Dismal market sees banking team hit hardest after banks retreat from the leveraged arena
Allen & Overy (A&O) is to drastically scale back its core leveraged finance team after a dearth of buyout activity has driven leveraged markets to an all-time low.
Five partners, whose names are known to The Lawyer, will leave A&O’s leveraged finance team in London, which numbers 12 and is led by Tim Polglase. Four of the departing partners are understood to be equity partners.
A&O’s general banking practice is looking to lay off 31 of its 192 associates – a total of 16 per cent compared with the 9 per cent cut announced across the rest of the firm. Although redundancy consultations are still ongoing and will also include 92 other fee-earners in that department, it is expected that leveraged finance associates will be especially hard hit as the team is bearing the brunt of the partnership cuts.
A&O said in a statement: “This is an unsettling time for everyone at A&O. In the interests of our people we won’t be commenting on speculation regarding who may or may not be departing. Nor will we be commenting on how different practice groups or offices may be affected.”
Until recently leveraged finance was a driving force in A&O’s banking practice, but as the graph shows the market has fallen away and is showing no signs of recovery. According to one City finance partner, it could be up to seven years before the market comes back.
The ;partner ;said: “Leveraged finance isn’t happening at the moment – most of the players who are providing those loans are out of the market. It’s an extremely challenging time.”
Last month Royal Bank of Scotland (RBS), one of Europe’s largest leveraged lenders, announced that it was pulling out of the leveraged field and stopping lending in the structured real estate and project finance arenas.
“The banks are starting to dismantle their lending platforms,” explained one finance partner.
RBS is a major finance client of A&O’s, as well as Clifford Chance and a number of other firms.
Clifford Chance also has a large leveraged finance group, but a spokesperson for the firm said that no decision had been made about the practice, with plans ;for ;a ;firmwide reshaping of the partnership still under review.
The exit package for A&O’s departing leveraged finance partners, who will leave by the summer, is thought to be the equivalent of a year’s drawings.