Bank Lending and Acquisition Finance

Debt funds raising the pressure on banks

Even though the Brexit vote brings a fresh wave of uncertainty, there was no shortage of cheap money – along with all the positive and negative consequences this brings. While the banks are complaining of low margins and regulatory hurdles, companies of all sizes are capitalizing on the good conditions to refinance themselves for as long as possible – if they have not done so already. Mid-cap and large-volume buyouts can also be debt-financed in the current market without too much difficulty. However, many strategic investors prefer to pay out of their own (often bulging) coffers.

For creditors, the competition also heated up in the leveraged market, specifically in midsized company acquisitions and investments. Whereas only a few years ago debt funds were sneered at as an expensive fad, they are now firmly established alongside the traditional banks. Now that the German legislators have simplified market entry for these lenders, more and more investors looking for returns are entering the field of lending for themselves – so many that interest rates have already come under huge pressure.

Debt finance more diverse than ever

Until recently, alternative lenders had been limited to smaller volumes and special configurations; now they preside over hundreds of millions of euros. The components of debt finance are more diverse than ever before, ranging from pure senior finance to the comparatively quick and simple unitranche, right through to complex combinations with super senior, term loan B, second lien and, time and again, bonds. When it comes to corporate finance in particular, the debenture – which, for its part, is increasing in complexity – is experiencing a renaissance.

High-profile partner moves changing the balance of power

Even the law firm landscape has become more differentiated in recent years. Last year saw some extremely high-profile moves, and this year was no different. Among the winners were Noerr and new market entrant Goodwin Procter, who both helped themselves from Ashurst: Goodwin Procter brought on board Dr. Stephan Kock, the long-standing head of the Ashurst practice, and shortly afterwards his successor went to Noerr.

Mayer Brown, meanwhile, expanded its team with an experienced lawyer from Freshfields Bruckhaus Deringer. At the same time, some of the market’s central names are now missing. White & Case lost its most highly regarded partner Leïla Röder to a client. Latham & Watkins lost practice veteran Dr. Christina Ungeheuer, who set up her own firm.

Financing specialists still sought after

But although some interpret these moves as proof that the finance market is still overstaffed, quite a few in the market reported that the intensive search for experienced finance experts continues unabated. The fact is, new firms are still attempting to get a foothold in this market, among them Bryan Cave and Morrison & Foerster, which brought in experienced lawyers from Kaye Scholer and Linklaters as reinforcements. The small Baker & McKenzie practice also widened its base with a counsel from Allen & Overy.

Kirkland & Ellis and Weil Gotshal & Manges have long occupied a niche in US-dominated advice to borrowers, while King & Spalding recently turned heads with its work on financing a major takeover.

 


 

This subchapter discusses those law firms which advise banks and companies, not just on normal loans but also on acquisition finance. The advisory work of law firms in all forms of debt finance, for example transactions initiated by private equity houses, is of particular interest here. Information concerning advice on real estate, project and ship finance can be found in the chapters ?real estate, and ?energy law.