King & Wood Mallesons (KWM) has come under scrutiny for an ’embarrassing’ error made on a £40m real estate finance deal carried out on behalf of private equity group, Better Capital, last March.
Owned by venture capitalist veteran Jon Moulton, Better Capital instructed KWM last year on its £40m acquisition of Cav Aerospace. KWM’s team on the deal was led by former corporate co-head Richard Lever with real estate finance partner Ian Borman. Lever has since left for Goodwin Procter.
Better Capital, which also owns collapsed parcel delivery firm City Link, instructed Macfarlanes last month to advise on another round of investments to support the turnaround of the Cav Aerospace business.
Problems were then discovered in the funding structure from KWM’s original handling of the deal as the security was not registered at Companies House within 21 days, leaving the debt unsecured.
After securing the debt, KWM has in recent weeks filed an application at the Companies Court to declare an administrative error was made on the deal – which will be a public record – and proceedings are now ongoing. If approved by a judge, the firm will not be vulnerable to a professional negligence claim.
A City partner said: ‘It’s an administrative error that can happen to any firm – you leave something to a junior, they get it wrong and mistakes happen. But it’s desperately embarrassing.’
KWM has previously advised Better Capital on financings for home improvement group Everest, a deal valued at £25m. Better Capital recently reported that it was forced into writedowns on several of its companies in the six months to 30 September 2015 after poor trading. Cav Aerospace’s value was cut by £28m, while Everest’s value fell by £16m.
KWM and Macfarlanes both declined to comment. Better Capital did not respond to requests for comment.
sarah.downey@legalease.co.uk