Public Finance in New York City Biglaw

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From Law Hub, this is I Am The Law, a podcast where we talk with lawyers about their jobs to shed light on how they fit into the larger legal ecosystem. In this episode, Kyle McEntee interviews a finance associate in New York City, who spent the first few years of her career helping public entities borrow money.

Kyle McEntee:

We're joined today by Joan Kerecz, a 2013 graduate of Duke University School of Law. Joan, you started at the New York office of Orrick, Herrington and Sutcliffe in 2013 as a public finance associate. You actually left Orrick just a few weeks ago. Now we'll talk about your transition to Freed Frank, another large New York City law firm. But first, tell us what public finance is.

Joan Kerecz:

It's basically when the government or a nonprofit or a governmental agency wants to either issue debt through the use of bonds or private placement, and it's a just specific type of finance.

Kyle McEntee:

Basically, it's when some kind of public entity wants to raise revenue and usually through the securities market.

Joan Kerecz:

Right.

Kyle McEntee:

Let's unpack that a little bit. You said a public entity. So it could be government, it could be university, hospital, some kind of non-profit entity. But generally speaking, governments get their money in two key ways. We have it through revenue and borrowing. With the revenue side, it's taxes and non-tax revenue, and then the borrowing side. When you mentioned issuing bonds, that's what we're referring to.

Joan Kerecz:

It's going out to the market. It's saying, "Please lend me X amount of money to build this new library or to build this new bridge, and in 20 or 30 years I will pay you back."

Kyle McEntee:

Then a public finance lawyer like you, it's just someone who's involved in any of those types of transactions. Let's go through the lawyer's role in these transactions by way of example. Let's say a city needs 50 million to do construction on new roads. And some of this money, it'll come from city taxes, some will come from the state, and say 30 million of that $50 million will come from borrowing because interest rates are really low. What has been your role as a junior associate in those transactions?

Joan Kerecz:

I've had two main roles as bond counsel and as underwriters counsel. And the only thing that you need in a public finance deal for it to be legal is bond counsel. But usually, most of the deals have more than that role just because they should.

Kyle McEntee:

If a city wants to borrow money and they're doing it by issuing bonds and that money comes from banks... And those banks are underwriters, correct?

Joan Kerecz:

Mm-hmm.

Kyle McEntee:

Then what's your role when you're representing either an underwriter or a group of underwriters for a deal like this?

Joan Kerecz:

If they're issuing bonds to the public market, they need to issue a disclosure statement, which tells the market the type of entity that they are, the properties of the bonds, the risks of the bonds, any litigation history, the ratings, any tax issues. And it needs to have an opinion from bond counsel saying that these bonds are legal debt. If you're underwriters counsel, you're prepping that statement usually. To prep that statement, you need to do a lot of diligence prior to it at one point or another. If it's an issuer that issues debt very frequently, then you probably are only going to be doing diligence maybe once or twice a year just because it's a more continual thing. If it's an issuer that doesn't issue that as frequently, then you're doing diligence from the last time that they issued. And basically in the diligence, you're looking for anything that should be disclosed in the official statement.

You're reading through loan agreements, you're reading through mortgages, you're reading through their litigation history, you're reading through the minutes of their board, you're reading through audits. You're just basically looking for anything that should be in the document that's going to bondholders saying, "Here's the debt, here's what you should know." That's your main role as underwriters counsel. There's other roles as well, such as you will have to issue an opinion to your client. You will have to usually prep the bond purchase agreement for the underwriters, but your main role is to make sure that what you're selling to the market is accurately disclosed.

Kyle McEntee:

When you're saying diligence, that's also known as due diligence. And this is basically just you reading over a lot of different things to identify risks for the market that they should know about.

Joan Kerecz:

Right. And identify further things that you need to ask, additional documents that you need to request. It's really just making sure that you're protecting your client, that they're not buying something that the issuer can't pay back. And also protecting the secondary market who they're selling it to, that the bondholders aren't going to be at risk. There's no risk that can't be disclosed in the offering document. You just need to make sure it's disclosed. It's less that, wow, there's this huge thing that's going to prevent us from doing the deal. That might happen, but you can still go to the market with any huge risk just as long as you disclose it and people know what they're buying.

Kyle McEntee:

Then as bond counsel, what are the kind of things you're looking for to ensure that the city is legally okay to issue the debt?

Joan Kerecz:

As bond counsel, you're making sure that the debt is truly authorized, that they had the authority to issue it. As bond counsel, you're doing things like checking the bylaws to make sure how many board members had to approve the resolution that said it was okay to issue this debt because if the amount of board members weren't there to approve that resolution, the debt's not valid. And if the debt's not valid and they don't repay it, then there lacks the authority to go after them. You're doing things like reading through the bylaws, you're doing things like prepping the resolutions, you're doing things like making sure the entity is in good standing. If it's a non-for-profit, it needs to be a 501(c)(3). That's where the tax lawyers come into the picture.

Kyle McEntee:

With all this money and so many different parties, is it a fairly contentious practice?

Joan Kerecz:

No, it's very friendly. A lot of the lawyers that have been in there have been practicing it for their entire careers. It's a very friendly field. And people want to make deals work, and people also really love their work and want to make sure that a deal is done correctly.

Kyle McEntee:

As far as big law is concerned, and I'm defining big law as roughly 100 or more attorneys at a firm, you came out at a pretty good time in 2013, but is it what you wanted to do when you started law school?

Joan Kerecz:

When I started law school, I wanted to go into criminal law but then change my mind after a couple of months.

Kyle McEntee:

What is it that caused you to change that career path from criminal law to pursuing a big firm job?

Joan Kerecz:

Well, I changed my mind about doing litigation versus transactional. And if you're doing transactional law, it's harder to do outside of the biglaw spectrum, especially in 2011 where there were a lot fewer jobs. And the only sector that was significantly hiring was big law. My favorite course 1L year was contracts. And I slowly, after a summer of practicing litigation, realized that I wanted to do transactional law. That's what influenced me. But I think a lot of people in law school, especially in my year when everyone is talking about the big law world, I think there were a lot of kids that came into law school intending to do public interest or something like that. And then OCI is definitely a big sweeping process that maybe some kids get swept up in and go into it because of that.

Kyle McEntee:

I guess generally there's a bit of a herd mentality at the more elite schools. I went to Vanderbilt and I definitely saw this, and I think as you move up the food chain as measured by the percentage of people going into big firm jobs, there's probably more and more and more of that kind of herd mentality. And then as you pointed out, wrapped up in that it's the reality of that's where a lot of the jobs are, especially when law school costs so much money and people want to repay their debt.

Joan Kerecz:

Right. I definitely saw that happening with some of my classmates. For me, it was more of a realization of wanting to do transactional law and what's the best way I can position myself to do that at a high level. But a lot of my classmates, everyone's going into this and it gets very competitive and I saw people get more swept up in it when they wanted to do public interest in their first year of law school.

Kyle McEntee:

What do you think it is that's doing the actual attraction or is it just that everyone else is doing it?

Joan Kerecz:

It's also the easiest sector in terms of they're coming to your law school. It's not the easiest sector to break into, but in terms of applying, when they're going after the big law schools, they're coming to your law school. There's 20 or 30 of them, you're signing up for interviews and everyone else is doing it. It's a very straightforward path into having a job.

Kyle McEntee:

Among your peers, is it your sense that they're looking to eventually make partner and everything that comes along with that or something else?

Joan Kerecz:

I think it depends peer by peer. Some of my peers are thinking about partner. Some of my peers are thinking about going in-house. Some of my peers have been at a big law firm for a little bit and are going to clerk. I do think that a big law firm is a good way of... I think it's an excellent place to learn, and I think you can figure out what you like about what you're doing and what you don't like about what you're doing. I'm sure that's actually probably true of any first law job, but I can only speak to big law firms that it is nice to be surrounded by a lot of people. Trying to figure out how they want to carve their career out is basically what you're doing. It does set you up for a lot of good options that maybe would've been harder to break into outside of the big law world.

Kyle McEntee:

Yeah, I actually think that's significantly underestimated by people when they're looking at the certain jobs that they find pretty cool. And you look at who ends up in those jobs, it's people who started at the big firms.

Joan Kerecz:

Yeah. I think there's a respect that comes towards people that were working at big law firms that whether it's validated or not, I think there is a little bit of a perception from coming from big law that you survived.

Kyle McEntee:

Sounds like the large firm life is really a lot about trade-offs. Can you talk to us about how you view those trade-offs personally for you?

Joan Kerecz:

I really liked my old group. I was very happy there. The trade-offs came from being trained by some of the best lawyers, in my opinion, in public finance in the country. And I learned a lot and I worked with really great people and I was doing deals that other law firms weren't doing. And the trade-off comes from picking up the skills that you need to pick up. In terms of work-life balance, any big law firm is going to be a little tough with that. But if you're with a good group of people, they're usually pretty understanding in terms of really important things that come up. And I worked with a great group.

Kyle McEntee:

When you're looking at a firm to go work for, how can someone look at the firm and maybe in particular the group they're considering an offer from and identify the people that might respect their time more or might be more forgiving when something comes up?

Joan Kerecz:

It's not easy. I think just you have a summer associate experience usually. Sometimes you don't. If you do, you can get a sense during the summer how the different groups are. And it's also a balance of what you want in terms of exit options. Some people are perfectly happy to work crazy hours in M and A group because they know that it's going to be two or three years of really bad hours, but at the end of the day, they're going to get the 10:00 to 6:00 job at a bank. It is a trade-off. It's trying to figure out exactly what you want your career to look like and how you can position yourself best for what you want.

And it's not easy when you're a second-year law student. At least at my old firm, that's how we used to rank our practices. Because it's hard to know what you want until you start practicing. Look at the groups and look at the associates and look at what their lives are and see if that's what you want. And look at when associates leave from a certain group where they go and see if that's what you want.

Kyle McEntee:

Let's talk about your new firm, Freed Frank, you literally just started last week. What made you switch firms after just two years?

Joan Kerecz:

I really loved my old firm and I really loved my old group, and I did enjoy what I was doing, but I was very specialized in public finance law. And then I wanted to try general finance practice just to acquire some additional skills and see what some other deals were like.

Kyle McEntee:

Why after two years did you make the transition instead of say three or four or five years?

Joan Kerecz:

The market was pretty hot, and I was worried that if I stayed in public for another couple of years, it would've been harder to try out another field and I wanted to try out another finance field. I think if I waited a couple of years, it would've been a little bit harder to make the switch that I was thinking about making. And that was really what drove me.

Kyle McEntee:

Well, now you have a really fun new opportunity ahead of you.

Joan Kerecz:

Yeah, I'm excited about it. I've been working with some really great people so far and it's exciting.

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