Banks Scrutinize BigLaw Borrowing
Just when many BigLaw firms reportedly have more need to borrow, because of a slowing economy, banks are scrutinizing their lending to law firms more closely.
Although interest rates haven’t gone up, lenders are looking to see that law firm financials support their borrowing, according to a National Law Journal article excerpted by New York Lawyer (reg. req.).
“We’re looking at the number of partners who leave in a given year. We’re looking at cash flow coverage and asset coverage ratios,” says Dan DiPietro, a leader of Citi Private Bank’s law firm group.
Nonetheless, many firms apparently are doing well enough to qualify for increased credit: According to DiPietro, average borrowing by Citi clients was up 32 percent in January, 26 percent in February and 22 percent in March compared to the same months last year.
However, plenty of law firms “are very nervous right now” about their finances, according to consultant Richard Gary of Gary Advisors in Tiburon, Calif. For a demonstration of this, “look at what law firms are doing in terms of layoffs, summer hiring freezes and extension of first-year start dates by several months,” he says.
