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Annington deal underlines relationship with magic circle firm
Freshfields Bruckhaus Deringer is advising Annin-gton Finance on its asset-backed £428m bond issue. The deal will be secured on rents and sale proceeds from the Annington Homes housing portfolio. The firm has a long-standing relationship with the group and advised on its original acquisition of a portfolio of 57,428 homes when it bought the Ministry of Defence's (MoD) Married Quarters Estate for £1.66bn. Annington was set up in 1996 by Nomura's principal finance group to buy the MoD estate. The principal finance group is run by banker Guy Hands, who is leaving to establish his own investment fund - Terra Firma - and who has close ties with Freshfields. The tap issue includes the introduction of Class C notes and an additional liquidity facility. However, there were no additional assets sold into the company.
"There's been a higher release of units by the MoD and more cash has flowed through the transaction than originally expected" Alan Newton, Freshfields Bruckhaus Deringer
The deal saw £240m worth of AAA-rated tranches, a £220m A2-rated tranch and a £150m tranch rated Baa2. However, the deal is noteworthy in that it raises additional funds without additional collateral while preserving the original rating. According to the lead partner on the deal Alan Newton, this is because the underlying portfolio has performed better than expected. "The assumption by the raters as to the rental and capital growth in the value of the estate has been realised through the disposals," said Newton. "There's been a higher release of units by the MoD and more cash has flowed through the transaction than originally expected." According to rating agency FitchRatings, the rental receipts on the properties increased by nearly a third in 1999 and are projected to rise by 48 per cent in 2001. Market participants, however, said that the lead managers struggled to get the lower-rate tranches away. Some investors said they were put off by the complexity of the structure behind the lower-rated tranches. Annington's acquisition in 1996 was followed by a securitisation in 1997, and again the company instructed Freshfields. A team at Nabarro Nathanson led by corporate partner Peter Williamson advised the directors of Annington. Lead managers on the deal Barclays Capital and UBS Warburg were advised by international capital markets partner Christian Lambie at Allen & Overy (A&O). David Krischer took over from Lambie in January. A&O also advised the trustee Law Debenture Corporation.