Vanessa Pawsey
National firm completes its most complex syndicated loan deal to date
Pinsent Curtis Biddle has advised Bank One as agent and arranger of a syndication of banks on a £60m cross-border multi-currency facility for collagen manufacturer Devro.
The facilities will allow Devro to restructure and reorganise in the UK, the US, Australia and Czechoslovakia, where it has business interests.
Pinsents' relationship with Bank One was founded by Rhodri Davies, lead partner on the deal, who has advised First National Bank of Chicago since he was at Clifford Chance. When First National Bank of Chicago merged with Bank One, Davies continued to advise the merged entity and the bank moved with him when he left Clifford Chance in 1992.
The facilities, which were provided by Bank One, the Royal Bank of Scotland, Clydesdale Bank and Fortis Bank, required cross guarantees with each group company in each jurisdiction.
Because finance was being invested in a number of jurisdictions local law had a large part to play in the transaction and a number of law firms were involved in advising the syndicate.
Mayer Brown & Platt advised on US law, Mallesons Stephen Jaques advised on Australian law, White & Case advised on Czech law and Burness advised on Scottish law.
Included in the deal was a letter of credit and guarantee option which allowed the borrowers to counter indemnify the syndicate and take on the risk.
However, this chain of indemnity could not be applied to the Australian facility because of differences in Australian law. In this case, the credit of the Australian borrower was not strong enough to support lending without a guarantee from the other groups.
According to Davies, tax was a large consideration in structuring the deal. He said that because the number of banks in the syndicate did not exceed nine and the Australian borrowers could not use the letter of credit option, the UK banks had to indemnify the Australian banks in order for the Australian borrower not to pay withholding tax.
"The transaction had to be custom made to take account of universal composition of the syndicate. The structure also allowed the banks to provide the facilities cost effectively within Australia," he said.
The refinancing of Devro follows the disposal of its loss-making cellulose food casings business to a newly-formed entity company for £4.9m. The company, named Teepak, is based in Chicago.
As part of the deal, Teepak agreed to take on £28.3m worth of liabilities relating to employees of the cellulose operation, which lost Devro £2.6m last year.
The disposal of the cellulose business means that Devro can concentrate on its successful global collagen business, which includes the manufacturing of sausage skins.
Devro instructed long-term adviser Clifford Chance. According to the lead partner on the deal Mark Stewart, Devro has been a client since Clifford Chance advised the company on its management buyout and subsequent flotation, which took place more than 10 years ago. Mallesons advised the company on Australian law.
