Herbert Smith secures CDO first for AIB Capital Markets

Galway Bay project gives firm £285.8m kick-start in structured finance

Herbert Smith has acted for AIB Capital Markets for the first time as it continues its push into structured finance.

Finance partner Jake Jackaman advised AIB on the Galway Bay collateralised debt obligation (CDO), AIB’s third in two years. This deal confirms AIB’s position as a key player in European leveraged financing.

Galway Bay is a cash-funded arbitrage CDO, which has issued e407m (£285.8m) of senior deferrable interest and subordinated notes to buy senior and mezzanine loans in the leveraged market.

Jackaman, who arrived at Herbert Smith from White & Case last year, replaced AIB’s prior adviser Ashurst Morris Crisp, which had acted on Clare Island, the previous CDO, in March 2002. Ashursts did not return a call for comment.

Jackaman said: “This deal for an investment adviser complements a number of highly structured private deals which we closed for arrangers earlier in the year.”

Galway Bay marks Herbert Smith’s first major incursion into the CDO market, although the firm’s securitisation practice, led by Jane Borrows, has won a number of mandates from arrangers such as HSBC, Lehman Brothers and Merrill Lynch in the past year.

In June it acted for HSBC on the £250m mortgage-backed deal for the Paragon Group and for Merrill Lynch on a £150m secured warehouse facility.

Advising Morgan Stanley, the lead managers, was a White & Case team led by Rich Reilly. The US firm has acted for Morgan Stanley on all three of AIB’s CDOs and has built up a strong practice as deal counsel for arrangers, having acted on both of the Duchess CDOs.

As reported in The Lawyer in February 2002, White & Case snagged the Duchess 1 tap issue and Duchess 2 CDO for CIBC World Markets after Freshfields Bruckhaus Deringer turned down the work because it did not have sufficient resources to handle it.