is shifting £30m of its borrowings away from its bank facility and back to its equity partners as it again shakes up its capital base.
The move, which coincides with the firm’s first partner retreat for two years, comes 14 months after its groundbreaking private placement in December 2002.
It became the first UK law firm to access the capital markets. It eventually raised $150m (£81.7m) – up from the $100m (£63.7m) originally envisaged – using 10 and 20-year unsecured loan notes placed with US institutional investors and was given the equivalent of a single ‘A’ rating.
The £30m represents a little under £1,000 per point in capital contributions and some 15 per cent of overall borrowings, meaning that top Clifford Chance partners will effectively be contributing some £100,000. Freshfields Bruckhaus Deringer partners contribute an average of £220,000 in capital, and top Lovells partners contribute around £180,000, but neither of those firms have opted for bank borrowings.
While its overall level of borrowings remains the same, Clifford Chance’s move represents a reversion of its policy of no individual capital contributions. That policy has been in place since the end of 2001, when the firm first put in place a syndicated loan facility of £150m with Barclays and Citibank.
Several sources close to the firm have told The Lawyer that there had been concerns within the partnership about the covenants imposed by the 2002 private placement. Another source claimed that the covenants would be better aligned if the firm adopted a UK limited-liability partnership (LLP) structure.
The change in funding arrangements is expected to have a knock-on effect on distributions for partners. In July 2003, the firm decided to delay its quarterly distribution to partners after funds retained within the firm dipped to £161m, a level close to the firm’s agreed floor of £160m.
Although the firm posted relatively healthy half-year revenues of £440m, Clifford Chance is predicting that its top partners will make some £625,000 at the end of the financial year, which is itself a drop of 15 per cent from the year before.
Clifford Chance declined to comment.