Dewey & LeBoeuf’s UK arm has been hit by a £36.7m claim from the firm’s US LLP, as the latest report filed by administrators reveals more than £40m sought by unsecured creditors.
The update, released by UK LLP administrators Mark Shaw and Shay Bannon at BDO, states that the pair had been notified of unsecured creditors’ claims totalling approximately £40.8m up to late November.
The report, up to date as of 27 November and filed at Companies House yesterday (8 January), comes six months after the firm filed for Chapter 11 bankruptcy in the US and the London and Paris arm filed for administration in the UK in May.
It says the US LLP’s claim of £36.7m was “in respect of an inter-company position that arose prior to administration”, understood to be related to the UK LLP’s guarantee for its revolving credit facility and the private placement it issued in 2010.
The statement of administrator’s proposals in July detailed that unsecured creditors of the UK LLP and the firm’s UK services company were owed £5.2m (30 July 2012).
Both secured and unsecured creditors are set to suffer a significant shortfall, with funds available for distribution to unsecured creditors limited to a floating charge of up to £600,000, excluding any proceeds from the partner contribution plan (PCP) agreed as a settlement between participating former partners and the estate (10 October 2012).
Any settlement coming from the PCP will not fall within the secured lenders’ security and will be available to the general body of creditors, the report states. The plan has been agreed in principle but is still subject to a vote and will force the UK LLP to provide partners with a formal release from claims.
The BDO team is holding negotiations with Dewey’s US LLP and its advisers to ensure that proceeds coming from UK partners’ settlement contributions should be made available to creditors of the UK LLP.
Meanwhile, £1.53m has been paid to secured creditors in the first distribution by the UK LLP to secured creditors since the firm’s collapse.
The only preferential creditors of the UK LLP are the employees of the Paris office or the French government body that administers a compensation scheme for French redundancies. The amount of this claim has not been confirmed.
The report also reiterates the UK LLP’s accounts receivable of roughly £5.6m and work in progress of roughly £4.7m. The administrators expect the combined realisable value from these amounts to be more than the original estimate of £4.8m, with £4.5m already collected to date.
The news comes amid confirmation in the report of the redundancy of all the employees retained in the London office, or in alternative working premises, to work on the UK LLP’s wind-down. Finance director Alison Clifford was retained until 26 October to assist with debt collection, while all other retained employees were made redundant on 31 August. Total wages and salaries paid to staff since the administration filing came to £222,874.30 up until 27 November.
The firm will now appoint a specialist debt collection agent to sweep up the remaining book debts.
The UK LLP vacated all but one floor of the firm’s Mincing Lane property to minimise rental liability, which is considered an expense of the administration. The remaining floor was vacated before the end of September to ensure there was no liability for rent in the September quarter.
The filing also states legal fees incurred by the administrators of £309,533.28 between 28 May and 27 November, including £250,425.02 in sterling, understood to have largely gone to CMS Cameron McKenna, lawyers to the UK administrators, with the remainder incurred in dollars ($65,789.36, or £41,070) and euros (€21,375, or £17,420).
The report also specifies an additional £57,448.50 plus VAT and disbursements accrued by CMS for its pre-administration role, with the £41,200 of this authorised by a court order and paid in full. The status of the remaining amount is unclear.
Fees to Richard Slade of Richard Slade and Company hit £90,000 for his role as solicitor manager. The report makes no mention of fees earned by former partners Mark Fennessy and Hazel Miller, the two other solicitor managers.
BDO’s own fees due from the UK LLP have so far come to £484,846.57, including disbursements and £171,756.80 of partner time. None of the amount had been billed at the time the report was authored.
The administrators and solicitor managers agreed with the SRA that hard and electronic client files with no material activity for seven years or more prior to the administration date could be destroyed, as could any files for which there had been no material activity for six years but which had not been accessed since.
Separately, administrators are currently taking legal advice over the exit from administration to liquidation, which they expect to take place within two to three months to facilitate the PCP.