Dewey & LeBoeuf’s wind-down team has amended the bankrupt firm’s controversial settlement deal, with partners now being enticed into the plan by a discount based on how much they bring back to the firm in receivables in the coming weeks.
Bankruptcy chiefs have also announced a discount if the total amount raised through the so-called partner contribution plan hits a certain threshold, with the deadline for opting in postponed by a day.
Under the changed deal, which absolves participants of liability from the defunct US firm’s estate, partners who collect receivables attributed to them will be able to use up to 5 per cent of the amount collected between 1 August and 15 September this year to deduct from the figure they have been asked to contribute to the settlement pot.
In a further amendment, announced in a global conference call at 10am New York time today, partners will obtain a 2.5 per cent discount if total settlement contributions reach $65m (£41.6m) or a 5 per cent discount if they hit £70m (£44.8m).
The deal gives partners the option of paying a proportion of their 2011 and 2012 income from the firm to the estate in order to absolve them of future liabilities, with the percentage determined by how much they received from the firm during the period. It ranges from 10 per cent to 30 per cent, with a minimum cap at $5,000 (£3,198) and a maximum set at $3.5m (£2.2m).
The bankruptcy team is still aiming to raise $90.4 (£57.8m) through the plan, although it originally hoped to hit $103.6m (£66.3m) before the target was amended last month. The threshold for keeping the case out of Chapter 7 remains unchanged at $50m (£32m).
Partners now have until the end of the day next Tuesday (14 August) to choose to participate in the deal, which has stalled after the original deadline was set for 24 July before being repeatedly postponed (7 August 2012). Bankruptcy chiefs are eager to see the contribution plan ratified by the following day, when a creditors’ meeting will be held in New York.
A judge will decide later this month whether to appoint a bankruptcy trustee, with a group of retired Dewey partners yesterday filing a motion in the United States Bankruptcy Court for the Southern District of New York calling for a Chapter 11 trustee to be appointed.
Today’s call, headed by Dewey chief restructuring officer Joff Mitchell of Zolfo Cooper and bankruptcy counsel Albert Togut of Togut Segal & Segal, represents the latest amendment to the details of the deal, with the terms changing late last month to ensure top-earning partners were contributing more and low-earners less (27 July 2012). However, it is understood that a number of partners are still disenfranchised with the deal because they feel it gives partners at the highest end of the compensation scale an easy way out of liability.
Mitchell told listeners this was the final plan, but it is understood he has also said this on previous occasions.
A former partner commented: “Every time we had a conference call they always said there is no more negotiation, this is final. And then they came up with this.”
Partners have not yet received documents related to the deal. Under latest plans, partners are set to receive them tonight (9 August) New York time, but any further delays are likely to make the 14 August deadline unmanageable.