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13 February 2014
Milbank Tweed Hadley & McCloy's London finance practice has achieved an impressive first. Already accustomed to working on a number of the largest-to-date European deals, it has now brought a new structure to Europe. In February, the Netherlands became the first European country to agree to a contractually, rather than structurally, subordinated high-yield bond financing.
The $260m (£182.6m) Bluewater Group deal closed on 22 February when acquisition finance partner Kevin Muzilla, who led the team advising lead managers ING Barings and Morgan Stanley, agreed the terms of a contractually subordinated high-yield transaction. It stands out because it defies the accepted European relationship between senior debtors and bondholders and opts instead for the more bondholder-friendly structure favoured in the US. A feat in itself, but whether it catches on elsewhere in Europe remains to be seen.
Milbank's high-yield team is one of the best in London and has been present on a number of the high-profile deals in the last two years, advising Goldman Sachs in the £1.3bn leveraged buyout (LBO) of the high-yield offering of the AES Drax power station and on the j2bn (£1.2bn) bridge facility for United Pan-Europe Communications. It also advised Deutsche Bank on a bridge and high-yield offering for the £1.3bn LBO of United Biscuits and was involved in the Messer Griesheim LBO, which at j2.7bn (£1.6bn) is the largest ever in Europe, where it advised Goldman Sachs' private equity division.
But it would be a mistake to pigeonhole Milbank as a high-yield and leveraged specialist, as it is one of the few US firms that has managed to do more than carve out a London niche.
The office opened in 1977 at the request of Chase Bank's general counsel and now has around 40 lawyers and a turnover of £20m. Ten years ago it began to arrange itself along product lines, emulating its US focus on project finance. It has since grown, bringing on board private equity, leveraged finance and most recently a structured finance team, which mixes collateralised debt obligation (CDO) and collateralised loan obligation (CLO) work. Despite its connections with Chase, Milbank is not known for an exclusive relationship with any investment banks. This could be seen as a disadvantage, but Milbank has managed to turn the predicament to its own advantage and instead boasts strong relationships with a number of them, including JP Morgan Chase, Credit Suisse First Boston, Goldman Sachs, Lehman Brothers and Deutsche Bank.
The office has seen enormous growth in the last two years. Muzilla joined from Cahill Gordon & Reindel in New York just over two years ago; then came securitisation partner John Walker, who joined from Cadwalader Wickersham & Taft and tax partner Russell Jacobs, who followed a few months later.
Walker and Jacobs have already made their mark and in June last year they closed Europe's largest static CDO, advising lead managers Merrill Lynch and Deutsche Bank on the k1.1bn (£670.8m) transaction known as Tagus 2.
Milbank is recognised globally as a project finance firm, and as expected, the London office was involved in some of last year's biggest project finance deals. The $262.4m (£184.3m) financing of the Salalah privatisation and power project and the $1.4bn (£983.3m) power and desalination project in Abu Dhabi are the most obvious, but there are more.
London managing partner Phillip Fletcher is a global project finance partner and UK-qualified John Dewar was recently made a partner to head up project finance. Milbank is one of the only firms to offer projects advice in both UK and US law.
Yet there are weaknesses. What the firm does not offer is a large European network. Bar Frankfurt, which opened late last year, London is the only European office. But Muzilla has a point when he says that clients want the best lawyers for the high-end work. He is even modest enough to admit that, given the choice, in Germany clients would likely opt for Freshfields Bruckhaus Deringer or Hengeler Mueller over Milbank.
So while the firm continues to bring in the biggest and best deals, it remains questionable whether it would benefit from a string of mediocre European offices. More of a problem, however, is what happens when all the 'biggest ever' deals are done and dusted, the question being: what will the firm do then?