Reuters: Bankruptcy News: Dewey & LeBoeuf lender deadline draws near-source

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Dewey & LeBoeuf lender deadline draws near-source Apr 24th 2012, 18:34 Tue Apr 24, 2012 2:34pm EDT * Law firm has drawn down $75 mln on credit line - source * Dewey negotiating with lenders - source * Other firms have rejected Dewey merger proposals - sources By Caroline Humer and Leigh Jones NEW YORK, April 24 (Reuters) - Law firm Dewey & LeBoeuf is facing a deadline in less than a week to renegotiate terms of its $100 million credit line with lenders as it scrambles to stay afloat, a source familiar with the situation said on Tuesday. The firm, which has lost about 70 partners out of 300 since the start of year, owes roughly $75 million to the bank group, according to one source, who was not authorized to discuss the situation publicly. The negotiations are ongoing ahead of an April 30 deadline, this person said. When the debt comes due, the lenders can ask to be repaid, which could put the firm into default if it cannot do so. The bank group is led by JPMorgan Chase and includes Citi Private Bank, Bank of America Corp and HSBC Holdings PLC, two sources said. JPMorgan, Bank of America and Citi declined to comment. HSBC was not immediately available. Representatives for Dewey were not immediately available to comment. The details on the loan negotiations were initially reported by The Wall Street Journal. Sources told Reuters last week that Dewey, struggling with high debt and departures of lawyers, has hired bankruptcy attorney Albert Togut of law firm Togut Segal & Segal and is working on its restructuring options. Among options Dewey has considered is a prepackaged bankruptcy and a merger with another law firm, one source said. Last week, law firm Greenberg Traurig LLP said it had had "preliminary discussions" relating to lawyers from Dewey, but had reached no agreements. A leader of a major law firm said his firm also met with Dewey's management earlier this year to discuss a possible merger, but the debt situation made such a deal untenable. "It was just too complicated," said this person, who declined to be identified so as not to jeopardize a relationship with Dewey. Three other law firms have been approached by Dewey but also determined not to go ahead with a deal, a different source familiar with those discussions said. Last year, Dewey hired about 10 prominent attorneys, some of whom were awarded salary guarantees. Since then, the firm has been unable to pay many of its longer-term partners full compensation, according to two partners who have left, Reuters previously reported. Dewey has used the bank loan for regular operations. In addition, it issued a private placement of $125 million in bonds in 2010, a rare liability for a law firm. The bonds start maturing in 2013. It is unclear whether that debt is secured or what the collateral on the bank debt is, but typically a law-firm loan is backed by a firm's receivables, industry experts said. The status of those receivables is uncertain as partners leave the firm. "A partnership is only as good as the partners who are there, and Dewey seems to be facing what is somewhat similar to a run on a bank with its partners departing," said Stephen Lubben, a law professor at Seton Hall University School of Law and an expert on bankruptcy. Link this Share this Digg this Email Reprints

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