Freshfields Bruckhaus Deringer's finance department has lost out to White & Case on CIBC World Markets' latest deal.
The US firm acted for CIBC in its role as co-arranger on Duke Street Capital Debt Management's latest collateralised debt obligation (CDO) fund, Duchess II.
The e750m (£496.8m) CDO, which sees CIBC teaming up with Société Générale as co-arranger on the deal, is due to close by the end of March.
The appointment of White & Case is a blow to Freshfields, which initially advised CIBC as the lead arranger on Duke Street's first CDO e750m fund, Duchess I.
White & Case, led by structured finance partner Richard Reilly, snagged the mandate after taking part in a beauty parade early last year, where it is understood that Freshfields was among the four competing law firms.
Howard Redgwell, a lawyer at CIBC, confirmed that the bank had initiated a beauty parade and White & Case had been chosen for the deal.
In December last year, however, Duke Street decided to increase the size of the fund, which was fully invested in July last year, to e1bn (£662.5m), making it the largest in Europe.
CIBC, which structured the tap issue to expand the size of the fund, brought in White & Case after Freshfields had turned down the work due to a lack of resources.
According to Zak Summerscale, a senior portfolio manager at Duke Street, Duchess II will be configured slightly differently from Duchess I, where 10 per cent of the fund was invested in high-yield debt. The rest consisted of 80 per cent senior secured loans and 10 per cent was invested in mezzanine.
Duchess II will be made up of 75 per cent in senior debt, with the remainder invested in mezzanine.
Summerscale said: “I think that mezzanine is much more attractive than high-yield at the moment – for example, the returns are better and it's seen as less risky.”
The decision to concentrate on senior and mezzanine is symptomatic of the CDO market, where over the last 12 months there has been a move away from more fragile high-yield investment, blighted by the collapse of the junk debt-ridden European telecoms sector, to the leveraged loan arena.
Clifford Chance is again acting for Duke Street after advising on Duchess I, with securitisation partner Neil Hamilton taking the reins.