A year-long bidding process for the first ever private sector purchase of UK student loans won by a consortium advised by Clifford Chance has left Freshfields and Slaughter and May licking their wounds.
Freshfields had been advising two of the four shortlisted bidders for the £1bn tranche of student loans being offered by the Department for Education and Employment (DfEE).
But it is understood the department, advised by Lovell White Durrant, asked Freshfields to resign as adviser to one of the bidders to avoid a conflict of interest.
In the end Freshfields declined to act for either consortium, a combined BZW- Goldman Sachs team on the one hand and Deutsche Morgan Grenfell-Fannie Mae on the other, to avoid any perception that there might be a conflict of interest.
Both bidders ended up instructing new solicitors: BZW-Goldman used Slaughter and May, while Allen & Overy stepped in to advise Deutsche Morgan Grenfell (DMG). The other two of the four finalists were NatWest Markets, advised by Clifford Chance and JP Morgan, advised by Linklaters.
The DfEE had selected the four at the end of October from 11 consortia that had made indicative offers. In January this year the NatWest and BZW teams were selected to sign heads of agreement.
The Clifford Chance team, led by Stuart Popham, was finally able to celebrate earlier this month when the privilege of buying the loan, complete with a Government subsidy to top up student-discounted interest rates, was awarded to the NatWest team.
It is understood both Clifford Chance and Slaughters agreed that their clients would only pay a substantial proportion of their fees if they won the bid, so Slaughters is likely to have been only partly paid for the year of work it did preparing its client's bid.
Slaughters partner Jonathan Marks declined to comment on the fee arrangements with his client.
The Lovells team, led by Andrew Gamble, also advised NM Rothschild, the Government's financial adviser, on the terms of the sale. Gamble's assistant, Emily Reid, said her team had to first advise the DfEE on the legislation required to ensure the loans were commercially attractive.
The Government will be selling a further £2bn worth of student loans next financial year and will use the deal agreed with NatWest as a template.
NatWest's separate vehicle, Finance For Higher Education, is funding the purchase by securitising the loans.
Popham stressed that student loan securities, proven to be popular with investors in the US, had never before been issued in this country. "The transaction marks the arrival of a major new asset class," he said.