May 1 (Bloomberg) -- Dewey & LeBoeuf LLP is preparing to liquidate its U.K. office while its U.S. practice tries to collect its bills and preserve its business, a firm executive and two people familiar with the situation said.
The New York-based law firm’s London office appointed a committee including restructuring lawyer Mark Fennessy and banking lawyer Bruce Johnston to review its options to wind down or close the business, said the people, who declined to be named because the matter is private. More than 25 partners work at Dewey’s London operation, out of about 300 partners worldwide before a round of departures, said one of the people.
In New York, the firm is near an agreement with banks about extending a credit line and plans to stave off bankruptcy by collecting bills to pay lenders and transferring employees and property to other firms, said Martin Bienenstock, one of four members of Dewey’s chairman’s office. Dewey is talking with potential merger partners and its lenders are being cooperative, he said.
“Bankruptcy is always a last resort and is not in current plans,” Bienenstock, who heads Dewey’s restructuring group, 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.”
Dewey has drawn about $75 million of an available $100 million on the credit line, according to a person familiar with the firm’s finances. About 85 partners have left the U.S. firm in recent weeks.
Angelo Kakolyris, a spokesman for Dewey in the U.S., didn’t return a call seeking comment. Calls and e-mails to Fennessy and Johnston weren’t immediately answered. Peter Sharp, the managing partner of the London office, didn’t reply to requests for comment.
Dewey’s U.K. partnership, which also covers its Paris office, is a separate legal entity to the firm’s U.S. limited liability partnership, so a decision on whether to file for so-called administration can be made separately.
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.
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.”
The firm said today in an e-mailed statement that health insurance coverage for its partners and employees had been suspended.
“A payment routing issue involving the agent and the insurer resulted in a temporary, very short-term suspension of medical coverage,” according to the statement. “The firm has paid its premium and is actively working with the insurer to restore full coverage to partners and employees as soon as practicable. Health coverage will be restored.”
Dewey’s talks with Greenberg Traurig LLP about a possible merger fell apart this week, Dewey said. No single firm currently appears willing to buy all of what is left of the firm, said 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 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.
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.”
SNR Denton, which has headquarters in Washington and London, is also in talks with Dewey on a possible merger, according to a source familiar with the discussions. The firm declined to comment.
Comment on Rumors
“We enjoy strong relationships with many law firms around the world,” said Jeff Scalzi, a spokesman for SNR Denton, in an e-mailed statement. “However, we never comment on rumors about specific discussions or our continuing efforts to enhance SNR Denton’s already robust global presence.”
Since yesterday, at least 15 lawyers have announced departures from Dewey 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.
Among the departures announced today is Stuart Saft, co-chair of Dewey’s New York real estate practice group, who’s joining Holland & Knight.
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.
Dewey & LeBoeuf was created by the merger of Dewey Ballantine and LeBoeuf Lamb Greene & MacRae in October 2007, during a credit crisis. The marriage produced the 11th-largest U.S. law firm with 1,300 lawyers, offices in 25 cities and revenue of more than $900 million. LeBoeuf Lamb Chairman Steven Davis took the helm.
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