New York, May 19 (FinanceEnquiry.com) - According to people familiar with the matter,distressed law firm Dewey & LeBoeuf is looking to file for bankruptcy as new debt holders take a more hardened approach, moving away from earlier stance of at an out-of-court liquidation.
In 2012 through mid May 12, approximately 200 of the 300 total partners have left the firm as a result of concerns about compensation, and $225 million in bank loans and bond debt.
Creditors who have acquired Dewey's distressed debt at a discount on the secondary market would likely want to see the firm wound down in bankruptcy court rather than out of it.
With the emergence of new creditors, Dewey on Tuesday brought in new restructuring adviser Zolfo Cooper, at the expense of Development Specialists Inc (DSI).
Bill Brandt, chief executive of DSI, confirmed that his firm's involvement in the matter was coming to an end. 'Our firm is transitioning out,' Brandt said. 'We've been replaced by Zolfo at the insistence of the debt holders. It now becomes a creditor-driven case.'
The timing of any potential filing including a bankruptcy filing remains unclear. The firm has been holding talks with restructuring lawyers since April and has retained bankruptcy counsel, Albert Togut of law firm Togut Segal & Segal.
Neither Togut, Stephen Horvath III, Dewey's executive partner nor Janis Meyer, its general counsel, offered any comment.
In 2011-12, the firm's financial difficulties and indebtedness became public, and have occurred at the same time as significant numbers of partners departed, and an investigation by the New York District Attorney into alleged false statements by firm chairman Stephen Davis.
Once one of the largest law firms in the United States, Dewey & LeBoeuf on May 4, sent 'conditional advance notice' to all US employees under the Federal WARN Act that their employment may be terminated. The letter advised all employees of their rights under Federal and New York State law in the event of termination. The letter provided the firm's first formal acknowledgment to employees that the firm could ultimately close.
To further aggravate matters, lawsuits are also piling up against Dewey. The firm on Monday was sued by the US Pension Benefit Guaranty Corporation in Manhattan federal district court in order to take control of three of the firm's pension plans, which the agency said were underfunded by $80 million.
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