A flair for innovation sets apart the banking and finance teams on this year’s shortlist for top honours at The Lawyer Awards
The improved financial landscape in 2013 was a gift to banking and finance lawyers, offering an abundance of opportunities to get creative with their advice to clients. That is reflected in The Lawyer Awards shortlist for Finance Team of the Year, sponsored by Duke and Rawson, which highlights some of the innovative deals of the period that will no doubt influence the way dealmaking is done in future.
Linklaters: Co-operative Bank recapitalisation
Linklaters played a key role in The Co-operative Bank’s recapitalisation plan following the discovery of capital hole of about £1.5bn – the first voluntary bail-in of a British bank without state assistance. It advised dealer managers HSBC and UBS on filling the gap. The teams worked to generate around £1bn of Common Equity Tier 1 to meet the capital requirement set by the Prudential Regulation Authority.
The complex deal involved targeting 10 subordinated securities issued by The Co-op Bank, and transforming these into a combination of bank equity, new bank Tier 2 instruments and subordinated instruments issued by The Co-operative Group.
By its close, on 20 December 2013, the plan had ensured the Co-op Bank could reach its capital requirements without direct action by UK regulators.
Capital markets partners Carson Welsh, Cecil Quillen and John Lane; restructuring and insolvency partner Richard Hodgson; and managing associates Arjun Muddu and Tom Matthews
Shearman & Sterling: Piraeus Bank recapitalisation
Shearman & Sterling merits a spot on the shortlist for its team’s work on a very different bank recapitalisation – on behalf of Greece’s largest financial group by assets, loans and deposits, Piraeus Bank.
The firm engaged in a €8.4bn (£6.8bn) recapitalisation, including an international rights offering.
The transaction was the largest in Greek financial history, attracting international investment to the tune of €1.4bn – a significant landmark in the recovery of the country’s troubled banking sector.
Shearman & Sterling team:
Capital markets partner Apostolos Gkoutzinis; finance partner James Duncan; capital markets counsel David Dixter, and associates David Shennan, Katerina Rainwood, Dimosthenis Papanikolaou, Randy Nahle, Naomi King and Adam Cubbage. Tax partner Iain Scoon and Kristen Garry assisted, as did antitrust partner Stephen Mavroghenis and associate Jessica Schonber
Reed Smith: Eurosail RMBS restructure
Shearman’s and Linklaters’ finance lawyers weren’t the only ones helping to mop up the mess left largely by the economic downturn. Reed Smith also found itself busy restructuring a group of residential mortgage-backed securitisation (RMBS) transactions originally arranged by Lehman Brothers in 2007/08. The deal consisted of four transactions grouped into one, known as ‘Eurosail’, with combined debt exceeding £2.4bn.
It was a particularly tricky job given that after the demise of Lehman Brothers in 2008 every Lehman party defaulted on their obligations. The transactions were left with no arranger or lead manager entity, so the firm helped the company’s manager, Wilmington Trust, to form bondholder committees for each Eurosail restructuring. Investors held the companies’ debt through differing tranches and had varying financial goals, which posed an additional challenge.
The result? The first-ever UK Lehman Brothers RMBS deal to be effectively restructured since the bankruptcy, and the first to be restructured through a process in which each stage required a publicly convened bondholder meeting to ratify the proposals.
Reed Smith team:
Structured finance partner Tamara Box; and associates James Fisher, Simon Hugo and Sarah Caldwell. Partners Andrea Pincus and Lal Mack worked on insolvency and regulatory advice, while partners Caspar Fox, Harriet Morgan and Anelo Ciavarella assisted on tax matters
Allen & Overy: Elenia restructure
In another ground-breaking securitisation deal, Allen & Overy (A&O) advised Elenia (whose principal shareholders are 3i and GSIP) on its refinancing, to become the first non-UK utility company to raise debt in the capital markets through a whole business securitisation.
The bonds are backed by the operating cashflows of Elenia Group’s two businesses: Elenia Oy, which provides electricity distribution, and Elenia Lampo Oy, a subsidiary focused on the heating business. A&O used a structure that ring-fences these two parts of the business and delinks them from their parent company.
While the structure has been used in the UK before, the Elenia deal is thought to be the first time the blueprint has been applied to a transaction in Continental Europe. And it worked a treat. There was excess demand for the whole business securitisation, with the bonds being significantly oversubscribed.
Allen & Overy team:
Conrad Andersen and Tim Conduit supported by Erika Singer, Christina Nayman-Mills, Jean-Baptiste Gaudin, Tina Barazandeh-Nejad and Rhiannon Bail, with tax advice from James Burton and Steve Quinn. On the corporate reorganisation: Richard Evans; Nikhil Chary; and Harriet Stephenson. Derivatives advice provided by Alex Barros-Curtis and Sheng Goh. The Amsterdam team included Jonathan Heeringa, Loes Schepers and Sophie Hoogenberg and the Luxembourg team, led by Frank Mausen, included Evelina Palgan, Laurent Sidier, Marine Tarditi and Florent Trouiller
Simmons & Simmons: Royal Bank of Canada project bond
Also venturing into uncharted waters was Simmons & Simmons, which secured its place on the shortlist thanks to its work for the Royal Bank of Canada. The firm helped arrange the first known unwrapped project bond in Europe for the £143.5m, 2.057 per cent index-linked secured bonds, due 2054, issued by student accommodation consortium Uliving@Hertfordshire, based entirely on demand. The bond allows the University of Hertfordshire to pay only for the rooms it needs, not those that are surplus to requirements.
A number of investors including Bouygues UK, Derwent Housing Association and French infrastructure fund Meridiam entered a project agreement with the university for the design, build, finance and operating of 2,500 student accommodation units.
The transaction is unusual, largely because it is understood to be the first project in Europe that is unwrapped and does not have any part of its income underwritten by the university or any other third party – a big breakthrough in the financing of major projects in the UK. Given the dearth of long-term bank finance in recent years, Simmons’ capital markets solution offers a viable alternative.
Simmons & Simmons team:
Banking partner Simon Kildahl and capital markets partner Charles Hawes
Mills & Reeve: University of Cambridge college debt cluster
Mills & Reeve also shone for its work in the higher education sector in 2013 – an area clearly rich for the pickings by finance lawyers during the period. Like Simmons, the firm was involved in a first-of-its-kind deal, this time for 18 University of Cambridge colleges.
The firm helped the cluster of colleges to aggregate their debt requirements and access institutional investment. It utilised a concept devised for companies and adapted it to work for the colleges, which are both Royal Charter Corporations and charities. The structure enabled the collection of small charitable organisations to join forces and access institutional investment through private placement notes and on-loans.
The colleges are reaping the benefit of the arrangement, which gave them access to a wider investor base while sharing the costs across the entire group.
Mills & Reeve team:
Finance partner Sarah Seed, corporate partner Claire Clarke, tax partner Kevin Lowe, associate Matthew Howling and solicitor Dan Bryan
Kirkland & Ellis: Exopack formation
Last but not least, Kirkland & Ellis earned a spot on the shortlist thanks to its advice on the combination of six packaging businesses to form Exopack Holdings – now the sixth largest global plastic packaging company in the world.
The transaction involved juggling a range of moving parts – both people and products – made particularly complex by the six businesses being scattered across 18 different jurisdictions in the US and Europe.
In order to streamline the new group’s capital structure, Kirkland arranged for Exopack Holdings to offer a $325m (£194.5m) aggregate principal amount of 77 to 78 per cent senior notes due 2019. The proceeds of these were used together with borrowings under a newly-established $675m term loan and cash to refinance the debt of the group’s operating subsidiaries and pay any fees and expenses related to the huge transaction.
Each of the six businesses came with their own financing structures, and the result featured the unusual combination of a bond sitting alongside an asset-backed loan facility in Europe.
Kirkland & Ellis team:
Capital markets partner William Burke and associates Matthew Merkle and Tim Volkheimer; corporate finance partner Neel Sachdev, banking partner Sam Norris, with associate Bryan Robson; US-based corporate finance partners Jocelyn Hirsch and Brian Ford