Meltdown Claims Another Top Law Firm

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New York law firm Thacher Proffitt & Wood said it will shut down early next year, another casualty of the meltdown in structured finance and real estate dealmaking.

About half its 195 lawyers including Managing Partner Paul Tvetenstrand are joining a Chicago-based rival, Sonnenschein, Nath & Rosenthal, as of Jan. 1.

Just three weeks ago, the Treasury Department awarded Thacher Proffitt a contract for up to $500,000 of legal services to assist the department with investments under the Troubled Asset Relief Program and a related Federal Reserve lending program for asset-backed securities. That work will be performed by some of the attorneys who are moving to Sonnenschein, according to Bloomberg News.

Thacher Proffitt led Thomson Financial's 2007 league table among U.S. law firms advising issuers of asset-backed deals, advising 202 transactions valued at $102 billion. It was the third-ranked law firm advising managers of both asset-backed and mortgage-backed securites that year, according to its Web site. As that business withered in 2008, it shrank from a peak of 350 lawyers to 195 before the latest departures.

However, Thacher Proffitt also had substantial practices in banking and financial institutions, bankruptcy, compensation and benefits, distressed assets, environmental issues, investment management, litigation, maritime, tax, technology and intellectual property, and trusts and estates.

The 160-year old firm had been discussing a merger with an unnamed firm for six months, but "in the current economic environment it became apparent ...that a merger could not be executed," the company announced last week. "As a result, and in light of severe reductions in revenue, it became clear that Thacher Proffitt would not have the financial resources to continue business operations in its current form into the new year."

Thacher Proffitt becomes the fourth U.S. law firm to announce plans to close this year, according to Bloomberg. Dozens more firms have laid off attorneys and staff, especially in structured finance and real estate.