The partners of Mudge Rose Guthrie Alexander & Ferdon, one of the nation's top municipal bond law firms, yesterday voted to dissolve the firm by the end of the year.
The liquidation announcement followed the departures of numerous public finance and litigation lawyers from Mudge Rose over the last few months, and speculation about how the firm could extricate itself from a dismal fiscal situation.
Since last fall, Mudge Rose had lost key clients, such as Cigna Life Insurance Co., and the firm's profits had sunk at time when the number of partners had grown over the last 10 years, sources familiar with the firm said.
The firm's decline and accompanying speculation about its future fed the notion that municipal bond lawyers have become a regional commodity, and that the market can't support national practices like Mudge, especially in a time of declining bond issuance.
"If you look at the firm's numbers, you see that in the last few years they have been big volume-wise," said a former Mudge attorney. "But that's due to big deals for a relatively few number of clients."
In 1994, Mudge Rose ranked fourth among bond counsel firms nationwide, serving on 104 issues totaling more than $7.5 billion, according to Securities Data Co. This year, the firm served on 38 deals totaling more than $3 billion, Securities Data said.
In comparison, the top-ranked bond counsel firm so far in 1995, Brown & Wood, served on 93 issues totaling more than $6.3 billion, while the number two firm, Orrick, Herrington & Sutcliffe, served on 167 issues totaling more that $5.8 billion, Securities Data said.
The firm's executive partner, Donald Zoeller, did not return telephone calls yesterday. However, the firm released a statement announcing the partners' unanimous decision to liquidate the firm.
"At today's meeting, the partners unanimously pledged to assure the protection of their clients in a prompt satisfaction of all responsibilities," the statement said.
The partners named a committee consisting of Zoeller, Malcolm R. Shade, and Arthur F. McMahon to oversee the firm's dissolution, which is expected "by the end of this year," the statement said.
As for the firm's debts: "It is anticipated that the liquidation will be an orderly one and that creditors' claims will be satisfied," the statement said.
In the last few months, noted public finance lawyers Eugene Harper of the New York office and Charles Carey of Los Angeles left Mudge for smaller firms. Experts on tax law, public power, and other key areas of municipal finance also departed to such market powerhouses as Orrick.
Harper joined New York City-based Haythe & Curley, a firm focused on corporate financing, and Carey went to Boston-based Mintz, Levin, Cohn, Ferris, Glovsky & Popeo.
What will happen to the public finance attorneys remaining at Mudge remains to be seen. Some market sources even speculated that the dissolution could be a window of opportunity.
"A new group of former Mudge attorneys could break off and form their own firm with much lower overhead and a regional commitment," said one former Mudge attorney.
Over the last few weeks rumors have swirled that Mudge, once the firm of Richard Nixon and John Mitchell, might merge with another firm, or that still strong segments such as the public finance and litigation units might split off, unburdened by Mudge's high overhead costs.
Last week, the firm's chief litigation lawyer, John Kirby, left Mudge, taking 30 litigators with him.
In the meantime, the firm's clients - which include some of New York State's largest issuers of municipal bonds - must restructure their legal teams.
Stephen Reitano, finance director for the Metropolitan Transportation Authority, a long-time Mudge client, said the authority plans to send out a request for proposals for bond counsel in the coming weeks.
"I'm well aware of Mudge Rose going out of business later on in the year," Reitano said. "We anticipate having a bond firm prior to that happening ... We don't anticipate (the firm's closing) impacting any of our financings."
