13,000 a year)
to 4,000 miles on long road trips over from CBS radio,” says Lonstein. “I couldn’t
summer weekends whenever possible. She imagine living in New York on that because
confesses she missed her target last even back in 1984 that wasn’t a lot of
summer and this summer looks bleak as money.” However, she still liked the idea of
well. She does yearn to see more. “I’ve working her way up the ladder and then
been on trips to northern Wisconsin and getting a shot at making it big in the business.
northern Michigan short of Traverse City. After being accepted on scholarship to
My goal this summer is to take the bike to some of the best law schools in the country
Traverse City. I’ve also ridden north of including Georgetown University Law School
Madison. Wisconsin is very beautiful.” and New York University Law School,
Some people would feel nervous being however, she decided she could not turn
exposed on a motorcycle. But Lonstein says down the opportunity to go to law school.
the danger is manageable with focus, skill “Not only was NYU a top law school, but I
and responsible driving. “It is true you are would be living in the Village and I was still
more vulnerable, but at the same time you in love with New York,” she says.
do feel like your vulnerability is protected by She made the most of her time at NYU.
your level of competence. You do it with a The classes she took there would shape her
level of competence and the discipline it legal career, providing a foundation for her
deserves. I love the intensity,” she beams. work in corporate bankruptcy. “I took
“I’ve celebrated the Fourth of July on bankruptcy classes with Larry King, who
Main Street, U.S.A., and I always discover basically wrote the Bankruptcy Code,” says
something new when I’m out there on a Lonstein. She had another class with
road trip,” she says. “I have very good Michael Cook, the lead lawyer in the A.H.
friends that I enjoy exploring with, but most Robbins mass torts case involving the
importantly, it is the only time that no one Dalkon Shield. And Harvey Miller, considered
can reach me. My Blackberry is in the a guru in Chapter 11 restructurings, was her
saddlebag. That’s definitely a benefit.” Chapter 11 class teacher. This was a lineup
she could not resist. “I know this sounds so
Humble Background nerdy, but my professors really fired me up
She comes from a humble background to practice in this field,” she says.
with parents who had limited education and “Corporate bankruptcy was in my blood
spoke little English, but believed in her after law school.”
talents and potential. Lonstein belonged to After law school, she went to Florida
the first generation in her family to speak where her fiancé at the time lived. “I went to
English fluently and graduate from high work for Greenberg Traurig in Miami in its
school, college and, of course, law school. bankruptcy practice. At the time it was the
Except for a four-year period when her best firm in Florida. I had the opportunity to
family lived in the small town of Comerio, work for seven years for the head of the
Puerto Rico, she lived in Massachusetts bankruptcy practice group, Mark Bloom. He
until high school, when she moved to was a terrific mentor; there is no doubt that
Rhode Island. I’ve benefited from having some excellent
“I basically worked my way through mentors along the way during my career,”
college, and through various scholarships, she says. I
patched my way through both college and
law school,” says Lonstein. One of those
jobs changed her life when she was
working as an intern with the district
attorney’s office of Brooklyn under District
Attorney Elizabeth Holtzman. Lonstein says,
“She and her deputy press secretary, Mara
This article originally appeared in Leading Lawyers Magazine—Business Edition for 2010 and has been reprinted with permission. © 2010 Law Bulletin Publishing Co.