Travers Smith steers Deutsche Bank’s Climate Exchange plan

Travers Smith has won a key client in the expanding carbon trading market with a mandate to steer it through an innovative arrangement with Deutsche Bank.

Travers, which along with Sullivan & Cromwell and Isle of Man-headquartered Cains advised exchange operator Climate Exchange on the deal, was gifted the instruction from two separate recommendations from the company’s prior advisers.

The deal sees Sidley Austin client Deutsche Bank invest in a minority stake in Climate Exchange’s subsidiary, Insurance Futures Exchange Services (IFEX). Rather than stump up cash, Deutsche Bank will contribute IP rights and expertise in the launch of a new derivatives product. In return, the bank will retain the right to exchange its minority interest for shares in Climate Exchange, equal to a maximum of $50m (£24.79m).

Climate Exchange, which runs the Chicago Climate Futures Exchange (CCFE) as well as owning the European Climate Exchange and the Chicago Climate Exchange (CCX), does not operate a panel and has used different firms in the past. Taylor Wessing advised on its 2003 AIM flotation and last year also acted on its £29m acquisition of the 60 per cent stake in CCX it did not already own.

The deal with Deutsche Bank sees the launch of catastrophic event-linked futures contracts on the CCFE. These derivative contracts are a way for insurance companies to hedge against hurricanes or other natural disasters.

Head of corporate finance Spencer Summerfield led the team at Travers, with derivatives head Ken Raisler at Sullivan and corporate partner Andrew Baker at Cains. At Sidley, corporate partner Michael Yanowitch led.