Cahill on European bond red alert

Last week the transatlantic legal community was buzzing following’s story (3 November) that high-yield boutique Cahill Gordon & Reindel plans to fly in associates to London to help cope with increased dealflow in the European bond market.

The story has also got tongues wagging at Cahill itself. “It’s simply not true that we’re flying in a team of associates to London,” counters administrative partner Jonathan Schaffzin. “It’s just not right to say these plans have been made.” Cahill refuses to comment further on the story, but sources at the firm suggest that, although plans to bulk up in London may not have been finalised, it is certainly a topic under discussion. “We’ve periodically sent over associates to work in London on a project-by-project basis,” says a partner at the firm. “The markets are much more active this year and there’s a need for more lawyers on the ground.”

The demand for resources in the high-yield area has grown strongly in recent months and Cahill currently remains streets ahead of the competition on the underwriter side. Thomson Reuters’ statistics on high-yield deals for 2009 ranks the firm at number one on advising managers, having advised on 34 deals with a total value of $14.84bn (£8.97bn). Cahill’s closest rival is Shearman & Sterling, which secured 16 underwriter mandates ($13.64bn), followed by Latham & Watkins with eight ($6.33bn). Cahill is already active in London, although its City office is tiny, with just one partner and two associates.

That team, featuring London partner Jim Robinson, was instructed earlier this year as underwriter counsel to a group of banks, which included Credit Suisse on Fresenius’s $860m high-yield bond. Globally Cahill boasts an impressive roster of longstanding investment banking clients, including Deutsche Bank, Morgan Stanley and Bank of America, all of which have been active internationally. But while many of its US rivals – most notably Latham – have grown significantly overseas, Cahill remains ultra-conservative in its approach to expansion.

The 287-lawyer firm operates mainly out of its New York headquarters, plus a small office in Washington DC and another in London, its only international office. “It’s a niche firm that’s had tremendous success in high-yield,” says one former Cahill New York partner. “Their philosophy has always been, if it ain’t broke don’t fix it.” Schaffzin’s denial that it is looking to ramp up in London demonstrates Cahill’s continuing lack of appetite to expand internationally, and considering its high profitability during the boom time this is understandable.

But last year the firm suffered a revenue drop of almost 12 per cent, from $280m in 2007 to $247m, and a reduction in profit per equity partner (PEP) of 18 per cent, from $2.59m down to $2.12m. Indeed, the firm’s natural conservatism appears to have been damaging in recent years. In January partner Gary Brooks, whose clients include Barclays and Credit Suisse, defected to Clifford Chance’s New York office to help bulk up the magic circle firm’s high-yield capabilities (The, 20 January). A number of other Cahill lawyers have also moved to firms with more international outlooks. Cahill’s first UK-based associate Jonathan Bloom joined White & Case in 2007 before being hired by Ropes & Gray last month to help former colleagues Maurice Allen and Mike Goetz launch the US firm’s office in the City (The Lawyer, 26 October). “Cahill is a training ground for entrepreneurial and talented high-yield lawyers,” says one of the firm’s former partners. “The alumni have a lot of respect for it and the way it’s run. You’d be hard pushed to find anyone saying anything negative about Cahill.” Judging by past behaviour Cahill is unlikely to launch a fullscale international high-yield practice in London equipped with local law capabilities. But as its rivals jockey for position in the burgeoning European high-yield market, the firm could be missing a trick.