Over the last several decades, Martin J. Bienenstock has established himself as one of America’s most prominent bankruptcy lawyers, advising General Motors and Enron. Now, he faces perhaps the most challenging assignment of his career: the restructuring of his own law firm.
Mr. Bienenstock is one of the leaders of Dewey & LeBoeuf, the embattled law firm struggling to survive. A heavy debt load and a wave of lawyer defections — more than 20 percent of its partners have left this year — have imperiled the 1,000-lawyer firm.
Dewey is locked in negotiations with its banks to restructure its outstanding loans. The precipitous decline in the firm’s partnership ranks could violate those loan agreements, allowing the lenders — JPMorgan Chase, Citigroup, Bank of America and HSBC — to demand repayment.
At the same time, Dewey’s management is considering several options to try to reorganize and avoid a painful liquidation. One potential solution is a prearranged bankruptcy filing. Under such an arrangement, Dewey could reach an agreement with its creditors while simultaneously merging with another firm, according to two people with direct knowledge of the plan who requested anonymity because they were not authorized to discuss it publicly.
Such a filing, called a “prepackaged” bankruptcy, tends to be shorter in duration than a typical Chapter 11 bankruptcy filing and could spare the firm time and potential legal headaches. It could also free Dewey of its debts and pension obligations, making it far more appealing to a potential acquirer.
“We are considering various paths, including continuing to operate as an independent global law firm and a strategic combination with another leading law firm, the latter of which could take many forms,” said Michael S. Sitrick, a spokesman for Dewey. “Nothing, however, at this point, is definitive.”
Legal-industry experts say that Dewey would have several hurdles in making a prepackaged bankruptcy and merger actually work. Among the problems for an acquiring firm: taking on so many lawyers at once would not only be cumbersome, but also potentially alienate its own partners.
