The Spector of bankruptcy.

The Spector of bankruptcy

A man where the action is, with a ticking bomb behind his office desk and a goldbrick on it: Bruce Spector, 48, chairman of the executive committee at Stutman, Treister & Glatt, one of the nation's leading bankruptcy law firms.

"In the decade of the 1980s everybody leveraged up," says Spector, toying with a gold bar, a gift from Drexel Burnham Lambert. Engraved on the bar are the words, "High Yield Securities - Better Than Gold."

So it was in the 1980s, but this decade is different, says Spector. "In the 1990s, it is almost chic to declare Chapter 11 bankruptcy. We are growing. Everyday I open up the papers I see another major bankruptcy or restructuring."

From across the country, corporate chieftains are making the trek to Stutman, Treister's Mid-Wilshire offices, seeking advice on how to go bankrupt, or on how take steps - such as restructuring corporate debt - to avoid it.

Ranking among Stutman, Treister's clients are Campeau USA, the American operations of the Toronto-based retailing giant, Public Services of New Hampshire, the utility with nuclear power problems, and Los Angeles-based Northview Corp., owner of the Vagabond motel chain.

On the other hand, in the gigantic Resorts International Inc. debacle, Stutman, Treister is representing a bondholders' committee and is also representing the chairman of the bondholders' committee in the discount retailer Revco Inc. bankruptcy.

But even before going bankrupt became a financial fad, Spector took on as a client Sanford Sigoloff, the former chairman, chief executive and television pitchman at Wickes Cos.

The Santa Monica-based conglomerate Wickes declared Chapter 11 in 1982, and emerged from it in 1984. At the time, Sigoloff was hailed as a turnaround genius.

In gratitude to Spector - who motored to Wickes for regular Saturday morning meetings after a hard week's work - Sigoloff bestowed upon him three sticks of dynamite wired to a clock. A small bronze plaque on the ersatz TNT acclaims Spector's work in "defusing ticking bombs."

At one point, Spector worked so regularly for Sigoloff that "Spector actually had an office at Wickes," recalls Michael Sitrick, former Wickes senior vice president and Sigoloff's right-hand man. "You just cannot do a bankruptcy without a good bankruptcy lawyer. And he is among the best."

Spector's response? "I was just glad we didn't work Sundays too, `he recalls, a reference to Sigoloff's famed work habits.

Spector, who has spent his entire professional life at Stutman, Treister, says the Wickes case amplified a central fact of a bankruptcy: That the guts of a successful bankruptcy or out-of-court restructuring are found on the negotiating table - in the deals struck with creditors - not in the formal documents.

"As important as knowing the law," says Spector, "is that you have to master the art of the practical."

The "art" concerns persuading a company's creditors - which can include banks, bondholders, the IRS, the suppliers and dozens of other groups - that accepting less than 100 cents on the dollar and a slower schedule of repayments is a good deal. "You have got to defuse the bombs," Spector says.

Too, some creditors can be enticed by offering to trade equity - ownership of part of a bankruptcy company - for debt, notes Spector.

Because bankruptcy has become negotiation, Spector has re-institutionalized an all-hands Friday luncheon meeting, something that had been a fading tradition at the 40-year-old Stutman, Treister firm.

"One of the things I insisted on was making the Friday luncheon meeting mandatory," says Spector, speaking of Stutman, Treister's crew of 27 lawyers. "It had been dying out. But I wanted the lawyers to talk to each other, to tell each other what happened in negotiations, what are the latest wrinkles. The important stuff you won't find in the law books."

What makes the negotiations even possible are some 12-year-old changes in federal bankruptcy law. The modern-day bankruptcy declaration is a lot more tolerable - certainly to management, if not for creditors - due to some 1978 rewrites of the federal bankruptcy code authored by Ken Klee and Richard Levin, then staff counsel in U.S. Congress but now partners of Spector's at Stutman Treister.

"The big change was to a presumption of a debtor-in-possession," says Spector, lapsing into lawyer-speak. That means the owners and managers of a firm can declare Chapter 11 bankruptcy - a "reorganization" - and keep the reins of a company and their jobs.

"Before 1978, when a large public company declared bankruptcy, you had a trustee take over stewardship of a company," recalls Spector. "Now how many managers are going to go for that?"

But today, the advantages of going into bankruptcy are many, including an immediate stay on all creditor claims, and 120 days for management to come up with a reorganization plan. "And, in major cases, we always get more than 120 days to come up with that plan," observes Spector.

With the changes in the law, declaring bankruptcy today is just another option in the business big leagues, says Spector. He notes that the minimum size bankruptcy Stutman, Treister will handle, generally speaking, has grown to $25 million.

"It is my impression that in the level of big business I deal in a bankruptcy proceeding is viewed as just another of the tools to solve a problem," says Spector. "I don't think there is a stigma there anymore." Bondholders, take note.

The stock of being a bankruptcy attorney has risen much since Spector landed with Stutman, Treister in 1967, fresh out of UCLA law school.

He had been an economics undergraduate major at the University of Southern California, after spending his youth in many parts of the country. "My father was in the produce business, so we followed the business around. I lived in El Centro, Fresno, Phoenix, anywhere the crops were," remembers Spector.

After graduating second in his law class at UCLA, Spector signed on with Stutman, Treister, interning there on the advice of Stephen Feldman, who was already working there.

Back then, the bankruptcy practice was somewhat declasse, and downtown Los Angeles' largest firms - the Gibson, Dunn & Crutchers, the O'Melveny & Myers - regularly referred such cases to Stutman, Treister, rather than get their own hands dirty, recalls Spector. "But I loved the people at Stutman, and the practice. I had a wife and a child to support, so I stayed on," says Spector. Too, founders Stutman and Treister had stellar Ivy League credentials, as did other lawyers in the shop. "They really lent a lot of credibility to the bankruptcy craft," says Spector.

Even today, the largest firms, with the exception of Latham & Watkins, are weak in the practice, as exemplified by the Los Angeles offices of Skadden, Arps, Slate, Meagher & Flom, which has but a lone bankruptcy specialist under roof.

Partly as a result of the somewhat plebian background of the bankruptcy bar, Stutman, Treister is the nation's largest firm devoted to bankruptcy, insolvencies and informal "work-outs" between corporate debtors and creditors.

The National Law Journal, in an issue coming out this week, recognizes six Stutman, Treister lawyers - including Spector - as being tops in the profession nationwide, and calls the firm a team of "all-stars."

With recognition, Stutman, Treister has begun charging up to $400 an hour - rates nearly as pricey as any.

But the gold bar from Drexel Burnham was not payment-in-kind, says Spector. "It's not real," he says, holding the bar up in the light, which reveals it to be only gold-plated. "I got it for speaking at the last Predator's Ball."