Howrey LLP Files First Monthly Operating Report, Assets Decrease by Almost $85 Million (or 61%) From Schedules

Last week, Howrey LLP filed its first monthly operating report in its chapter 11 case, which covers the firm's operations for the month of June.  Howrey was once a major international law firm with over 750 attorneys, but a group of creditors filed an involuntary chapter 7 petition against the firm after its partners voted to dissolve.  That involuntary chapter 7 petition was converted to a chapter 11 case in June at the request of the firm.


Howrey filed its schedules of assets and liabilities on July 6, 2011.  Those schedules, which are unaudited and report the financial condition of the firm as of the bankruptcy filing, reported assets of $138.7 million and liabilities of $107 million.  The assets consisted entirely of personal property and the largest category of assets was accounts receivable.  Howrey reported $59.6 million in billed accounts receivable and an additional $14.6 million in work in process accounts receivable.  The firm also listed $36.5 million in office equipment, furnishings and supplies and $11.1 million in leasehold improvements at its various office locations.  Of the liabilities, $62.4 million were scheduled as secured, $25.5 million were scheduled as unsecured priority, and $19.1 million were scheduled as unsecured nonpriority.

The first monthly operating report paints a much different picture as of the end of June.  Most notably, total assets have fallen to less than $54 million.  In the notes to the monthly operating report, the firm explains the over 61 percent decrease in assets as being a result of "a) the passage of time (April 11 to June 3, 2011), including closing all but one office location and b) the inclusion of the allowance for doubtful accounts amount, whereas the Accounts Receivable was reported at gross on the Bankruptcy Schedules."  In the monthly operating report, accounts receivable have decreased from $74.2 million to only $29.2 million.  The $29.2 million of accounts receivable listed reflects a $22.1 million allowance for doubtful accounts which the firm has taken (out of a total $51.3 million in accounts receivable).  Of the total accounts receivable outstanding as of June 30th, over $43.3 million is listed as having been outstanding for more than 90 days.  Almost all of the accounts receivable are, not surprisingly, from the pre-petition period (only $41,061 is from after the petition date).

Howrey's equipment, furnishings and leasehold improvements have also been significantly reduced from the values listed in the schedules.  The firm now lists the following values for these categories of assets:

•  Artwork
• Cost: $734,000
• Market Value: $1.2 million
• Furniture & Fixtures
• Cost: $7 million
• Market Value: $1.6 million
• Office Equipment (Includes Computer Equipment & Software)
• Cost: $13.4 million
• Market Value: $2.5 million
• Leasehold Improvements
• Cost: $11.5 million
• Market Value: $1.5 million

Howrey listed its pre-petition debt as "unknown" in its monthly operating report with a note that the firm has not yet reconciled claims.  Post-petition debt as of June 30th was listed as slightly more than $750,000, with most of that total being for accrued professional fees.  One line item (real property lease arrearage) was listed as "to be determined" and was accompanied by a notation that the firm's landlord for its Washington, D.C. office has filed a motion to compel Howrey "to pay administrative rent in an amount vastly different than the amount the Debtor believes it owes."

You can access copies of Howrey's June monthly operating report and/or its schedules of assets and liabilities from the following links:

• Operating Report for Filing Period Month ended June 30, 2011 Filed by Debtor Howrey LLP (Attachments: # 1 Exhibit A - Part I# 2 Exhibit A Part II# 3 Exhibit A Part III# 4 Exhibit A Part IV# 5 Exhibit A Part V# 6 Exhibit A Part VI)
• Schedules of Assets & Liabilities, Notes and Statement of Limitations, Methodology, and Disclaimer Regarding Debtor's Schedules and Statement of Financial Affairs., Summary of Schedules , Schedules A-H. , Declaration , Statement of Financial Affairs , List of Equity Security Holders (RE: related document(s) 59 Order on Motion to Convert Case to Chapter 11). Filed by Debtor Howrey LLP (Attachments: # 1 Summary of Schedules# 2 Schedule A thru H# 3 Declaration of Robert Ruyak re Debtor's Schedules# 4 Statement of Financial Affairs# 5 List of Equity Security Holders)