Dewey Files for Bankruptcy as Partners Flee, Debts Surge Le BOOF..POOF!!
May 29 (Bloomberg) -- Dewey & LeBoeuf LLP, the law firm that advised Los Angeles Dodgers LLC on restructuring, filed for bankruptcy after its chairman was ousted and almost all partners quit as creditors began suing for unpaid bills.
Dewey, based in New York, listed debt of $245 million and assets of $193 million in a Chapter 11 filing yesterday in U.S. Bankruptcy Court in Manhattan.
The firm, which had more than 1,300 attorneys in 12 countries after the 2007 merger of Dewey Ballantine LLP and LeBoeuf, Lamb, Greene & McRae LLP, now has 150 employees in the U.S. to wind it down, Jonathan A. Mitchell, the firm's restructuring officer, said in court papers. Dewey will be liquidated, he said.
Dewey & LeBoeuf "was formed at the onset of one of the worst economic downturns in U.S. history," wrote Mitchell, who works for the restructuring adviser Zolfo Cooper Management LLC. "These negative economic conditions, combined with the firm's rapid growth and partnership compensation arrangements, created a situation where the cash flow was insufficient to cover capital expenses and full compensation expectations."
Dewey hired Togut, Segal & Segal LLP as bankruptcy counsel. It is closing offices in Hong Kong, Beijing, Sao Paulo, London, Paris, Madrid, Frankfurt and Johannesburg. All U.S. offices have been closed or are closing. The firm is recovering equipment and artwork and securing client records, according to the filing.
Dewey's plan to save part of its business through a merger was dealt "a body blow" when the Manhattan District Attorney said he was probing possible wrongdoing at the firm, Dewey's bankruptcy lawyer Al Togut told U.S. Bankruptcy Judge Martin Glenn at a court hearing today. Dewey has no reason to believe that money was stolen, Togut said.
Dewey, which has been collecting bills to pay lenders, had about $13.4 million of cash in its bank accounts on May 25, according to a U.S. budget published in a court filing. Cash could rise by June 25 to $30.3 million as more clients of the law firm pay their bills, according to the filing.
Expenses in coming weeks will include $375,000 for rent on the 10th floor of Dewey's Manhattan headquarters including storage space; $340,000 per week of restructuring costs for lenders and $58,000 a week for a so-called dissolution committee, according to Dewey's budget.
Dewey has accounts receivable and work in progress in the U.S. valued at $255 million, according to filings. The firm has historically collected about 95 percent of its accounts receivable and converted 84 percent of work-in-progress to accounts receivable, it said.
"It is unlikely the debtor will attain historical collection rates on its accounts receivable," according to the filing. "The Chapter 11 process will enable the debtor to maximize collections on its accounts receivable in the most effective and expeditious manner as possible."
Dewey owes secured banks and bondholders $225 million, with an additional $50 million owed to secured property lessors and $40 million in accounts payable, pension and deferred compensation claims and claims by employees for accrued paid time off, it said.
The law firm said it consolidated its bank debt on April 16, issuing $150 million of notes. From Jan. 1 to March 30, about 20 percent of the firm's equity partners resigned or left, it said. As of last week, at least 250 of Dewey's 304 partners had found new jobs.
"These partner departures led to a continuing cycle of decreased potential revenues, which itself caused further partner attrition," Mitchell said.