Law firm Dewey secures two extra weeks of bankruptcy funding

NEW YORK, July 30 Tue Jul 31, 2012 3:39pm EDT

NEW YORK, July 30 (Reuters) - Dewey & LeBoeuf on Tuesday secured an extra two weeks of funding for its bankruptcy, giving the defunct law firm some leeway in trying to convince former partners to accept a settlement and avoid what could be years of litigation.

Judge Martin Glenn in a court filing approved Dewey's request to extend its funding deadline - which would have lapsed on Tuesday - through Aug. 15. The request had the support of Dewey's lenders, who are effectively bank rolling the case by letting the firm use money pledged to them as collateral.

The extension comes as Dewey tries to claw back payments made to its former partners, the proceeds of which would go toward paying back creditors. The law firm went bankrupt in May after deciding to close its doors due to high debt and a raft of partner defections.

It has offered former partners a deal under which they would pay between $5,000 and $3.5 million depending on compensation, with a maximum total recovery of $90.4 million.

Failing a robust settlement, it is unlikely Dewey's lenders would continue to fund a Chapter 11 bankruptcy. That would likely force Dewey to convert its case to a streamlined liquidation under Chapter 7, in which a court-appointed trustee would take control of Dewey's assets and litigate against partners.

The firm had hoped to know by July 24 whether partners would accept the settlement, but requested the extension after it decided to alter the terms of a previous offer in response to partner concerns.

The case is In Re Dewey & LeBoeuf LLP, U.S. Bankruptcy Court, Southern District of New York, No. 12-12321.

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