Wednesday, April 25, 2012

Updated - Greenberg source tells AmLaw full merger with Dewey unlikely , the firm most likely will seek to Cherry pick internationally .... ( and with no ax to grind , just covering the story ) Dewey & Leboeuf struggle to find a white knight , struggle to workout 100 million revolver - with 75 million drawn down , struggle to retain partners and practice groups / offices - drop dead date seems to be April 30th , executive floor up for sublease..... and then there's that 125 million private bond that matures starting in 2013.......

http://www.law.com/jsp/law/newswire.jsp


For Most Dewey Lawyers and Staffers, the Silence Is Deafening

The Am Law Daily

As Dewey & LeBoeuf's management scrambles to find a solution to the embattled firm's problems, those not actively involved in the rescue efforts are being given scant information about what is going on behind the scenes, even as Dewey's lawyers talk with other firms and keep their options open. Meanwhile, a top Greenberg partner told The Am Law Daily on Wednesday that a full merger with Dewey is unlikely, and that the firm will most likely seek to "cherry pick internationally" to bolster its own presence abroad.



http://blogs.wsj.com/law/2012/04/25/dewey-leboeuf-to-sublease-executive-floor/?mod=WSJBlog&mod=smallbusiness


New York law firm Dewey & LeBoeuf LLP, which is heavily in debt, is planning as early as Wednesday to put the executive floor of its Manhattan headquarters up for sublease, a move that could bring in a couple of million dollars a year, according to a person familiar with the matter.
The firm plans to sublease the 43rd floor, which measures about 43,000 square feet, this person said. The space is the firm’s top floor in the building, and is fitted out with executive offices. Some spots offer a view of Central Park.
In a statement, a spokesman for the firm said Wednesday that “plans to sublease the 43rd floor were made in January of this year as part of the firm’s efforts to reduce costs.”
Dewey, which has been suffering under a heavy debt load and an exodus of partners, is considering a merger that could involve a prearranged bankruptcy filing, which would allow it to resolve debts and other obligations before being bought.
Dewey & LeBoeuf occupies more than 10 floors at 1301 Sixth Avenue. The building housed the headquarters of Dewey Ballantine LLP, an old-line New York firm that merged with LeBoeuf, Lamb, Greene & MacRae LLP in 2007 to create one of the largest law firms in New York.
Dewey leases about 470,000 square feet, or the largest block of space, in the Paramount Group’s 1.8 million-square-foot building, according to CoStar Group Inc., a commercial real-estate database.
The law firm’s lease runs until 2020, according to the person familiar with the matter. Dewey’s asking annual rent is in the $50 a square foot range, according to that person. In other words, a tenant leasing the entire block of space would pay about $2 million a year.
It isn’t unusual for law firms, companies and other types of businesses to sublease small amounts of space as they grow or shrink, according to real-estate brokers.
Law firms often look for new space during recessions when their leases expire and they can get better deals, said John Maher, a broker at CBRE Group Inc. Usually, law firm space is quite easy to sublease because the offices are well laid out, Mr. Maher said.

and a tad dated but good insights ....

http://kowalskiandassociatesblog.com/2012/04/12/dewey-need-to-take-a-pledge/


Dewey Need to Take a Pledge?

Posted on April 12, 2012 by kowalskiandassociates
The National Assembly taking the Tennis Court ...
The National Assembly taking the Tennis Court Oath (sketch by Jacques-Louis David). (Photo credit: Wikipedia)
Jerome Kowalski
Kowalski & Associates
April, 2012

Again, I am constrained to comment on a rather absurd story appearing in a Reuters dispatch concerning a venerable law firm listing along a perilous course. Leigh Jones, a capable journalist now reporting for Reuters and, I suspect in this instance taken in by the firm’sHollywood Ninja flack, posits that this firm can hold steady and survive the storm if a “few key players” stay on board (all men) and steer the firm to safety.
The proposition is dubious as a general matter. Given where this law firm finds itself right now, the notion requires a complete suspension of disbelief. Sure, there are a few notable large law firms that achieved remarkable success because of the drive, skill and leadership of a few key players.  Boies, Schiller & Flexner, Kassowitz, Benson, Torres & Friedman and Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylorcome to mind. However, Dewey & LeBoeuf is not, in its current incarnation, the product of a few driven leaders of the bar.  Dewey is a century old global law firm with 1,000 professionals (maybe fewer by the time you read this) and 24 offices. The notion that a law firm in crisis can survive the loss of 50 partners and a complete crisis in confidence by and among all of its stakeholders by keeping a small cadre signed on to stay the course is simply not credible. Collaboration, the key to law firm survival, is painfully missing here.
Ms. Jones goes on to note that Dewey “… firm leaders say that the vast majority of the departures are due to the firm’s decision to downsize in order to increase profitability.”  Let’s look at the numbers: Six of thirty-five executive committee members have left, four of nine office managing partners are gone and some seven practice group leaders have checked out. And the folks at Dewey want you to believe that this loss of leadership – previously key parts of this firm’s management who have credible client following will enhance profitability.  What we do also know is that one fellow who certainly was tossed out the window (I guess to “increase profitability”); he was the firm’s duly elected chairman who took his defenestration with style and grace.
The firm provocateur then identified the seven amigos on whose shoulders the firm’s survival can be bound: “The seven key Dewey lawyers … are Martin Bienenstock, a bankruptcy attorney; Jeffrey Kessler, a litigator; Morton Pierce, a mergers and acquisitions attorney; Ralph Ferrara, a regulatory and corporate governance lawyer; Michael Fitzgerald, a corporate securities attorney; Bruce Bennett, a partner in the business solutions and governance group; and Berge Setrakian, an international commerce and corporate lawyer.” Well, gosh, that’s neat. Each of the Magnificent Seven were in place as part and parcel of the cadre that charted the disastrous course, and, presumably prime beneficiaries of the healthy succor doled out to the big producers. The message here is that the Magnificent Seven chose poorly when they allowed the now departed executive committee members, office heads and practice group leaders to assume positions of law firm leadership.
But, these seven keys to success do not quite seem to be reading from the same playbook.
Marty Bienenstock advised Reuters that “[t]wo weeks ago, more than 50 business-generators each individually pledged to stay with the firm.”  Mort Pierce, the firm’s vice chairman saw it differently: “There was no formal pledge, no secret handshake,” he said. Asked whether he was part of the “consensus,” Pierce said, “There was a meeting and I was there.” Ralph Ferrara acknowledged that he is busily fielding calls from the firm’s competitors seeking to lure him away. Jeffrey Kessler offered some faint praise: “I am committed to Dewey and believe the firm will prosper.” Bennett, Setrakian and Fitzgerald did not respond to requests for comment.
None of these fabulous lawyers offered up the solid pledge that Bienenstock averred was in place. And these are the believers.  One who didn’t drink the Kool Aid is John Altorelli, an outstanding corporate lawyer and former Dewey executive committee member who is now at DLA Piper. Altorelli, who ironically actually began his career at LeBoeuf, thought well of his former associates and publicly opined that while most of the folks at Dewey were quite good, management (of which he was a member) was “obtuse.” Altorelli also plainly stated that the king has no clothes: “I’m not sure how [Dewey] can weather the departures.”
It’s not just the previously announced departures.  Bienestock probably had it right when he spoke of the “pledges.”  He is an outstanding bankruptcy lawyer, after all, and knows how valuable pledges can be. The key here is for a public announcement, with no wiggle room, in which at least the  Magnificent Seven and hopefully the Key 50 make an unwavering vow to stay with the firm until either they retire or events force a shutdown. This pledge is certainly unenforceable in any judicial proceeding, but it is crucial in the court of public opinion, where the firm is now being badly battered. These outstanding lawyers have much to lose in the event the firm implodes and for that reason should be motivated to provide an oath of loyalty.

and....



http://abovethelaw.com/2012/04/dewey-have-a-shot-of-working-out-a-rescue-plan-before-the-loans-come-due/


Dewey Have A Shot Of Working Out A Rescue Plan — Before The Loans Come Due?

By 

Today we’ll give you a double dose of Dewey. This morning we published an eloquent email from a Dewey paralegal, which looked at the story from a human-interest perspective. Now we shall return to the business aspects of the crisis.
Last week, we mentioned that tax partners Fred Gander andHershel Wein were in talks to leave Dewey. Those talks have come to fruition: Gander is heading to KPMG, where he will lead its U.S. tax practice for Europe and the Middle East, and Wein is joining him there.
Now let’s look at the big picture: Dewey’s looming debt deadline, and the possible rescue by Greenberg Traurig….
According to the Thomson Reuters and the Wall Street Journal (sub req.), Dewey & LeBoeuf owes roughly $75 million under a $100 million revolving line of credit (not the $30 million or so that was previously reported by the WSJ). Dewey has until April 30 — yikes, that’s this coming Monday — to renegotiate the terms of the facility with the syndicate of bank lenders. The syndicate is reportedly led by JPMorgan Chase and also includes Citi Private Bank, Bank of America, and HSBC.
(The same WSJ article also contains confirmation of our earlier report about Dewey getting cut off by a car service for non-payment: “On Sunday, the firm told its New York lawyers they would have to pay for car reservations with their own corporate or personal credit cards rather than billing rides through a corporate account, as had long been custom.”)
What happens if Dewey and its banks can’t renegotiate the revolver? In that case, the firm could be driven into bankruptcy, according to the Journal.

As we’ve discussed before, a “prepackaged” bankruptcy for Dewey, followed by a merger with a healthier firm, could be just what the doctor ordered. Think of it as a detox diet or master cleanse, to purge Dewey of the “bad stuff” (read: debt), followed by marriage to a healthy and wealthy husband.


Can Dewey lose enough weight to attract a mate?
But will a post-diet Dewey be svelte enough to attract a desirable partner? According to the Daily Journal (sub. req.), Dewey’s “strategy of seeking a prepackaged bankruptcy-and-merger deal with another large law firm has been widely rejected by several of those who have been courted by it…. Potential suitors have not gotten far beyond viewing the firm’s financial information and the structure of such a deal, according to one source.”
Dewey’s rumored love interest, the Christian Grey to Dewey’s Anastasia Steele — right now I’m reading a great guilty pleasure, 50 Shades of Grey (affiliate link) — is said to be Greenberg Traurig. But according to Casey Sullivan of the Daily Journal, Greenberg needs Dewey to lose some major weight before they hop into bed: “Greenberg expressed to Dewey that roughly half of Dewey’s partnership would need to be shed in order for a deal to occur.” Even considering all of the recent defections, Dewey would have to lose over 100 partners.
Some observers told the Daily Journal that Dewey is looking desperate these days:
The range in quality of law firms Dewey has reached out to for a merger has prompted industry watchers to speculate how dire of a situation Dewey has found itself in. Greenberg Traurig has traditionally been viewed as a lower-tier firm than Dewey. Some have also speculated how dangerous a strategy it is for Dewey to engage a handful of other law firms in merger talks, saying that those firms could instead pick off individual lawyers amid those discussions.Well, desperate is as desperate does. Dewey is in a world of pain. And we’re not talking the good kind.
http://www.businessweek.com/news/2012-04-18/dewey-and-leboeuf-russia-office-said-to-seek-new-law-firm


Dewey & LeBoeuf LLP’s struggle to survive a defection crisis that has seen it lose 20 percent of its partners is intensifying as its 42-lawyer Moscow outpost seeks to decamp to another U.S. law firm, according to a person familiar with the negotiations.
More than 60 partners have departed New York-based Dewey over the past several months during what the firm has called a restructuring process. The largest contingent to leave was a group of 12 insurance and regulatory lawyers who went to Willkie Farr & Gallagher LLP last month.
The firms in talks with Dewey’s Russia-based lawyers include Orrick Herrington & Sutcliffe LLP, Winston & Strawn LLP and King & Spalding LLP, said the person, who declined to be identified because they weren’t authorized to speak publicly on the matter.
Dewey has had a Russian presence since 1990 and currently houses 12 partners there, according to U.K.-based spokesman Duncan Miller. With one of the larger Russian offices of the international law firms in Moscow, its team focuses on corporate and finance work in the energy sector.
Garry Pegg, co-managing partner of Atlanta-based King & Spalding’s London office; David Schaefer, a spokesman for San Francisco-based Orrick; and Thomas Benz, a partner in Chicago- based Winston’s London office, didn’t immediately return calls seeking comment.
Yesterday, eight lawyers, including several members of Dewey’s key utilities, power and pipelines industry group, left for Hunton & Williams LLP and Pillsbury Winthrop Shaw Pittman LLP. The drumbeat of departures, if it continues, may trigger requirements to pay back loans, a law firm consultant said.

Firm Capital

“I think the departures are likely of concern internally and to providers of capital to the firm,” said Kent Zimmermann, a Zeughauser Group consultant. “This just fuels the perception that is widely held in the market that the firm is in a spiral.”
At issue are Dewey’s loan agreements tied to its lines of credit, the consultant said. Typically, law firms are required to maintain a certain number or percentage of partners, said Zimmermann. Dewey is in renegotiation talks with lenders including Citigroup Inc. (C) (C) on restructuring its credit lines, the firm said.
“We’re in ongoing discussions and they’re private,” Angelo Kakolyris, a spokesman for the firm, said today. He declined to comment on the Russia office.
New York-based Citigroup said yesterday the firm is still in good standing. The New York Times reported earlier, citing three unidentified sources, Dewey’s talks with its banks.

‘Good Standing’

“Dewey LeBoeuf is a client in good standing with Citi Private Bank,” Dan DiPietro, chairman of Citi’s Law Firm Group, said in an e-mailed statement. “Citi has had a banking relationship with the firm dating back to the early 1970s and continues to provide banking services to a significant percentage of the partners and associates.”
Dewey has maintained that the departures are consistent with the reduced headcount contemplated by the firm’s restructuring plan. Further departures are expected, the firm said in a statement yesterday.
“Their best hope is loyalty,” Zimmermann said. “At this point what Dewey needs to do is to retain their top talent and attract strong talent and the hill keeps getting steeper.”
To contact the reporters on this story: Jeremy Hodges in London at jhodges17@bloomberg.net and; Sophia Pearson in Philadelphia at spearson3@bloomberg.net.
and....

http://online.wsj.com/article/SB10001424052702303592404577364550507928644.html


possible deal with struggling New York firm Dewey & LeBoeuf LLP, which is looking for a lifeline amid heavy debts and an exodus of partners.
Top partners at Greenberg, a 1,700-lawyer firm that was founded in Miami, have been reaching out individually to key partners at Dewey, according to two Dewey lawyers. The New York firm has approached at least three firms about options that include a potential merger, according to people familiar with the matter.

Earlier

The phone calls from the Greenberg partners, many of which took place over the weekend, were described as "social" and "highly introductory," according to one Dewey partner. Neither financial terms nor the structure of a potential merger were discussed, according to the partner.
The result of talks between the two firms remains unclear. Greenberg reiterated Monday that the firm has had "preliminary discussions relating to lawyers" at Dewey but that no agreements have been reached. Greenberg Traurig didn't respond to a call seeking comment Tuesday. Dewey & LeBoeuf didn't respond to calls seeking comment.
A merger being considered by Dewey could involve a prearranged bankruptcy filing, which would allow it to resolve debts and other obligations before being bought.
The talks carry high stakes for Dewey, which has drawn some $75 million on a $100 million revolving credit line and is days away from a deadline to renegotiate the terms of the loan with a syndicate of banks. It also owes at least $125 million to insurance companies that purchased a private bond the firm floated in 2010, according to people familiar with the matter.

In recent months, the firm has seen dozens of partners leave over pay disputes.

It isn't uncommon for distressed U.S. companies to try to sell themselves in bankruptcy court but it is unusual for law firms. Legal consultants say that opening Dewey's books to a prospective suitor is risky because that makes it easier for a rival, for instance, to cherry-pick the most valuable assets.
Dewey & LeBoeuf became one of the largest law firms in New York five years ago when Dewey Ballantine LLP merged with LeBoeuf, Lamb, Greene & MacRae.
If there were to be a merger, and the new firm wished to use "Dewey" as part of the firm's name, it has to appear first in the lineup.
When Thomas E. Dewey, the three-term New York governor who founded Dewey Ballantine died in 1971, his will dictated that the firm no longer use his name. The firm persuaded Mr. Dewey's estate to retain the use of his name, but only on the condition that it would always come first.
and....


Partner Exodus May Upend Dewey’s Loans

BY PETER LATTMAN
To survive, Dewey & LeBoeuf will lean on its so-called rainmakers, including Jeffrey L. Kessler.Hannah Foslien/Getty ImagesTo survive, Dewey & LeBoeuf will lean on its so-called rainmakers, including Jeffrey L. Kessler.
An accelerating wave of partner defections from the New York law firm Dewey & LeBoeuf is now threatening to violate the firm’s loan agreements with its banks.
Dewey has been in turmoil after slashing its partners’ salaries — many of them that had previously been guaranteed — after weak financial performance last year. With eight more partners announcing their departures from Dewey on Tuesday, at least 66 of 300 partners have now left the firm since January. Having lost more than 20 percent of its partners, the firm has run into problems with its banks, according to three people with direct knowledge of the matter who spoke on the condition of anonymity because they were not authorized to discuss it publicly.
At issue are Dewey’s loan agreements that require the firm to maintain a certain percentage of its partnership. It is unclear exactly what that percentage is for Dewey, but legal industry experts say that typically, a law firm’s agreement with a bank requires it to maintain 75 to 85 percent of its partners. If it falls below that threshold, the firm is considered in default and the bank can demand repayment.

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Dewey is locked in negotiations with lenders —JPMorgan Chase and Citigroup — to restructure its credit line, these people said. It also has a $125 million bond issue it raised in 2010 that begins maturing next year.

“As Dewey’s partnership ranks thin, the banks have all the leverage,” said Bruce MacEwen, a lawyer and consultant who publishes the Web site Adam Smith Esq. “The firm’s leadership now bears the burden of proof to convince lenders, clients and lawyers that it can survive.”

Among the banks’ concerns, say legal industry experts, is that Dewey’s main source of collateral is the firm’s outstanding receivables from completed legal work and work in progress. Once partners start leaving the firm, it becomes significantly more difficult to collect unpaid bills from clients, and their collateral can become impaired.
On Tuesday, Dewey said the departures had not violated loan covenants, and Citigroup issued a statement of support for the firm. A spokesman for JPMorgan declined to comment.
“Dewey & LeBoeuf is a client in good standing with Citi Private Bank,” said Dan Di Pietro, the chairman of the law firm group at Citi Private Bank. “Citi has had a banking relationship with the firm dating back to the early 1970s and continues to provide banking services to a significant percentage of the partners and associates.”
Several industry consultants and recruiters say that, in addition to the outcome of talks with its banks, Dewey’s future now largely depends upon the loyalty of a small number of the firm’s partners who generate an outsize amount of business for the firm.
Among the so-called rainmakers who are crucial to the firm’s survival, these people say, are Jeffrey L. Kessler, the head of the litigation department and a prominent sports lawyer; Richard E. Climan, a Silicon Valley mergers and acquisitions lawyer; Berge Setrakian, a corporate lawyer with a large international practice; and Martin J. Bienenstock, a bankruptcy partner.
Since running into problems earlier this year, Dewey has gone on a public relations offensive. Last month it hired Michael Sitrick, an expert in crisis management.
Dewey has insisted that downsizing is necessary to increase profitability. It has maintained that the bulk of the departures would not affect the firm’s financial performance because many of those leaving were laggards. It has overhauled its management team and announced that its billings for the first three months of 2012 were up nearly 30 percent over the year before.
In its statement Tuesday, Dewey, the product of a 2007 merger of the two New York firms Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae, again sought to minimize the escalating number of departures.
“As we have said in the past, although the new direction that the firm is taking was approved and is supported by the overwhelming majority of the firm’s partners — as might be expected at a firm with 300 partners — some didn’t like the change,” the statement said.
The firm absorbed a blow to its highly regarded energy group on Tuesday when Hunton & Williams, a law firm in Richmond, Va., said it had hired six partners, including Bud Ellis, formerly co-head of Dewey’s utilities, power and pipelines group.
“Current departures aside, Dewey & LeBoeuf retains one of the world’s leading energy practices spanning virtually every aspect of the sector across the globe,” the firm added. “It has been an important component of the firm’s practice for decades and remains as such.”
Dewey, with about 1,000 lawyers in 25 offices worldwide, is among a handful of large corporate firms that in recent years have added partners by poaching star lawyers from rivals with record-size, multiyear, multimillion-dollar contracts. Mr. Climan and Mr. Bienenstock, for instance, were both lured away from other firms.
Compounding Dewey’s problems were dozens of additional guarantees extended to the firm’s partners. These came from the Dewey and LeBoeuf merger in 2007, when management gave contracts to partners in order to retain top talent.
Dewey’s issues grew acute last year after it missed its earnings targets. It had budgeted a double-digit percentage rise in profits yet showed no increase over 2010.
Short on cash, Dewey management was forced to cut the compensation of numerous partners, many of whom thought they had guarantees. The financial woes have caused its partners to head for the exits.
To stabilize the firm, Dewey restructured its management last month, stripping its chairman, Steven H. Davis, of his title. He will join four other lawyers in an “office of the chairman” with five co-equal members representing the heads of the firm’s most profitable practice areas.
Amid the distress, Dewey continues to work on several prominent matters. The firm is involved in two takeover battles, representing the pharmaceutical company Genomma Lab in its bid for Prestige Brands Holdings, and defending Illuminafrom a hostile bid by Roche. And the partner Bruce Bennett represented the Los Angeles Dodgers baseball team on its sale to a group that includes the former basketball star Magic Johnson.
Yet Peter Zeughauser, a legal industry consultant, says that such tumult has a toxic effect on the work environment and the production of billable hours. Mr. Zeughauser was a consultant to Howrey, a 700-lawyer Washington firm that collapsed last year amid financial woes.
“It’s hard to get people focused on client work when they’re busy focusing on their own future,” he said.


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