The debt holy grail

Ironic, isn't it? For five years Weil Gotshal & Manges argued that it was a credible City alternative to the finance duopoly of Allen & Overy and Clifford Chance. It made inroads when it advised Barclays on the Kappa buyout 18 months ago, but its role for Chase Manhattan and Barclays on the $2.3bn (£1.5bn) LBO of VEBA Electronics – advising on senior debt, high-yield, and the unusual receivables securitisation – was a huge breakthrough.

But Weil Gotshal's triumph was short-lived. With James Chesterman's departure for Latham & Watkins, Weil Gotshal – which spent the last six months being raided by former partner Maurice Allen, who is now at White & Case – has a major hole on the banking side, despite retaining its securitisation and capital markets capability. The firm's loss is all the more poignant, as investment banks targeting leveraged finance are providing the entire debt package themselves, and they want the same firm to advise on all the different levels of debt. And so City firms – notably Shearman & Sterling, Allen & Overy and now Lathams – have begun to put together bank/bond capability.

Weil Gotshal will be sorry to lose Chesterman. But its metamorphosis into a corporate finance boutique serving the likes of Hicks Muse Tate & Furst makes sense. Indeed, firms eyeing this burgeoning leveraged finance sector may be wiser to try and bag sponsor clients. On the VEBA deal Clifford Chance – happily back in the bosom of Schroder Ventures after Schroders' dalliance with Slaughter and May – is likely to bill in the region of £5m – considerably more than Weil Gotshal for the banks. With an increasing number of US private equity houses landing in Europe, there is scope for an entirely new market.