FINANCE TEAM OF THE YEAR
WINNER: Slaughter and May
Slaughter and May advised power station Drax on its conversion from a predominantly coal-fuelled to a predominantly biomass-fuelled generator. A new client to the firm, Slaughters helped Drax secure £790m of funding. Slaughters' debt financing team set about raising the amount through a combination of equity by Drax, and term/working capital debt raised in the UK business. The team faced a particular challenge in bringing together a hodge-podge group of lenders into the debt financing. As well as a traditional group of lending banks including Barclays, Lloyds and RBS, it brought in innovative lenders including Prudential/M&G and the UK Government-owned Green Investment Bank. In fact, Drax was one of the first companies to benefit from UK Green Investment Bank funding and the first on such a big scale. All this took place against a background of regulatory upheaval, which demanded the team build a high level of flexibility into the transaction. This clearly worked. In late October 2012 Drax successfully raised £190m of equity, within just weeks of the UK Government's autumn endorsement of biomass. The result? The £790m of funding achieved not only the quantum but also the maturity profile and operational flexibility needed to make the transformation to a clean energy generator. For the judges, the deal was “an impressive transaction involving finance counterparties with differing interests funding a transaction with a significant risk profile”.
2ND: Freshfields Bruckhaus Deringer
UK-based company Center Parcs already has four holiday villages in the UK, and was looking for a way to finance building its fifth. There wasn't any one product that would have been able to cover the amount, so Freshfields Bruckhaus Deringer advised the Royal Bank of Scotland on how to plug the gaps. The team worked to blend a £740m whole business securitisation with a £280m high-yield bond, allowing Center Parcs to refinance its existing CMBS debt structure. The new structure was backed by the four existing holiday park sites, while raising a development finance loan to fund the fifth. The team's biggest challenge was to make the isolated products work together without either losing their identity or appeal to investors. As part of the refinancing, a complex group reorganisation was undertaken to separate out the new Woburn site from the WBS/HY structure to enable the development finance loan to be raised against it. It could then be brought back into the WBS once the development was complete. Judges said: “The WBS was structured in a way that I had not seen previously and looks like a great achievement.”
3RD: Norton Rose Fulbright
Worldwide Islamic finance assets reached $1.6tr in 2012, with London becoming a global hub for the blossoming market. That said, the UK has been waiting for over five years for a UK sovereign sukuk. Norton Rose took strides towards achieving this aim in advising Gatehouse UK on establishing a real estate based sukuk backed by an ijara (lease) structure – the structure used by the majority of sukuk issued internationally. It's the first sukuk of its kind to be issued in the UK.
There's been great debate in the Islamic finance world about whether bonds are asset-based or asset-backed. This was at the heart of the conundrum for the team at Norton Rose. They tackled the problem by structuring the ijara with a sale and purchase undertaking that gives noteholders recourse to Gatehouse Bank in addition to security over the sukuk asset, in effect acting as an Islamic covered bond. For the judges, this was “an interesting transaction in an important and growing area and one which is underpinned by a wide range of other transactional work. Solid and sensible”.