US firms go head-to-head with magic circle establishment.
Another year, another set of bet-the-company workouts.
Every firm (bar one) on the shortlist for Finance Team of the Year at The Lawyer Awards won a place for a role on restructurings. Good technical and tactical lawyering was at a premium with intercreditor tussles aplenty.
Last year’s winner was Linklaters for its role on the collapse of Lehman Brothers. A 300-lawyer team advised Pricewaterhouse-Coopers on the unwinding of the bank. This year Linklaters has been shortlisted again for its work acting for RBS on its £282bn entrance into the UK Government’s Asset Protection Scheme.
Banking head Robert Elliott led a cast of hundreds on what is thought to be the largest financial transaction ever undertaken in any market. The deal involved HM Treasury agreeing to subscribe for £25.5bn of new capital in the form of B shares and a commitment to subscribe for another £8bn in B shares should RBS’s core Tier 1 capital fall below 5 per cent.
On the other side of the table was Slaughter and May, acting for HM Treasury on its negotiations with both RBS and the initial agreements with Lloyds Banking Group (before Lloyds decided not to participate). The lead finance partners were Matthew Tobin and Richard Levitt, with the Government’s go-to lawyer, 2009’s Lawyer Awards Partner of the Year Charles Randell, leading on the corporate aspects.
“Helping to implement a workable scheme to underwrite £282bn of complex and widely differing bank assets was a fascinating assignment for everyone in our team,” says Randell. “But real credit should go to the Treasury for making a series of judgements during the credit crunch that struck the difficult balance of restoring confidence in the banks while protecting the interests of the taxpayer. The contribution of the Treasury’s internal legal team to this achievement was extraordinary.”
On a more conventional level, City firms excelled themselves in logistical feats. Freshfields Bruckhaus Deringer’s pedigree in restructuring work was underlined by its role for Israeli-based Zim Integrated Shipping Services. Banking partner Presley Warner led a team that worked with Goldman Sachs to handle an under-the-radar restructuring of approximately $2bn (£134bn) of debt and more than 60 loan facilities.
A Herbert Smith team, led by new finance head Malcolm Hitching and finance partner Ben Ward, advised classified directories publisher Yell Group on its financing, which involved a rescheduling of its £3.8bn senior debt and a £660m placing and open offer in November last year. The most innovative feature of the deal – seen as a litmus test within the market – was the exchange of lenders’ existing debt participations for new debt with a longer maturity, higher interest rate and more covenant headroom. With more than 1,200 lenders of record involved, Yell offered a logistical challenge.
“It was being watched closely by the debt and equity markets,” says Hitching. “It was a fascinating combination of a finance and restructuring deal and last autumn it was the most closely watched financing bar none.”
Three US firms in London made the cut this year on a series of distressed deals that were tracked closely by the market.
Kirkland & Ellis fielded an eight-partner team led by finance partner Neel Sachdev that advised a consortium of lenders led by Apollo Management International, Towerbrook Capital Partners and York Capital Management on the restructuring of the Monier Group, which was previously owned by PAI partners. After a tense battle Kirkland’s clients won control of the building materials group.
“It was the first transaction that implemented a loan-to-own strategy,” says Sachdev.
Monier has been hailed by some observers as a template for a new world of transactions where activist investors call the shots; it was certainly the first time that private equity houses had teamed up with banks to take control of a major global leveraged buyout (LBO) away from the existing sponsor.
Also involved on Monier for the restructuring was Bingham McCutchen, which appeared in a traditional role for noteholders on a series of deals last year, the most prolonged being the e3.1bn (£2.64bn) restructuring of Greek telecoms operator Wind Hellas. A Bingham team led by partners James Roome, Liz Osborne and Brent Salmons advised the ad hoc committee on the group’s restructuring and prepack sale. The firm’s London office has crested the workout wave, with roles advising bondholders on Icelandic banks Glitnir, Kaupthing and Landsbanki, as well as bit parts for lenders on distressed LBOs such as Gala, Ineos and TI Automotive.
Perhaps the closest-watched restructuring of the past 12 months was IMO Carwash, which involved a classic, not to say titanic, struggle between the company and the senior and mezzanine lenders. Latham & Watkins advised IMO Carwash on the deal, which clarified a number of issues raised on MyTravel (2004) several years previously, particularly on the thorny issue of valuation and the role of the mezzanine debt in particular, which was left behind in the oldco structure, making
it effectively worthless.
“The innovation was around valuation, and this really helped settle the debate,” says restructuring partner John Houghton, who along with finance partner Dominic Newcomb advised the company.
To find out more about the shortlist, go to www.thelawyer. com/awards. The Lawyer Awards takes place on 22 June.
2009’s Banking & Finance winners
- Banking & Finance Team of the Year: Linklaters, for its work advising PricewaterhouseCoopers on the Lehman Brothers administration. The firm had to deal with assets
- of the business in more than 70 jurisdictions. It pulled together a 300-lawyer team led by London-based head of restructuring Tony Bugg and New York litigation head and US co-managing partner Larry Byrne. “Very few firms could have deployed the breadth and depth of expertise required for such a monster bankruptcy,” said one of the judges.
- Second was Slaughter and May for advising HM Treasury on the bailout of the UK financial markets in January 2009.
- Lovells was awarded the bronze medal for its work on a string of structured investment vehicle restructurings. The standout deal was the restructuring of $7bn Cheyne Capital, led by partners Robin Spencer and James Doyle.