Dewey brings forward debt talks as firm chairman heads for London

Dewey & LeBoeuf has brought forward negotiations with its bankers regarding its loan agreements, as chairman Steve Davis relocates to London as a part of a management shake-up.
 
The US firm has pushed through a top-level overhaul which has seen its heads of bankruptcy, corporate, litigation and public policy join a new five-member management team, following calls from the partnership for “more hands-on management”.

Davis, who will relocate to London later this year with a remit to manage the firm’s offices outside of the US, is joined by restructuring chief Martin Bienenstock, corporate head Rich Shutran, litigation head Jeffrey Kessler and public policy and Washington head Charles Landgraf on the revamped management team.

The firm, which was due to hold its next scheduled loan facility review with Citibank and other lenders in April, has also moved to bring forward negotiations with its banks due in part to the increasing number of partner departures both in the US and the UK. It is conceded that the stream of recent departures has taken the firm closer to breaching its loan covenants.

A Dewey spokesperson, who termed the discussions as “positive”, told Legal Week: “We are in the process of renewing our revolving credit facility with our banks and discussions are proceeding as expected.”

Ex-partners have claimed that options currently under discussion include bringing in additional restrictive covenants that could see the firm having to provide more financial and operating information within certain time periods.

Additional covenants could also limit the firm’s ability to incur further debt and engage in various types of transactions. Ex-partners also say that Dewey’s lenders are considering whether to increase interest rates on the firm’s loans.

The discussions with lenders come amid a turbulent period for Dewey, which has lost 37 partners so far in 2012 after missing certain financial targets and cutting compensation for a number of partners. Dewey also this month announced that it was to lay off 5% of its fee earners and 6% of support staff.

Dewey argues that its fundamental practice remains strong and that its current difficulties are largely the result of excessive partner recruitment in recent years.

Firms to have benefited from Dewey’s problems include Willkie Farr & Gallagher and Sutherland Asbill & Brennan, which have both hired large partner teams over the last week.

The firm saw its 37th partner departure last week, with Houston managing partner Sean Gorman joining US litigation boutique Ahmad Zavitsanos Anaipakos Alavi & Mensing. Gorman, who handles high-stakes litigation, is taking three associates with him.

For more, see: