The financial recovery plan that kept Harrisburg, Pa., out of bankruptcy serves as a blueprint for restructurings in the capital markets, according to its legal mastermind.
"If a restructuring is to work, it must truly be a fair restructuring and keep the creditors comfortable. That's key to the whole municipal debt market," said Mark Kaufman, a partner in the litigation department at McKenna Long & Aldridge LLP and lead counsel to the Harrisburg receivership team.
"My view is that the capital markets and the cities need to work with each other and not be point-counterpoint."
For its Harrisburg deal, McKenna Long's municipal reform and innovation practice last month received a Turnaround Atlas award for out-of-court restructuring of the year from the organization Global M&A Network. In addition, Kaufman was selected as mid-market restructuring lawyer of the Year and will also be individually listed as one of the top 100 restructuring and turnaround professionals worldwide.
Kaufman received his awards in Chicago.
The so-called Harrisburg Strong recovery plan, crafted by state-appointed receiver William Lynch's advisory team, erased roughly $600 million of debt and kept Pennsylvania's 49,000-population capital out of bankruptcy.
The plan hinged on the sale of the city's incinerator - long the symbol Harrisburg's debt crisis because of debt financing overruns to a retrofit project - to the Lancaster County Solid Waste Management Authority, and a long-term lease of parking assets from the city and the Harrisburg Parking Authority to the Pennsylvania Economic Development Financing Authority.
It also includes four years of balanced city budgets and other measures designed to restore Harrisburg's reputation in the capital markets.
Incinerator and parking bond sales for both closed in late December.
"[Kaufman] really was the architect of this whole approval, and he implemented it impeccably," Steven Goldfield, an attorney with Public Resources Advisory Group of Media, Pa. and the lead financial advisor to the recovery team, said in Harrisburg moments after Commonwealth Court of Pennsylvania Judge Bonnie Brigance Leadbetter approved the plan last Sept. 19.
The court vacated the receivership on March 1.
The City Council filed for Chapter 9 in October 2011, but federal bankruptcy Judge Mary France nullified it one month later. State receivership followed.
"If the out-of-court solution is a workable option for financially challenged cities, it is certainly a preferred course of action. It is certain, cheaper and faster than a Chapter 9 filing,' said Kaufman, a Cornell University and Harvard Law School graduate who has worked at McKenna Long for 27 years.
