Canary Wharf's u2.6bn bonanza for City firms

LEGAL history seems to be turning full circle at Canary Wharf – the 85-acre site east of the City – as Allen & Overy and Clifford Chance prepare for its unique u2.6bn flotation.

City firms such as Ashurst Morris Crisp, Lovell White Durrant and Slaughter and May have made a good profit out of Canary Wharf, particularly on property lettings. One US law firm, Skadden Arps Slate Meagher & Flom, made the Canada Square tower its home in 1996.

But Clifford Chance and Allen & Overy are arguably closest to the roller-coaster story of Canary Wharf, which has risen phoenix-like after nearly going bust in the early 1990s. One saved it from oblivion. The other was sued for u610m.

Back in September 1993, Allen & Overy triumphed with a u1.1bn bankers' rescue package. A high-level team led by insolvency head Peter Totty and banking chief Philip Wood – two of the City's best-known lawyers – put together an audacious rescue package involving five Company Voluntary Arrangements. “We have tried to avoid complication. I would prefer to use the word 'elegant',” Totty was quoted as saying at the time.

Clifford Chance also played a big role in advising four Canadian banks which bought a stake in Canary Wharf developer Olympia & York (O&Y). But it all ended in tears when O&Y collapsed and Clifford Chance was sued for u610m over allegations of professional negligence. The firm is thought to have paid u10m in a settlement a year ago.

Today, Allen & Overy is acting for the sponsor Morgan Stanley through a team led by partner David Wooton. Meanwhile, Clifford Chance is acting for the Canary Wharf Group. Partner Martin Richards calls the deal “unique”.

As to whether the lawsuit fiasco caused any lingering embarrassment, a Clifford Chance spokesman says: “It's unrelated.”

Both firms have done regular work for Canary Wharf in recent years. Allen & Overy conducted the u555m secured loan securitisation in December 1997 – the largest ever on a single property development.

The initial public offering of 25 per cent of the company is restricted to institutions. It will take place at the end of the month. Canary Wharf is expected to capitalise at about u2.6bn, raising u650m in cash.