Dewey creditors set for repayment as judge approves liquidation plan

DEWEY & LEBOEUF’S liquidation plan has been approved by the bankruptcy court judge overseeing the case, paving the way for repayment of millions of dollars owed to creditors of the collapsed firm.

Judge Martin Glenn approved the plan, that will see secured creditors – which are collectively owed $262m (£173m) – receive between 47 to 77 cents per dollar owed, while general unsecured creditors are expected to receive between 5 and 14 cents per dollar, Accountancy Age’s sister publication Legal Week reports. 

Dewey’s collapse in May was the world’s largest legal failure. The UK LLP, which also includes the Paris office, was also placed into administration in May, with BDO business restructuring partners Mark Shaw and Shay Bannon appointed as joint administrators.

In the latest filing, general unsecured creditors are claiming an unspecified amount totalling several hundred million dollars. These include the Pension Benefit Guarantee Corporation, which has had several filings amalgamated into a single $120m (£79m) claim.

A pair of liquidation trustees – AMJ Advisors and FTI Consulting – will now ensure creditors maximise their recoveries. They will continue to receive advice from former Dewey partners and wind-down committee members Janis Meyer and Stephen Horvath.

Part of the funds will be provided by former partners of the collapsed firm. In October, a settlement between Dewey’s former partners and the defunct firm’s estate was approved by Judge Glenn, which will see 450 former partners pay $71.5m (£47.1m) in exchange for a release from potential future litigation.

Other potential sources include a $50m (£33m) liability insurance policy taken out to cover Dewey’s former management.

Of the $67.5m (£44.5m) initial unfinished business proceeds – which include claims against some of the partners – 80% will be guaranteed for secured creditors. Any additional funds recovered above that amount will be split evenly between secured and unsecured creditors.

Last month, new filings showed that advisers to Dewey’s estate are seeking more than $14m (£8.7m) in fees and expenses for work carried out in the first five months of bankruptcy proceedings.

This week, (28 February) marks nine months to the day that Dewey became the world’s largest law firm failure when it entered into bankruptcy, in the wake of a stream of partner exits and revelations that the firm had overstated its 2011 financial results. 

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