* New crop of creditors pressuring Dewey to seek bankruptcy
* Creditors are secondary market buyers of Dewey debt
* Dewey had initially sought out-of-court liquidation
By Nick Brown and Nate Raymond
NEW YORK, May 18 Ailing U.S. law firm Dewey &
LeBoeuf is considering a bankruptcy filing as new debtholders
take a more aggressive track, shifting away from earlier
attempts at an out-of-court liquidation, a person familiar with
the matter said on Friday.
The majority of Dewey's partners have quit as a result of
concerns about compensation, and $225 million in bank loans and
Buyers of distressed debt who have acquired Dewey's debt at
a discount on the secondary market are more open to seeing the
firm wound down in bankruptcy court rather than out of it, said
the person, who requested anonymity because the information was
With the emergence of new creditors, Dewey on Tuesday
replaced restructuring adviser Development Specialists Inc.
(DSI) with competitor Zolfo Cooper. Joff Mitchell, a senior
managing director at Zolfo, is now Dewey's chief restructuring
officer, two people familiar with the situation said.
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 "We've been
replaced by Zolfo at the insistence of the debt holders.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."
A bankruptcy filing is not certain, and the timing of any
potential filing remains unclear. The firm has been consulting
with restructuring lawyers since April at the latest, and has
retained bankruptcy attorney Albert Togut of law firm Togut
Segal & Segal.
Neither Stephen Horvath III, Dewey's executive partner, nor
Janis Meyer, its general counsel, responded to requests for
comment. Mitchell and a spokesperson for Zolfo also did not
respond to requests for comment.
Togut did not respond to a request for comment on Friday.
A spokesman for the firm's primary bank lender, JPMorgan
Chase & Co, declined to comment late on Friday.
Once one of the largest law firms in the United States,
Dewey & LeBoeuf has lost all but a handful of the 300 partners
with which it opened 2012. It has laid off 433 of 533 employees
in New York, according to the New York State Labor Department.
Dewey's debtholders have been selling their stakes during
the firm's downfall. As of May 3, bankruptcy analyst Kevin
Starke of CRT Capital Group said Dewey's $150 million in notes
privately placed following a 2010 bond offering were trading at
between 45 cents and 55 cents on the dollar on the secondary
The shift toward a possible bankruptcy filing would be a
major change in direction. As recently as March 12, Martin
Bienenstock, formerly a top bankruptcy partner at Dewey and an
outgoing member of the firm's office of the chairman, told the
Wall Street Journal that the firm had "no plan to file a Chapter
"We've had a completely non-adversarial relationship with
our lenders, and right now the cash we're using is the lender's
collateral," he said at the time.
Bienenstock did not respond to a request for comment late on
Friday. He was one of four members of Dewey's top management
team, the office of the chairman, to decamp to other firms in
recent days, joining Proskauer Rose. The last member of that
office, Washington, D.C., lobbyist L. Charles Landgraf, said he
had joined Arnold & Porter on Wednesday.
Lawsuits are mounting against Dewey. The U.S. Pension
Benefit Guaranty Corporation sued the firm Monday 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
Bankruptcies are often driven by creditors. On Wednesday,
Annette Jarvis of Dorsey & Whitney, a bankruptcy lawyer who
represents a group of 51 retired pension partners at Dewey
predecessor LeBoeuf Lamb Greene & MacRae, said that in her view
the firm "has to be put into a bankruptcy."
Jarvis did not respond to a request for comment on Friday.