Dewey & LeBoeuf LLP’s unsecured creditors will be represented by individuals from a legal recruiting and placement firm, a car service company and an equipment leasing company, according to a list of the three committee members appointed by the U.S. Trustee.
Tracy Hope Davis, who oversees bankruptcies in the New York region, listed HireCounsel, Inta Boro Acres Inc. and Fidelity National Capital Inc. in a notice of the appointments filed in U.S. Bankruptcy Court in Manhattan yesterday. The defunct law firm will also have a four-person committee of former partners, including two whose addresses are care of Duane Morris, according to a separate filing.
Dewey’s Memorial Day bankruptcy filing indicated it might not be able to pay all of its secured debts, which it must do before giving anything to unsecured creditors. The firm disclosed $225 million of secured loans from banks and bondholders, to be paid mostly by collecting $255 million of bills to clients. Analysts value those bills at as little as 40 cents on the dollar.
Topping a list of Dewey’s unsecured creditors is the Pension Benefit Guaranty Corp., claiming $80 million for underfunded pensions. Second is Dewey’s landlord, Paramount Group, claiming $3.8 million for property taxes and May rent, followed by Thomson Reuters, owed $2.4 million for legal research. Former Dewey partners, including those with an estimated $100 million of guarantees, may rank equal to, or below trade creditors under bankruptcy law.
“Dewey is essentially a zero asset bankruptcy for the unsecureds,” said Ed Reeser, a former managing partner for the Los Angeles office of Sonnenschein Nath & Rosenthal LLP, who’s now a consultant. “There is nothing there for them to get. There is going to be terrible pain worked on many good people.”
Vendor claims against Dewey, also known as trade paper, were recently quoted at 5 cents to 8 cents on the dollar, said Joseph Sarachek, managing director of claims trading at CRT Capital Group LLC, which buys and sells distressed debt including Dewey’s. The category includes a unit of ABM Industries, which provided janitorial services at Dewey’s offices at 1301 Avenue of the Americas in New York, and sued the firm for about $300,000 in unpaid bills.
Dewey’s secured bonds, which were privately placed and trade sparsely, were quoted at 45 cents to 55 cents on the dollar earlier this month, CRT said.
Dewey unwound fast this year as at least 250 of its 304 partners quit to join rivals. Now it faces a long fight to collect money for secured lenders led by JPMorgan Chase & Co. (JPM:US)
Dewey had more than 1,300 attorneys in 12 countries after the 2007 merger of Dewey Ballantine LLP and LeBoeuf, Lamb, Greene & McRae LLP, making it the biggest bankruptcy in its business. It now has 150 employees in the U.S. to wind it down and pay creditors.
The case is In re Dewey & LeBoeuf, 12-12321, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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