Dewey & LeBoeuf takes steps to ward off bankruptcy
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NEW YORK -- Corporate law firm Dewey & LeBoeuf LLP hopes to stave off bankruptcy by collecting bills to pay lenders and transferring employees and property to other firms, a member of the chairman's office for the firm 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 cooperative, said Martin Bienenstock, one of four members of the chairman's office after the ouster of Steven H. Davis, formerly its sole chairman.
Mr. Davis was removed amid a criminal investigation into his conduct by the Manhattan district attorney.
"Bankruptcy is always a last resort and is not in current plans," Mr. Bienenstock wrote in an email. "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."
The firm is currently talking with "many merger partners," Mr. Bienenstock said.
The firm has drawn about $75 million of a $100 million credit line from banks, said a person familiar with its finances. The firm said in an internal memo April 29 that New York prosecutors were probing possible wrongdoing at the firm and that Mr. Davis was ousted from a five-person chairman's office and the executive committee.
Mr. 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," Mr. Bohrer wrote in an email confirming his retention. "He is confident that fair-minded professionals will conclude that he engaged in no misconduct."
The turmoil at the firm has upended its plans to find a merger partner and has 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 trading in the 60s on April 27, said Kevin Starke of CRT Capital Group LLC.
No single firm currently appears willing to buy all of what is left of Dewey & LeBoeuf, 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, the person said. 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."
Dewey management sent another memo to all the firm's partners last week 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, but 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.
First Published May 7, 2012 12:53 am