JD/MBA Students Honored for Scholarship on Debtor-in-Possession Financing
Two University of Chicago JD/MBA students’ scholarship on bankruptcy law was honored recently with a national award for paper they wrote about debtor-in-possession financing and the credit crisis.
Nikhil Abraham, ’11, and Aditya Habbu, ’10, were recognized by Turnaround Management Association in the nonprofit’s Carl Marks Student Paper Competition. The award was given as the two make strides in pursuit of academic scholarship.
Habbu will teach a class as an adjunct faculty member at Fordham Law School next semester while he continues clerking for a federal bankruptcy judge. Meanwhile, the Law School has awarded Abraham a Kauffman Fellowship to write a paper on venture capital and entrepreneurship. Abraham was working under the Law School’s Olin Student Fellowship when he and Habbu wrote their award-winning paper for Turnaround Management Association’s national student competition. TMA, an international nonprofit dedicated to corporate renewal and turnaround management, selected the students’ paper “The Death of Emergence” as the best in the theoretical/conceptual category.
“With the Kaufman and the Olin, and the faculty support that goes into each of those fellowships, the Law School has been phenomenal in creating an environment that helps students become scholars, contributing to the discussion at a high level,” Abraham said.
Habbu and Abraham were students together in the University of Chicago's JD/MBA program when they wrote the paper. Abraham said a major factor in building his confidence to apply for the competition was receiving the Olin Fellowship and participating in the Law and Economics Workshop. Olin Fellowships are available to top second- and third-year law students who show a grounded interest in and commitment to the study of law and economics.
“Participating in the workshop and seeing faculty critique scholarly papers helped us write a better paper,” Abraham said.
The two also won a $5,000 grant from the TMA's Chicago chapter to write the paper and tailored it for entry in the national competition. They were awarded $3,000 for winning. Students in the University of Chicago’s Booth School of Business have placed twice in the competition in the past, including a first-place win in 2005. Abraham and Habbu are the first Chicago Law students to be recognized.
“The grant money from the TMA made this possible,” Habbu said. “It is vital that law and business students keep applying for this money and entering this contest.”
In their paper “The Death of Emergence,” the two found that debtors that secured DIP loans after the credit crisis hit were more likely to be sold than to emerge from bankruptcy successfully. To write it, the two spent months collecting DIP lending data through news sources, DIP databases, court filings, and Lexis and Westlaw. Then they painstakingly coded each variable of the data in order to run stastical/regression analysis. “It took hours and days to run all this analysis then recheck it,” Habbu said. “Professor Douglas Baird provided fantastic insight along the way to ensure our data was saying what we thought it was saying.”
“Even after we found a generalized database, we spent time reviewing the original court documents to understand how the interest rate and other loan features were structured,” Abraham said.
Their research uncovered a significant difference between bankruptcy successes and failures before and after the credit crisis for those debtors that sought DIP loans. Those businesses were less likely to emerge from bankrupcy – and were more likely to be sold – in post-crisis world.
As they wrote in “The Death of Emergence”: “Companies who can obtain a DIP loan in these turbulent economic times are the most likely to be strong companies who are merely suffering from an overly onerous debt load. If even these companies are no longer heading towards emergence, we believe this is strong evidence that emergence is no longer the end goal of the bankruptcy process.”
After graduating in June, Habbu left Chicago to clerk for Judge Robert E. Gerber in U.S. Bankruptcy Court for the Southern District of New York. In the spring, he will teach “Bankruptcy Valuation, Hedge Fund Participation, and Modern Trends in Restructuring Litigation” at Fordham Law School, a course that combines the valuation skills he learned at the Booth School of Business with legal skills of the Law School.
“I would clearly not have been possible for me to design and be allowed to teach such a course if not for the incredible education I received from both programs,” he said.