The firm's warning - first reported on Tuesday (27 November) on legal gossip blog Above the Law - affected 24 non-first-year associates, who were told they were almost certain to be laid off in January unless the credit market substantially improved.
Additionally, the firm offered 29 first-years the option of taking four months' severance and leaving the firm. Thacher Proffitt chairman Paul Tvetenstrand had previously said the firm would not have associate lay-offs, but he said on Tuesday that the outlook for the asset-backed securities (ABS) market had grown worse in recent weeks.
Whereas the 350-lawyer firm had earlier projected the ABS market would bounce back in a quarter or so, he said the feeling was now that the mortgage-backed securities market in particular would remain moribund for at least six months, if not longer. He said the warning and buy-out offers were to give associates time to prepare.
"It would be unfair to these associates to have them sitting on their hands" during that time," he said.
Tvetenstrand said among the factors Thacher Proffitt had looked at was the health of its major clients among Wall Street investment banks. Several major banks have slashed structured finance departments and some have said they are pulling out of the area altogether.
Tvetenstrand said some areas of structured finance aside from securitization of residential mortgages remained strong and that overall health of the firm remained strong.
Thacher Proffitt's lay-off warning follows the release by Clifford Chance earlier this month of a six-lawyer structured finance group of associates, while structured finance boutique McKee Nelson extended similar buy-out offers to its own associates.
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