As the golden generation of banking rainmakers retire, Legal Business takes a look at the core teams of the City elite and assesses the talent in the Square Mile’s top finance practices.
‘The days of lawyers being experts only in the investment grade market are a thing of the past,’ reflects Clifford Chance (CC)’s Michael Bates, and, if anyone should know, the Magic Circle firm’s veteran head of finance should. ‘Corporate treasurers are diversifying funding sources, so while you have to be steeped in investment grade knowledge you also need to have a good level of understanding in areas such as the US private placement market, European private placement and institutional lending markets, the investment grade bond world and M&A/stock market-related requirements to ensure different strands of the capital structure work in harmony.’
The times are changing for the City’s leading banking teams. Since the market turned in 2008, they have been expected to manage much of their mainstream loans and banking work on increasingly tight margins, with the ultimate aim of securing more lucrative follow-on assignments. The ‘golden generation’ of finance lawyers that emerged in the wake of Big Bang deregulation of the City in 1986 and then thrived in the credit boom through the 1990s as interest rates fell, fixed income exploded and the launch of the euro stoked the credit markets are now retiring. It was the generation making their names at the establishment of the Loan Market Association and development of Europe’s syndicated loans and leveraged buyout markets.
‘You have to constantly think about who is coming up the ranks. Only with this type of planning can you ensure success for future generations.’
Philip Spittal, Linklaters
The current market has many echoes of the 2000s’ boom-time as it does contrasts. Increasingly constrained by funding and regulatory requirements, senior lenders have ceded ground to an array of funds and finance players. Yet years of ultra-loose monetary policy means debt remains as dominant in the capital structure as ever. Still, how that tool is deployed and who the key players are is changing. The investment-grade debt teams that were once the self-standing core of banking practices at leading finance shops like Allen & Overy (A&O), Linklaters and CC, have increasingly formed the bedrock of a broader practice. We look at the changing faces at London’s top three finance teams and seek to highlight the next generation of partners that will be driving these practices in the years ahead.
Generations
Canvassing several dozen finance partners for this article, the consensus is A&O is the most confident of London’s elite teams in recent years, even allowing for the fact that many of its celebrated post-’86 figures have either retired or will do so in the next two years.
One of its most cited practitioners is corporate lending head Trevor Borthwick, who advised GDF Suez on the €5bn refinancing of syndicated facilities in 2014, and is the relationship manager for clients such as Lloyds Bank, Tesco and Marks and Spencer. He has served the firm for 19 years and headed the corporate lending group for eight years.
Other key names include banking co-head Stephen Kensell, who was appointed alongside Andrew Trahair in 2008 for two terms heading A&O’s banking team. He was a candidate in A&O’s recent management election to replace senior partner David Morley, but managing partner Wim Dejonghe secured the role last month. Trahair contended for the managing partner position, which went to corporate co-head Andrew Ballheimer. A&O will soon be appointing a new head of banking as neither Kensell nor Trahair had indicated that they would continue in the role.
Outside the Circle – names to watch at challenger finance teams
As long as the shadow cast by elite finance teams remains, there is a wealth of notable practitioners at the next tier of firms, among them Hogan Lovells, Simmons & Simmons and Ashurst.
At Hogan Lovells, Jo Robinson, who was promoted to partner in 2012, has worked for Barclays, GE Capital and Santander. Described as ‘positive and proactive’, Robinson advised AIB, AIMCo, Barclays, HSBC, Lloyds, NatWest and The Royal Bank of Scotland (RBS) on 3i’s acquisition of Audley Travel from Equistone last year.
Also at Hogan Lovells, Shalini Bhuchar, who was made partner last year, has considerable asset finance experience in Africa. Bhuchar advised African Export-Import Bank on several transactions, including in its role as lead arranger on about $2bn in financing for 20 aircraft for Kenya Airways.
At Simmons, managing associates Marc Gilston, Katie-Jane Rees and Emmie Spring are highlighted. Gilston joined from Berwin Leighton Paisner, where he was an associate and has acted for the Commonwealth Bank of Australia, HSBC, Lloyds Bank, Macquarie Bank International and Santander.
Ashurst’s Nick Wong, who was made partner in 2015, has been working on bolstering the firm’s loans practice. Wong moved from Clifford Chance (CC) to Ashurst in 2012, and recently advised Deutsche Bank on bridge financing for the construction of a thermo-solar power plant in the Middle East.
Associates to watch at Ashurst include Darren Phelan, Vanessa Hunter and Andrea Thomas. Phelan joined from McCann FitzGerald in 2013 and recently advised The Bank of Tokyo-Mitsubishi and Barclays as joint co-ordinators on the amendment and restatement of a $1.2bn revolving credit facility made available to the Petrofac Group. Hunter also joined in 2013 from New Zealand regulator the Financial Markets Authority. Thomas joined in 2011 having trained at Dewey & LeBoeuf, and acted for HSBC, Lloyds Bank, RBS, Abbey National Treasury Services and Barclays Bank as lenders on a £380m revolving facility agreement provided to Kier Group in 2015.
At Herbert Smith Freehills, senior associates Elliot Beard and Kathryn Cecil are cited. Beard recently advised PA Consulting Group as The Carlyle Group took a 51% stake in the firm. Cecil, meanwhile, has undergone secondments at Société Générale and RBS.
Of the US-based advisers Mayer Brown associate Charles Thain, who joined last year, stands out for his focus on receivables financing and asset-based lending.
Baker & McKenzie partner Paul Hibbert, who moved to the firm after eight years as an associate at CC, has extensive experience and has worked on a string of high-profile infrastructure financings. The firm also cites Sebastien Marcelin-Rice, who was hired from Freshfields Bruckhaus Deringer three years ago at partner level to cover a broad range of lending.
At White & Case, Gareth Eagles, who was made partner two years ago, is described by finance partner Jeremy Duffy as ‘motivated and commercial’. Duffy adds: ‘He has managed to place himself within the direct lending community and is a person they know well. He understands their business model.’
Duffy also highlights junior partner Ben Wilkinson. ‘He is known to big institutional banks such as Deutsche and Goldman, and Jefferies also knows him well. He is a thorough and precise lawyer and makes sure that those rules and protections that are important to these clients are adhered to in a commercial manner.’ Both Wilkinson and Eagles trained at the firm.
Meanwhile, veteran Michael Duncan remains a major figure in the practice, despite having relocated to the firm’s Johannesburg office last year. Duncan headed the banking team alongside Chris Rushton until 2008 and then chaired the practice until 2012.
Other seasoned and well-regarded practitioners include Simon Roberts, who acts for both borrowers and financial institutions and represented a bank syndicate on a $1.75bn revolving facility for Pearson; Philip Bowden, who co-heads the firm’s leveraged finance practice; and George Link, who comes recommended for his ‘impressive borrower-side practice’ and boasts a client roster that includes Cobham, Arqiva, BAE Systems, DS Smith, Imperial Tobacco, Intertek, KPN, Pennon and Arcadia Group.
‘A&O is the top tier and has been out there on its own for quite a while.’
Trevor Borthwick, Allen & Overy
Working under these figures is a wide array of prominent younger partners. Highly recommended is Nicholas Clark, who returned to London in September last year from the Milan office and comes cited for his recent work advising lenders on the $75bn loan facility to finance the takeover bid by Anheuser-Busch InBev of SABMiller in what is the largest loan in the history of the global markets. He also represented Goldman Sachs and other underwriters of the £795m bridge and revolving credit facilities to finance Permira’s acquisition of Lowell; and Deutsche Bank and other lenders on the €515m loan post-IPO facilities for Intertrust.
Many peers also cited Sanjeev Dhuna, particularly for his work in emerging markets. He recently acted on the take-private of Essar Energy and Amtek Global Technologies on its €235m long-term facilities provided by Kohlberg Kravis Roberts & Co – the first time a private equity debt fund had solely underwritten a financing of this size.
Another hotly tipped younger partner is Denise Gibson, whose practice spans investment grade work and leveraged deals. Gibson re-joined the firm after two years as executive director in Goldman Sachs’ leveraged underwriting group.
In the increasingly key real estate finance sector, which has been one of A&O’s strongest growth areas in recent years, Paul Flanagan has been the firm’s most prominent figure, building a practice reflecting the recent trend of mixing property finance and leveraged finance structures; while Ian Powell, who covers acquisition and real estate finance, also comes recommended.
Other notable practitioners include Greg Brown, who heads the firm’s microfinance working group; David Campbell, who advised on the $5bn revolving credit facility for Statoil and on the restructuring of Stemcor; and Melissa Samuel.
CC by its standards has had a solid rather than spectacular run since the banking crisis. However, there is no doubt that the firm remains a huge presence in Europe’s finance market.
Of the seasoned hands, Bates remains arguably the team’s leading figure. Having joined CC in 1991, he became a partner in 2001 and co-headed the City finance practice from 2010, becoming sole head in 2014. Key clients include Commerzbank, Copenhagen Airport, Heathrow Airport Holdings, Kelda Water, Open Grid Europe, Arqiva and UK Power Networks.
Bates’ profile in the team has grown in part thanks to the much-admired Mark Campbell stepping back somewhat from front-line deal work, after a 25-year career spanning a huge range of syndicated, leveraged and structured finance transactions as well as restructurings. (Malcolm Sweeting, of course, has been away from the coalface since stepping up to the senior partner role in 2010, while on the deal finance side, one of CC’s leading names, James Johnson, is retiring in April.)
As one finance partner who worked on RBS’s first panel review 15 years ago drily observes: ‘The joke goes that the rates are still the same.’
Also recommended is Jim MacHale who made partner ten years ago having joined CC in 2000, though his practice leans towards acquisition finance and restructurings.
Other central figures include Charles Cochrane, relationship partner for Barclays and Goldman Sachs; Nicola Wherity, who advises the Loan Market Association on primary and leveraged loan documentation; Robert Lee, who acted for BSkyB on debt facilities of £6.6bn; Taner Hassan; and Emma Folds, who manages the relationship with Deutsche Bank on the lending side. Wherity in particular is singled out as one of the outstanding partners coming into their prime at CC, with Bates citing her as the ‘leading light on the investment grade market in terms of our team and bringing it all together’.
In comparison to A&O and CC, Linklaters divides opinion among peers. While the firm’s 15-year assault on the debt dominance of A&O and CC was widely admired during the 1990s and 2000s, the firm has been in less expansive form since the credit crisis.
The practice remains a formidable presence and well stocked in leveraged finance, with a host of established names such as Nick Syson and Adam Freeman – but its mainstream banking practice is perceived by some to have had less focus in recent years.
John Tucker, who became a Linklaters partner in 1990, boasts a wide list of banking clients – including advising Bank of America, Citi, Deutsche Bank, Goldman Sachs, JPMorgan, Lloyds Bank, The Royal Bank of Scotland (RBS) and UBS on a variety of leveraged, structured and other financing transactions – is one of the practice’s elder statesmen.
The face of the loans practice for many is Philip Spittal, one of a number of former Wilde Sapte partners to have made their mark at Silk Street. Other high-profile operators include former head of Linklaters’ German banking and current co-head of global loans Stuart Thomas; and Trevor Clark, who has been a partner for 14 years and recently returned from a seven-year stint in Hong Kong where he headed the Asia banking and projects practice, and now co-heads the property practice with Steve Smith.
Perhaps the firm’s most cited younger banking partner is Oliver Edwards, a Linklaters trainee who was promoted to partner in 2011. Edwards covers cross-border syndicated lending, restructurings and structured financings. He acts for both lenders and borrowers and recently advised on the CHF2.5bn Oerlikon restructuring; a $1.55bn and CHF700m facility for Lonza Group’s acquisition of Arch Chemicals; a €1.5bn facility for OMV; a $3bn facility for ArcelorMittal; and a £650m facility for Catlin Insurance.
Toby Grimstone was also recommended by several peers, having made a particular mark in the mining sector. With seven years of partner experience, Grimstone trained at the firm and also had stints in Linklaters’ New York and Singapore offices.
Another standout name in London is Yen Sum. The former Barclays Capital banking professional made partner in 2010 and is one of Linklaters’ key names in building up links with the credit arms of major buyout houses.
Spittal comments on the evolving team at Linklaters: ‘The partners who are near retirement have already largely stepped out of this space as they’ve taken up management positions in the last few years. You already have a new generation of debt lawyers who have taken up the helm. It is probably harder for more junior partners to get recognition than it used to be as the market, and products within it, [have] become more diverse with many more types of clients and banks to face, plus the more traditional big banks having less clout than they used to with a huge amount of competition being faced across the market. Succession planning is incredibly important. You have to constantly think about who is coming up the ranks, who needs greater client exposure, any training gaps etc. It’s only with this type of planning can you ensure success for future generations.’
Business on the side
While it has become a cliché to dismiss mainstream banking work as commoditised and unprofitable, a number of finance partners argue the pendulum has begun to swing the other way thanks to two forces: the onslaught of regulation impacting the banking sector and the demise of the ultra-specialised ‘product lawyer’ who churns through one narrow deal structure.
Says Bates: ‘Corporate debt work did become slightly commoditised but because of pressures on the market generally and increasing regulation, the work has become technical and less commoditised than it used to be. For example, sanctions-related issues in loan documents can take a lot of negotiation. Increasing event-driven transactions such as mergers and acquisitions also change the dynamic entirely. It is no longer simply a commoditised practice.’
And, of course, advising on debt facilities forms a key strategic relationship and positions firms for the ultimate prize that the banks are targeting: major deal financings.
‘The days of being experts only in the investment-grade market are a thing of the past.’
Michael Bates, Clifford Chance
But even allowing for such sentiment, the debate remains whether banking clients still have the first-among-equals status they enjoyed (and largely took for granted) through the 1990s and 2000s. The recent RBS external adviser review, in which most of the major firms rebuffed a call from RBS to freeze rates in return for a five-year term on the panel, was one indication of law firms pushing back against the demands of banking clients. A previous panel review by RBS saw Slaughter and May refuse to adhere to its policy on liability capping.
As one finance partner who worked on RBS’s first panel review 15 years ago drily observes: ‘The joke goes that the rates are still the same.’
While banks remain important clients, privately many finance partners concede that the UK clearing banks, with the partial exception of Barclays, are not quite as prized as they were during their 2000s heyday. Says one CC veteran: ‘With the UK banks, they are getting to a model now where they are less core clients, and becoming more relevant to a DLA or Addleshaws because of how they want to buy. They’re not really [buying] a relationship anymore. They’re clients and they’ll remain clients but it’s made a difference.’
One banking head at an elite firm adds: ‘The panel process [is] becoming more of an annual event but because of that there is less movement. The banks got savvy with procurement people that have a particular angle – and the longer that’s gone on the more law firms have got savvy with procurement. They’ve held rates for [a] long time to the point where you say: “Look, it’s unsustainable.” Rates [are] only one part of the equation. The number of secondees they get is a significant investment. We’ve been very successful in saying: “You can’t have it both ways. You can’t have free people from us as well as rate freezes.” They’ve started to realise that. We’ve been successful with those arrangements and other firms have as well. I wouldn’t say they’ve got easier because there is a lot of pressure from them but law firms have got better at navigating those negotiations.’
Beyond succession the obvious challenge for leading teams is adapting to a credit market with a wider band of funds and credit providers pitching among the banks, though such players are often looking to partner with senior lenders on deals rather than compete head-on.
And while 2016 looks to be shaping up to be a poor year for bond-driven deal financings, the underlying shift towards capital markets and US investors continues to have an impact towards alternative finance houses.
In a less defined finance market, City finance leaders have often sought to break down siloes in favour of lawyers who can shift from different products and structures. The vogue for transferring senior finance lawyers to foreign offices, which typically forces them out of narrow specialisms, is a related trend. Many of those talking up the value of traditional loan and facility work, argue such structures have become once again the foundation on which more specialised debt structures are then built.
| 2015 – Top lender counsel for EMEA syndicated loans | ||||
|---|---|---|---|---|
| 2015 rank | Lender adviser | 2014 rank | Proceeds | Number of deals |
| 1 | Allen & Overy | 1 | $186,404m | 206 |
| 2 | Clifford Chance | 2 | $115,869m | 88 |
| 3 | McGuireWoods | 54 | $75,213m | 3 |
| 4 | White & Case | 10 | $51,342m | 21 |
| 5 | Linklaters | 3 | $35,546m | 34 |
| 6 | Latham & Watkins | 4 | $8,863m | 25 |
| 7 | Herbert Smith Freehills | 8 | $8,551m | 18 |
| 8 | Milbank, Tweed, Hadley & McCloy | 17 | $7,289m | 4 |
| 9 | Freshfields Bruckhaus Deringer | 6 | $7,158m | 8 |
| 10 | Ashurst | 21 | $6,026m | 14 |
| Ranked by value | Source: Thomson Reuters | |||
The shift away from niche teams was particularly evident in the 2009 partnership restructuring at A&O, which heavily impacted its leveraged finance team but positioned its general finance practice to handle more deal finance work. The restructuring – in which 47 partners left in total – hit five of its nine-partner City leveraged finance team.
Judging London’s top three, the clear consensus is that A&O has established itself as the team to beat in recent years. The firm – which fields 31 partners advising on loan work in the City – has a wealth of major clients, including HSBC, Deutsche Bank, Goldman Sachs, The Bank of Tokyo-Mitsubishi, Tullett Prebon, Eaton Towers, PAI Partners, Providence Equity Partners, Standard Chartered Bank and Lone Star. And if the current market favours the long game of using general lending to position for big-ticket deal finance work A&O was in the zone in 2015, acting for Bank of America Merrill Lynch as sole lender to Royal Dutch Shell on its £47bn takeover of BG Group.
A&O’s Borthwick argues: ‘A&O is the top tier and has been out there on its own for quite a while. CC and Linklaters are solid performers in the market and are in the next tier. They are a pleasure to deal with on the other side and know what they’re talking about.’
Between 2011 and 2013 the volume of syndicated loans dipped, but with the recent flurry of M&A activity, corporate lending activity has been robust again, and in 2015, global syndicated lending reached a reported $4.7trn.
A&O also gets credit for launching several other ventures that have helped progressively position it with banking clients. In 2013, the firm launched its high-end contract lawyer service Peerpoint in a move that targeted the secondment demands of banking clients (the bane of banking heads’ lives). A&O has also built up its online derivatives service aosphere to offer compliance and risk management solutions and cross-border legal information as more clients faced regulatory obligations across the globe with some success.
In comparison, CC is viewed as less expansive though it has avoided the high-profile departures to US law firms in finance that have dogged its corporate and funds practices. However, critics of the firm would contend that a practice once renowned for its entrepreneurial hustle has settled into a more institutionally sedate pace.
The firm retains a huge presence in the market, fielding over 50 partners in London covering general lending, while major banking clients include pretty much all the usual suspects: Barclays, HSBC, Credit Suisse, Morgan Stanley, Goldman Sachs, ING, Santander, UBS and Citi.
Linklaters, meanwhile, re-shuffled its finance practice’s structure in February. Just weeks into his new role as the firm’s global head of banking, restructuring veteran Tony Bugg told the firm’s 200 banking lawyers in London that a reorganisation was taking place, as the group pivots towards fast-growing shadow banking clients, starting with the London practice. The recent shake-up is also an effort to put Linklaters’ finance practice back in growth mode.
‘For pure investment grade loans, regulated banks will still be a big focus,’ comments Spittal. ‘There is talk about whether we will see more activity from funds and alternative credit providers in this space but there is a question as to whether the pricing and return works for them. They tend to operate at the sub-investment grade end of the spectrum.’
Bugg is also looking at whether to bolster Linklaters’ real estate finance practice. Ironically, considering that high-end City finance teams used to look down on such work, booming valuations and the increased willingness of real estate companies to use inventive capital structures has made it one of the hottest sectors in the last two years.
Linklaters has around 20 partners and 120 associates in London covering an array of finance work, including investment grade loans as well as leveraged finance – the firm would not provide a breakdown of headcount per specific specialism. In recent years a number of partners have returned to the London office, including Trevor Clark from Hong Kong, James Martin from UAE and Narayan Iyer from India, each of whom have a strong focus in the corporate lending area.
Some recent highlight deals at Linklaters include advising Barclays Bank and Morgan Stanley as arrangers to the $18bn facilities for Shire for the acquisition of Baxalta; advising Deutsche Bank and Morgan Stanley as arrangers to the $5.6bn facilities for Shire for the acquisition of Dyax Corp; and representing Citibank as arranger to the $850m facilities for Shire for the acquisition of NPS Pharmaceuticals.
Part of that relationship
If there is general agreement that A&O has established itself ahead of peers, there is much more debate about whether the pecking order will change in the years ahead. While it has not been a period of momentum for ‘chasing pack’ firms beneath the Magic Circle on a firmwide basis since the banking crisis, finance teams at Simmons & Simmons, Ashurst and White & Case have been upwardly mobile.
Ashurst finance partner Lee Doyle argues that investment grade lending has been one of the biggest successes for his firm, citing recruitment in recent years such as Linklaters’ Nick Moore in 2012 and former CC lawyer Nick Wong, who made partner in 2015 (see box, ‘Outside the Circle – names to watch at challenger finance teams’). ‘If there is a product in which we are stealing market share it is in investment grade loans.’ Core clients for Ashurst have been Citi, RBS, Lloyds, Goldman Sachs and Barclays, relationships underpinned by senior level secondments. (Moore has undertaken secondments at Citi and RBS.)
Despite some success at the banking teams in plugging leveraged and structured finance work, heavy investment by US firms such as Latham & Watkins and Kirkland & Ellis suggest that more of that profitable leveraged finance work will migrate to US-based firms. Certainly there has been no breakthrough in recent years for the US finance practices of the City’s leading teams to slow that trend.
Given the flux in the City finance market and the generational changes as many of the brand names hit retirement – the debate remains whether momentum is flowing in the direction of the original brand names in finance law, as Borthwick contends, or if it is effectively anyone’s game.
The danger remains that leading City firms – so institutionally geared up towards loans work – find it hard to adapt to shifts in the market as they go up against more nimble and focused rivals.
Borthwick disputes this. ‘To say we don’t have other important clients besides the banks would be a mistake because investment funds are very significant, but the regulated banks are extremely important clients of this firm.
Given the flux in the City finance market and the generational changes – the debate remains whether momentum is flowing in the direction of the original brand names in finance law or if it is effectively anyone’s game.
‘The lull in corporate borrowing in Europe is now behind us and we expect borrowing to begin to rise. The big global banks will continue to be an important part of our practice, but that isn’t to say that other banks will not become more important too, because they will. We may see a world where there are up to 25 banks which are key clients of this firm.’
One partner at a US law firms argues the market is moving away from the focus on personality that would have once underpinned the dominant players: ‘There are certain debt lawyers, which were around during the inception of certain developments in the market such as the Loan Market Association, and the start of what we know as the syndicated loan market. A lot of these people aren’t around anymore actively. The market has moved on anyway and I’m not seeing much impact at all frankly. The relationships if anything have grown from the personal to institutional, would be my comment, in terms of institutionalised relationships.’
Doyle concludes, nevertheless, that loan work will be at the heart of finance teams for years to come: ‘The corporate loan is still the dominant piece of the relationship between bank and the corporate. As a law firm you want to be part of that strategic partnership and being on that facility puts the firm in the best place.’ LB
jaishree.kalia@legalease.co.uk, victoria.young@legalease.co.uk