Legal News

Working for the Weekend: Lawyering up Merrill/BoA, Lehman, AIG

By Dan Slater

My goodness. I’ve been in the business 35 years, and these are the most extraordinary events I’ve ever seen. — Peter G. Peterson, co-founder of private equity firm Blackstone, former head of Lehman Brothers and secretary of commerce in Nixon administration, speaking to the New York Times

As our Deals Journal colleagues tell us, Wall Street’s Judgment Day remains yonder. Though it seems certain that Monday, September 15, will be remembered as Armageddon for at least two of Wall Street’s most venerable institutions. Here’s what we know: Late last night, 94 year-old Merrill Lynch agreed to sell itself to Bank of America for $50 billion. Lehman Brothers, facing a refusal by the federal government to bail it out, announced this morning that it intends to file for Chapter 11 bankruptcy in the Southern District of New York for its holding company only, while its investment bank and asset management operation will continue doing business as usual. Meanwhile, insurance giant AIG, whose role in global finance, writes the WSJ, is in many ways as critical as that of investments banks such as Lehman, is scrambling to raise cash — an effort that could include selling off some of its most valuable assets and going to the Federal Reserve for help.

Legal firepower on BofA/Merrill: The banking deal of the century calls for some serious legal heavies. Handling this $50 billion all-stock deal for Merrill’s independent directors were Cravath’s Robert D. Joffe, Susan Webster and Sarkis Jebejian. Shearman & Sterling’s John Madden — the former head of M&A and former co-managing partner of the firm — John Marzulli and Scott Pettepiece repped Merrill, while a team from Wachtell that included Ed Herlihy advised Bank of America.

Lehman turns to Weil: A squad from Weil, Gotshal & Manges is handling Lehman’s Chapter 11. As the WSJ notes, Weil advised Drexel Burnham Lambert on its 1990 bankruptcy filing. For discussion of Lehman’s filing, go to the Bankruptcy Litigation blog.

Dinallo’s time to shine: When Eric Dinallo, who made his name as the head of investor protection in Eliot Spitzer’s New York attorney general’s office, was named New York’s superintendent of insurance, some said, huh? If that position sounds lame to you, think again. With AIG gasping for air, these days are Dinallo’s Stanley Cup, so to speak. According to the WSJ, Dinallo (Vassar, NYU Law) “took a significant role” in AIG’s survival talks over the weekend.

Based on Dinallo’s recent record — earlier this year he helped bail out bond insurers Ambac and MBIA — he could take a hard line with AIG. Amid the Ambac and MBIA bailouts, Dinallo called a meeting with more than 30 top Wall Street execs, where he left no doubt who he thought was responsible for the mortgage meltdown. “You people created this mess,” Dinallo told senior officials of Wall Street’s top firms, including Citigroup, Goldman, Merrill and Morgan Stanley. “And the headline on this is going to be: ‘How Wall Street Ate Main Street.’”

Full post as published by Law Blog - WSJ.com on September 15, 2008 (boomark / email).