Bonelli challenges magic circle hold over structured finance
10 March 2003
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It's not quite what the magic circle is used to in Europe: an indigenous, independent firm suddenly venturing into a market that is largely the domain of the international heavyweights. But this is exactly what Bonelli Erede Pappalardo is doing as it builds a structured finance practice from scratch, and rather successfully.
Ok, so Bonelli can count Slaughter and May, Davis Polk & Wardwell, Cravath Swaine & Moore and Shearman & Sterling as its close friends, but it has never been known as a finance firm.
Formed by a three-way merger in 1999, its constituent parts were built on corporate relationships such as Telecom Italia, Benetton, Alitalia, Armani and Prada.
Historically, Chiomenti Studio Legale was the only Italian firm to invest significantly in finance lawyers. "We've been doing it since the 1970s," one if its partners is keen to point out. Until as recently as the early 1990s, when Clifford Chance entered the Italian market through its joint venture with Vittorio Grimaldi, Chiomenti faced virtually no competition. It was safe as the first choice for international banks active in the region. Inevitably, that position has since been eroded. Chiomenti lost partners to both Allen & Overy (A&O) and Freshfields Bruckhaus Deringer.
Managing partner and structured finance lawyer Francesco Ago is still in place, ensuring that its key relationships, including Chase Manhattan and Deutsche Bank, remain intact, even if it has to fight for a share of the work. The firm's relationships with state departments are also incredibly strong - a major plus given that the Italian government is the country's biggest originator of securitisations.
While Clifford Chance, A&O and Freshfields have all gained market share, Bonelli has not been entirely absent. In 2001, partner Alberto Saravalle advised Telecom Italia on the first European public telecommunications securitisation, structured as an AAA/Aaa rated E2bn (£1.37bn) asset backed note programme. Slaughters was brought in for a supporting role and there are no prizes for guessing that it was Clifford Chance that acted for lead arrangers, Westdeutsche Landesbank, BNP Paribas and Finanziaria Inter-nazionale. Belatedly, Bonelli made its move that same year, raiding Clifford Chance for one of Italy's best known structured finance lawyers. Alberto Del Din, the head of Clifford Chance's London Italian desk, moved to Bonelli with Milan finance partner Paolo Olivieri and a mandate to grow a practice for the firm. The impact of their arrival on Bonelli's institutional relationships is clear (see table). Slaughter and May partners, including Andrew McClean, Marc Hutchinson and Stephen Powell, have been brought in on a string of securitisations run by the new team over the past year. With Del Din in London, Bonelli can also stay close to the banks at a time when they are scaling back their on-the-ground presence across Europe.
So why is Bonelli suddenly so eager to play catch-up in the structured finance field? The general trend across Europe towards using structured finance techniques to increase the benefits of corporate transactions has not passed Italy by. An additional spur was the Italian Securitisation Law, approved in 1999. As well as giving corporates access to bondholders, the protection the law offers for investors if the corporate goes bankrupt is a major attraction. Securitisation is now commonly used in Italy as a way of finalising a deal.
A typical example is last year's 480m (£329.6m) acquisition of Aeroporti di Roma, which holds the concession to run Rome's two international airports. The acquiring consortium, led by Macquarie Bank, was advised by Freshfields. Last month, Aeroporti di Roma refinanced E1.8bn (£1.2bn) of debt as a condition for the acquisition to proceed, largely through a securitisation. Clifford Chance acted for arrangers Barclays Capital and Mediobanca, while little known Italian firm Giliberti e Associati advised Aeroporti di Roma by virtue of a longstanding corporate relationship.
Higher up the food chain it is just this kind of relationship that Bonelli is trying to safeguard. Without lawyers like Del Din and Olivieri, sources in the Italian market say that Bonelli risked losing some key corporate clients. The new practice is also a way of attracting mandates from the government.
Bonelli has recently acted for an investment group led by the Benetton family on the successful completion of its takeover offer for Autostrade, the Italian motorway operator. The group, Schema28, now owns 84 per cent of Autostrade after spending E6.5bn (£4.5bn) on the 70 per cent it did not already own. Again, the deal is likely to be refinanced through a securitisation. With the closing dinner out of the way, Del Din's work has barely begun.
So, would Bonelli have been instructed by Benetton without Del Din? Probably yes, but his new team eliminated any uncertainty.