Dec. 10 (Bloomberg) -- Thacher Proffitt & Wood, a 160- year-old New York law firm with about 200 lawyers, is subleasing its New York headquarters’ office space.

The firm, which fired at least two dozen lawyers and has seen at least as many attorneys depart for other firms in the past year, put all five floors of its New York headquarters at Two World Financial Center up for sublease, according to data from CoStar Group Inc., a Bethesda, Maryland-based real estate data service. Thacher Proffitt put the 30th floor up for sublease in July, the 29th floor in August and floors 26 to 28 last month.

In October, the law firm closed its White Plains, New York, office. It’s faced a decline in business since the U.S. subprime-mortgage market began to collapse, halting work in structured finance and real estate, two of its largest practices. In November 2007, it said it would cut 24 lawyers in those practice areas.

Lianne Cospito, a Thacher Proffitt spokeswoman, declined to comment on whether the firm is dissolving and said Chairman Paul Tvetenstrand wouldn’t be willing to comment. He didn’t respond to a phone call.

The firm, founded in 1848 at 29 Wall Street, signed a 15-year lease to rent offices in the World Financial Center in November 2002. The rental agreement started as a sublease from Merrill Lynch & Co., now owned by Bank of America Corp., and converts in 10 years, at the end of Merrill’s lease, to a direct lease with the owner, Brookfield Properties Corp., the law firm said at the time.

Financial Center

Thacher Proffitt was one of the first firms to take space at the Financial Center in the 14 months following the Sept. 11 terrorist attack. Prior to the attack, it had an office in the south tower of the World Trade Center.

At least two large law firms, San Francisco-based Thelen and Heller Ehrman, have collapsed in the past three months from a lack of business. Heller Ehrman saw its litigation work dry up when the firm settled several large cases in 2007. Thelen, like Thacher Proffitt, relied heavily on structured finance work.

Both firms defaulted on their primary credit agreements because of a provision that restricts the number of partners who may depart the firm within a 12-month period.

Cut Lawyers

Dozens of law firms have cut lawyers and staff in the past year, mainly in structured finance and real estate. They include New York’s Dewey & LeBoeuf, Proskauer Rose, White & Case and Cadwalader, Wickersham & Taft; San Francisco’s Orrick, Herrington & Sutcliffe; and Chicago’s Mayer Brown, Katten Muchin Rosenman and Sonnenschein, Nath & Rosenthal.

Structured finance lawyers advise clients on complex transactions that transfer risk, such as credit derivatives and the securitization of mortgages.

Thacher Proffitt won’t give bonuses to its staff this year because of the economic decline, Tvetenstrand said in an internal memo last month. The memo was posted by the legal blog Above the Law.

“The past year has posed many challenges for the firm given the downturn in the economic climate which has affected our clients and ultimately the firm,” Tvetenstrand said in the memo. “Unfortunately given this continuing downturn the firm will not be able to pay any bonuses or year end service awards this year.”

In July, Tvetenstrand sent a memo to the firm denying a rumor on Above the Law that it was dissolving.

‘Changing Market’

“Like many firms in this unusual market we have had to take steps to adjust to the credit crisis,” Tvetenstrand said in the memo, also posted on the legal blog. “From where we stand, our business is improving and our practices are adjusting to the changing market. We are optimistic about the future and look forward to working together for many years to come.”

Thacher Proffitt had revenue of $194.5 million in 2007, up 1.6 percent from 2006, according to the American Lawyer, a trade publication. Partners made $1 million on average last year. The firm also has a nine-lawyer Washington office and one in Summit, New Jersey, with six lawyers, according to its Web site.

To contact the reporters on this story: Lindsay Fortado in New York at lfortado@bloomberg.net; David Levitt in New York at dlevitt@bloomberg.net.

Last Updated: December 10, 2008 20:55 EST