Orrick Delays Payments to Departing Partners, Blames Lenders
Partners who leave Orrick, Herrington & Sutcliffe will have to wait longer than usual to get their capital contributions returned.
Orrick has told former partners that they will have to wait for money that ordinarily would have been paid this spring, the Recorder reports. Orrick’s letter to the partners says it is making the change because of an amendment to its primary credit agreement with its banks.
An Orrick spokeswoman issued this statement to the Recorder: “A standard requirement contained in a new credit agreement we entered into this year now requires that these payments be made in the fall rather than the late spring/early summer.” She did not provide the publication with additional details.
The Recorder says some partners could have to wait nearly two years to get their money under the new credit agreement. It provides that a partner who leaves the firm won’t get capital contributions until the fourth quarter of the following year. That means a partner who leaves in January wouldn’t be paid for at least 22 months, the story says.
Legal consultant Peter Zeughauser told the Recorder that it is a best practice to defer capital payouts, but Orrick’s withhold time is “a long withhold period” that could harm lateral recruiting. He also said that he hasn’t heard of banks requiring the longer deferrals.
The story says only about eight partners left Orrick last year. Some former partners speculate the move is aimed at preventing a cash drain by any partners who decide to leave in the future.
