Kavisha Bilimoria, Ashurst

Ashurst advised BP on its $12bn debut corporate hybrid debt issuance, which at the time was the largest multi-tranche corporate hybrid ever priced.

This issuance was a strategically important transaction for BP and a significant step to improve BP’s liquidity, strengthen its balance sheet in response to challenges posed by covid-19 as well as supporting its long-term objective to become a net zero company by 2050.

The team was led by debt capital markets partner Alex Biles with support from senior associate Kavisha Bilimoria, who joined the firm in July 2015 in Sydney as an NQ before she moved to the London office in August 2018.

She qualified in Australia in May 2015 while working in the legal team at Westpac in Sydney, where she had been for five years. “I started off my legal career at Ashurst in Sydney working with global co-head of our finance, funds and restructuring division Jamie Ng – Jamie actually hired me – and we worked together on a number of derivatives, including structured derivatives transactions, as well as real estate and infrastructure finance transactions before I moved to London,” she says.

“Since then, I have worked with Alex Biles, and having worked with Alex on a number of debt capital market and infrastructure finance transactions, including BP’s debt issuance programme every year, I was delighted to be able to work with him on the hybrid bond issuance last year.”

She advises on a range of finance matters across various industry groups with a particular focus on energy, rail and infrastructure. “I really enjoy working with clients in these sectors because there is a tangible output for the financing. The BP hybrid issuance is a great example of this, where we were able to take a bespoke financial structure to deliver a product that not only supports BP’s balance sheet but also its long-term objective to become a net zero company by 2050,” she says.

“Most recently, I have been working on transactions to fund the rollout of smart meters. It is great to be working in this space as smart metering is such a new and exciting energy technology which will help inform the public about their own use of electricity in the home and hopefully make some informed decisions around energy efficiency.”

The transaction is a clear example of how large corporates are turning to the hybrid capital market to strengthen their balance sheet to be more resilient in the post-covid-19 economic environment and in anticipation of the acceleration of the energy transition process. The transaction was also aimed at helping BP to further invest in renewables and cleaner power sources as part of their commitment to be net zero by 2050.

Ashurst has advised BP in a number of areas in recent years and in 2020 alone, alongside this issuance, advised on its subsequent $4bn bond buyback – the largest corporate bond buyback conducted in Europe financed in part by the proceeds from the hybrid debt issuance – and its new $10bn revolving credit facility.

The transaction comprised dual offerings, with $5bn raised in the US/Asia offering in two USD tranches and approximately $7bn raised in the European offering, across three Euro and Sterling tranches. BP’s entry into the corporate hybrid market also reflects a wider trend of strong corporate issues looking to raise subordinated debt to support their balance sheets.

Ashurst was lead counsel advising BP on the structuring aspects of the transaction ensuring that the notes met Moody’s and S&P’s criteria to achieve 50 per cent equity credit rating, obtained 100 per cent equity treatment under IFRS and benefited from the desired tax treatment. The transaction was the first from the UK to achieve these three objectives on a corporate hybrid debt issuance.

Due to the simultaneous offering in the US/Asia and Europe, the Ashurst team worked collaboratively with Sullivan & Cromwell, who acted as co-counsel to BP and advised them on the New York law aspects of the US/Asia offering.

“I really enjoyed advising BP on its $12bn debut corporate hybrid debt issuance. This is the largest debut corporate hybrid issuance and the largest multi-tranche corporate hybrid issuance ever priced, so it was great to have been part of the team advising on such a landmark transaction and to have played a role in helping the bp team achieve such a successful outcome,” says Bilimoria.

“Working on this transaction I definitely gained a deeper understanding of our client’s drivers and business plan, but I was also able to develop my knowledge and experience of the hybrid market. This is an area which is only set to increase in activity as large corporates turn to the hybrid capital market to strengthen their balance sheet to be more resilient in the post-pandemic economic environment and, for energy companies in particular, in light of the changing environment towards cleaner, low carbon energy.”

Bilimoria describes the transaction as “highly complex” and requiring a detailed understanding both of the structuring and subordination elements. “The transaction needed to balance the tax, accounting and rating agency requirements, which often can lead to competing structuring demands. In addition, as the transaction involved a coordinated European/Asian offering alongside a US registered offering, we needed to be cognisant of the drivers for certain terms and conditions from a US perspective led by BP’s US counsel, Sullivan & Cromwell, that then had to be reflected in the European/Asian offering.”

She says she expects the deal will definitely have a lasting impact on her career. “This was a ground-breaking transaction which really allowed me to add further depth to my existing expertise, and off the back of the successful BP hybrid, I was given the opportunity to work on a similar hybrid transaction with another client shortly thereafter. Importantly it has also confirmed in my mind that banking/finance law is exactly the career I’d like to have, but also that I enjoy the challenge of working on transactions with bespoke, complex funding structures.”

One of BP’s key objectives was to ensure consistency between the European and US/Asian tranches of the transaction. The collaborative tax advice given to BP by the Ashurst team with respect to the corporate interest tax deduction rules and the interaction with the recently introduced UK hybrid capital instruments regime was integral to BP’s decision to proceed with the transaction. This was the first perpetual corporate hybrid transaction under the UK’s new hybrid capital tax rules and Ashurst excelled in providing advice on this market-leading and innovative transaction.

BP is a key client for the firm across various practice areas and in the past year the team has continued to strengthen and develop this relationship to work with them on some of their most important financings, including a $4bn bond buyback – the largest corporate bond buyback conducted in Europe financed in part by the proceeds from the hybrid debt issuance – and its new $10bn revolving credit facility.

“I am still working with BP and have recently been working on their debt issuance programme, including annual updates, and several tender offers that are part of its ongoing plans to deleverage its balance sheet,” Bilimoria says.

“I’d like to think we’ve always had a strong relationship with BP and this transaction has only solidified that further. We’ve worked on a number of transactions with bp since and it has helped us better understand BP’s overarching goals and the drivers behind their business, as well as forming strong working relationships with members of the team.”

Reflecting on the pandemic, she says that initially not having a working printer proved to be somewhat of a struggle when she started working from home, but she soon mastered the art of reading long prospectuses on a small screen.

“It was also the first big transaction which started and ended during the global pandemic, so all work was undertaken remotely. However, we have worked with the BP team on a number of transactions in recent years, and so do have a strong working relationship with them, which certainly meant picking up the phone and joining video calls was easy,” she adds.

“I don’t think you can underestimate the importance of having a supportive team who communicate effectively. In an office you can easily pop by someone’s office and bounce ideas around, however, having to complete this transaction while working remotely meant these types of discussions now had to take place over the phone or via video conference. This certainly made me think more critically from the outset, as I found I would think about the issues first before picking up the phone and having that discussion.”