Tuesday, May 22, 2012

New York Law Firm Going for Bankruptcy Protection

Story first appeared in The Wall Street Journal.

New York law firm Dewey & LeBoeuf LLP is readying a possible bankruptcy-protection filing for sometime in the next several weeks, said Philadelphia Bankruptcy Lawyers, a move that would initiate official liquidation of the beleaguered institution.

Dewey within the past week brought aboard an operational turnaround and restructuring firm to help the law firm collect receivables and attempt to return money to lenders and other creditors. Dewey's remaining lawyers and outside advisers are working to be ready to file for bankruptcy protection by the end of next week, though the actual filing could come well after.

Most of Dewey's partners, including its crisis leadership team, have left the firm over the past five months, as disputes over compensation and towering debts brought the 1,000-lawyer law firm to its knees. Many of Dewey's U.S. offices were closed or nearly empty in the past week, with 433 people laid off in New York alone, according to a notice filed with the state Labor Department.

Exactly how Dewey officially ceases operations remains under discussion and no final decisions have been made, Raleigh Bankruptcy Lawyers said. Dewey lawyers have said recently that they planned to wind down without going through a bankruptcy court.

But a bankruptcy filing has become an increasingly likely option as Dewey's remaining employees and advisers huddle to chart Dewey's end game. Dewey will have to negotiate with landlords who could at some point move to seize office equipment in lieu of rent payments unless the law firm seeks bankruptcy protection. Dewey needs computers and access to offices to wind down.

Dewey tapped restructuring firm Zolfo Cooper in the past week for additional help winding down the law firm's operations.

Zolfo Cooper, meanwhile, usually helps companies restructure their operations, sometimes offering advisers to take interim management roles. The firm also enlists advisers to oversee defunct operations and develop plans for returning money to creditors.

Dewey owes $75 million on a $100 million credit line from banks led by J.P. Morgan Chase & Co. Distressed-debt investors have been circling around Dewey creditors in recent days to buy up potential claims—betting that they can nab them at discounts and get a better recovery when the law firm ultimately winds down.

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