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 and Hershel 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.
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.
Hopefully Dewey can work out a plan. If not, the consequences — for thousands of lawyers and staffers — could be grave.
Dewey & LeBoeuf lender deadline draws near-source [Thomson Reuters News & Insight]
Dewey & LeBoeuf Faces Debt Deadline [Wall Street Journal via WSJ Law Blog]
Dewey merger tactics could be dangerous [Daily Journal (sub. req.)]
Dewey partners leave for KPMG and A&O as exits this year pass 70 [Legal Week via ABA Journal]
Second Dewey partner quits for KPMG [The Lawyer]
Earlier: Dewey & LeBoeuf: A Paralegal’s Lament
Dewey Have A Suitor? Plus Another Confirmed Partner Defection, and Discussion of Deferrals
Dewey Have Enough Money To Use FedEx? (Plus more potential defections, and bankruptcy planning.)