Year’s End a Crucial Time for Law Firms Paying Down Credit Lines

Some troubled law firms could have trouble paying down credit lines by the end of the year as required by their banking agreements.

Credit agreements usually require law firms to keep a zero balance for 30 consecutive days, experts told the Am Law Daily. They acknowledged that some law firms may have trouble complying before year’s end.

Jeffrey Grossman, a managing director in Wachovia's legal specialty group, acknowledged some concern. He told the Am Law Daily that law firms borrowing from the bank are 30 percent from the levels they usually pay down.

"It's pervasive," Grossman told the publication. "It's across the whole industry. It's not just New York City. It's not one practice area. It's not one geographic location."

Andrew Johnman, head of professional services at Barclays, told the Am Law Daily that it’s taking law firms longer to pay down credit lines because collections are slower and billings are lower.

Other experts told the Am Law Daily that law firms are facing higher rates on loans as they renew their credit. That’s bad news for law firms that are increasing their borrowing. For the first nine months of the year, Citigroup’s lending to law firms was up by more than 30 percent over last year’s levels, said Dan DiPietro of the bank’s law firm group.