May 1 (Bloomberg) -- Dewey & LeBoeuf LLP intends to stave off bankruptcy by collecting bills to pay lenders and transferring employees and property to other firms, a member of the firm’s chairman’s office said.
The New York law firm, which has lost more than 80 lawyers in recent weeks, is near an agreement with banks about extending its line of credit for a couple of weeks, a person familiar with the talks said. Lenders are being co-operative and the deadline isn’t a problem, said Martin Bienenstock, one of four members of Dewey’s chairman’s office after the ouster of Steven Davis, formerly sole chairman. The formal deadline was yesterday.
“Bankruptcy is always a last resort and is not in current plans,” he said in an e-mail today. “If real property and equipment leases are assumed by other firms or renegotiated, and the lenders realize on their accounts receivable and inventory, there may be no need for judicial intervention.”
Dewey is currently talking with “many merger partners,” Bienenstock said.
Dewey has drawn about $75 million of a $100 million credit line from banks, said a person familiar with the firm’s finances. The firm said in an internal memorandum on April 29 that New York prosecutors were probing possible wrongdoing at the firm. The memo said that Steven Davis, formerly sole chairman, was ousted from a five-person chairman’s office and the executive committee.
Davis hired criminal defense attorney Barry Bohrer, a partner at Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer, as he faces allegations of misconduct.
“Every action of Mr. Davis as chair of the firm was taken in good faith and in the best interests of the firm,” Bohrer said in an e-mail confirming his retention. “He is confident that fair-minded professionals will conclude that he engaged in no misconduct.”
The turmoil at Dewey has upended the firm’s plans to find a merger partner and sent prices of its bonds reeling. The privately placed debt, issued in 2010 to refinance older bank loans and once valued at 100 cents on the dollar, were seen to trade April 27 in the 60s, said Kevin Starke, an analyst at CRT Capital Group LLC.
“If the firm reorganizes, the loan and the notes could be money good, but if it liquidates, it will come down to the valuation of accounts receivable,” he said, referring to Dewey’s bills to clients for legal services. CRT, which trades distressed debt, didn’t handle the sale of Dewey bonds by an investor last week, he said.
No single firm currently appears willing to buy all of what is left of Dewey, according to a person familiar with the situation. Dewey now is talking with several firms that might take parts of its specialized practice groups, as part of a bankruptcy plan devised with lenders’ consent, said the person, who declined to be named because the talks are private.
Patton Boggs LLP, based in Washington, is among the firms conferring with Dewey, said the person. Under Dewey’s plan, different firms might pay to acquire receivables generated by lawyers they took on, he said. The law firm does have something to sell -- groups of strong practices, he said.
Dewey’s most profitable practices include bankruptcy, corporate law, litigation and public policy, the firm has said.
Pick Up Pieces
The plan remains uncertain because firms considering taking some of Dewey’s lawyers might do better to pick up the pieces after a bankruptcy filing, the person said.
Patton Boggs wouldn’t say if it will take on some of Dewey’s lawyers.
“From time to time we have conversations with other firms in connection with our interest in making strategic acquisitions to strengthen our practice,” said Patton Boggs Managing Partner Edward Newberry. “We have only the highest regard for the lawyers at Dewey & LeBoeuf. They have a legacy of being among the very best in the areas in which they practice.”
Dewey management sent another memo to all the firm’s partners yesterday informing them they are free to explore other job opportunities, said a person familiar with the contents of the document. The firm is carrying on business as usual and at the same time trying to find employment for legal and non-legal staff, according to the person who saw the memo and who declined to be identified because the information is private.
“Our memo did not encourage people to leave,” Bienenstock said today in his e-mail. “Rather, it explained that the partners who do not want to be part of a merger could look elsewhere. This way they would not be otherwise inhibited by duties to the partnership.”
At least 11 lawyers announced departures from Dewey yesterday including Marshall Stoddard, the U.S. head of Dewey’s bank and institutional finance practice group, and Charles Moore, an energy partner in Houston, who both left for Philadelphia-based Morgan Lewis & Bockius LLP along with two counsel lawyers and an associate.
Gibson Dunn & Crutcher LLP hired disputes partner Peter Gray for the firm’s Dubai office, and Clifford Chance LLP hired Howard Adler, co-chair of Dewey’s compensation and benefits practice and Gary Boss, a partner who specializes in mergers and acquisitions and insurance. Dewey partner Gary Apfel, co-chair of the consumer financial services group, also announced his departure yesterday to Philadelphia-based Pepper Hamilton LLP to lead that firm’s California expansion.