CC to raise $100m in US private placement

Magic circle firm in UK first; external investors wooed with pioneering bond issue

Clifford Chance is set to embark on a groundbreaking financial strategy which will see the firm raise $100m (£63.7m) through a US-based private placement.

The Lawyer understands that Clifford Chance is considering approaching US insurance companies to buy bonds in the firm as part of a long-term financial planning programme. It is believed that the firm has chosen Barclays Bank to act as the agent to sell tranches of the placement to interested parties.

It is the second major deal that Barclays has been involved with on behalf of Clifford Chance, after last year acting alongside Citibank on granting a £150m revolving loan facility to the firm (The Lawyer, 28 January).

Clifford Chance is only the third law firm, and the first UK practice, to contemplate such an innovative move after US firms Morrison & Foerster (MoFo) and Arnold & Porter raised funds through placements.

However, the scale of borrowing being considered by the UK firm considerably outweighs previous similar bond issues. MoFo, for example, raised a relatively small $30m (£19.1m) in 2001-02.

It is understood that the firm has been examining a number of funding options since the beginning of the year as a means of diversifying its portfolio of borrowings.

Also, while Clifford Chance could have chosen to take out a long-term loan with a bank, resulting in potentially large interest charges, a private placing will take advantage of current cheap borrowing opportunities in the US.

Stateside, interest rates are currently at a 40-year low of 1.25 per cent; and with speculation that the US Federal Reserve is contemplating another cut, long-term treasury rates, on which the price of the bonds will be set, could fall even further.

Sources speculated that the placement would allow Clifford Chance to pay off some of the funds it has drawn down from its revolving loan facility to allow continued flexibility of capital.

It is not clear if the bonds have yet been priced. But it is understood that Clifford Chance has been rated ‘one’ on a scale of one to six from the National Association of Insurance Commissioners.

This gives the firm the equivalent of a single ‘A’ rating, meaning that it would be considered an investment grade vehicle from rating agencies such as Standard & Poor’s and Moody’s.

Clifford Chance was unavailable for comment.