Legal Business

Troubled markets: Allen & Overy lays off four Moscow associates as firms face sanctions fallout

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The US and EU sanctions in Russia are taking their toll on some of the international firms located in the country with Allen & Overy’s (A&O) Moscow office offering redundancy packages at associate level.

Four associates, including two senior associates, have been made redundant in the Magic Circle firm’s Moscow office as it consolidated its capital markets practice within its broader finance offering in late October. The practice has also been hit as Russian law partner Alexandra Fasakhova, who specialises in capital markets, is currently on maternity leave.

A spokesperson for the firm said: ‘Following a review of our Russian business, we have decided to scale back our Russian law ICM practice, consolidating it within our wider finance team. Regrettably, this is resulting in a small number of redundancies. This adjustment reflects anticipated demand for local capital markets advice in the foreseeable future. We remain committed to our business in Russia and to meeting the changing needs of our clients in this market.’

The decision to scale back its Moscow-based capital markets offering comes as US-led sanctions continue to affect the debt financing capabilities of some of Russia’s largest banks, leading to a stark halt in Moscow-based capital markets work.

According to the firm’s website, A&O Moscow office currently houses six partners, two counsel and 20 associates. Of the six partners, five have experience of offering capital markets advice as well as US capital markets counsel Cameron Half.

A&O confirmed it has no intention of closing its offering in Moscow and said it would be ‘unthinkable’ to close down considering the depth of their services and clients. One Moscow-based A&O partner said: ‘Our capital markets team has scaled back, but we still have a strong finance practice.’

The US and EU sanctions, which started in March 2014, have had a hammering effect on Moscow’s business market, which has caused a number of firms to scale back on headcount, especially within firms’ capital markets practices, mainly because of the debt financing restrictions that were imposed on Russia’s largest banks including the Bank of Moscow, Gazprombank and VTB Bank.

Other firms that have also been affected by the sanctions include Clifford Chance, Linklaters, Freshfields Bruckhaus Deringer, White & Case and Cleary Gottlieb Steen & Hamilton.

One A&O partner commented: ‘There is a clear trend towards attrition in the Moscow legal market. Some areas, like capital markets, are affected more than others. But Russia is a market where firms have to take a long-term view and understand that the market is currently distressed.’

jaishree.kalia@legalease.co.uk

Legal Business

News in Brief – November 2014

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PWC LEGAL LOOKS FOR REGIONAL GROWTH

Addleshaw Goddard and DLA Piper veteran Neal Shepherd was recruited by PwC Legal to head a regional push out of its Manchester office. The accountancy giant is targeting the north of England, with Shepherd focusing on mid-market M&A and expanding the team into PwC business areas, including employment and pensions.

 

Legal Business

Allen & Overy becomes the first Magic Circle firm to set up in South Africa

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Firm opens Johannesburg office after hire of Bowman Gilfillan finance team

Allen & Overy (A&O) finally put its stamp on South Africa with the launch of office number 45 in Johannesburg last month. The move sees A&O become the first Magic Circle firm to establish a presence on the ground, with the hire of a banking and finance team from local firm Bowman Gilfillan.

Legal Business

‘Ahead of the curve’: Allen & Overy and Clifford Chance act on UK government’s landmark renminbi bond issue

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Magic Circle firms Allen & Overy (A&O) and Clifford Chance have advised on the UK’s renminbi debut bond issue, the first for a non-Chinese sovereign and signalling the first steps of China’s currency internationalising.

The 2.70% three year bonds were almost twice oversubscribed and, at RMB3bn, it was the largest renminbi issue so far by a non-Chinese issuer. The bonds were allocated to a wide range of investors including central banks, bank treasuries and fund managers across the world.

Clifford Chance represented the Bank of England and HM Treasury, led by banking partner David Dunnigan, while A&O advised Bank of China, HSBC and Standard Chartered as joint arrangers on the transaction, led by London-based capital markets partners Geoff Fuller and international markets partner Matthew Hartley.

Hartley said: ‘The Renminbi bond market has been growing in the last few years. The UK government is the first non-Chinese sovereign to come into that market and brings in a new asset class. So far, it has been the Chinese government, Chinese banks and other multinationals that have offered Renminbi bonds. I anticipate that this will encourage other governments to bring similar products to the market.’

The deal marks the UK governments’ interest in becoming a renminbi hub, as well as representing a significant step in the internationalisation of the Chinese currency. The funds will be used to diversify the UK’s reserves, which have only included financial assets denominated in Canadian and US dollars, euros and yen. The proceeds are expected to be reinvested in the small but rapidly-growing renminbi offshore market.

A&O capital markets partner Geoff Fuller said: ‘The renminbi is quickly becoming a vital part of the currency mix, and the UK has shown itself to be ahead of the curve once again by being the first Western sovereign to raise debt finance in this way. We expect this will prompt market participants from both the private and public sectors to follow.’

jaishree.kalia@legalease.co.uk

Legal Business

Salaries: Allen & Overy thaws out and increases trainee/associate pay

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After having decided to freeze pay earlier this year, Allen & Overy (A&O) has decided to up trainee, junior and mid-associate level pay after reviewing the salary market at half year.

First and second seat trainees will now receive £1,000 more, taking them to £40,000 and £45,000 respectively, while newly qualified associates will see pay rise from £64,000 to £66,500.

Those with post qualification experience (PQE) also saw pay increase with first year’s increasing from £69,500 to £72,500 and two years’ PQE seeing salary packets go from £78,500 to £82,500, while three-year PQEs will earn £93,500, up from £89,000.

The adjustments will come into effect on 1 November, but will backdated to the beginning of the financial year on 1 May 2014. The pay increases come after the firm decided to hold pay levels, except for senior associates which saw a £5,000 rise to £105,000, earlier this year while the rest of the Magic Circle made increases.

The firm said in a statement: ‘It has been our practice to review the salary market at the half year and decide whether any action is necessary to ensure our total reward proposition of salary and bonus, remains competitive at all levels.

‘Our decision to adjust compensation levels at this point is also a reflection of the strength of our performance within the London office as we have made a positive start in the year to date. It is the hard work and effort of all of our people that underpins our success as a firm, and this is recognition of the contribution our trainees and associates make to that success.’

Pay was last increased in November 2013, which saw NQ lawyers’ pay upped from £61,500 to £64,000, one-year post-qualified experience (1PQE) associate pay raised to £69,500, 2PQE increased from £74,500 to £78,500, and 3PQE up to £89,000 from £86,000.

jaishree.kalia@legalease.co.uk

Legal Business

Dealwatch: A&O, Hogan Lovells and Freshfields help Heathrow’s £1bn airport sale take off

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Allen & Overy (A&O), Hogan Lovells and Freshfields Bruckhaus Deringer have led on Heathrow Airport Holdings sale of Aberdeen International Airport, Glasgow Airport and Southampton International Airport to a consortium formed by Ferrovial and Macquarie for £1.05bn.

Heathrow has agreed to sell its 100% stake in all three airports, which combined handle 12.5 million passengers a year, though the deal is still subject to EU merger regulation. Closing is expected before the end of January 2015 with the sale consideration expected to increase to compensate Heathrow for the delay.

A&O is advising Ferrovial and Macquarie led by infrastructure partners Richard Evans and Conrad Andersen, while Pinsent Masons advised on Scottish aspects, with partner Richard Linton and senior associate Andrew Crichton

Freshfields advised Heathrow Airport Holdings, led by corporate partner Stephen Hewes and Laurie McFadden, while Hogan Lovells acted for the consortium of banks, led by infrastructure and project finance partner Andrew Gallagher.

Ferrovial chief executive Iñigo Meirás said: ‘As a long standing investor in the UK, we are aware of the importance of these airports for the population in their surrounding areas. The transaction proves how valuable these assets are for Ferrovial.’

Freshfields worked alongside Heathrow Airport Holdings (formerly BAA) legal head Carol Hui (Profile) who has overseen the company’s legal department during the sale of all of its airports except for Heathrow and in-house counsel Catherine Ledger and Irina Janakievska. BAA sold Gatwick in 2010 for £1.5bn and committed to selling Edinburgh Airport in 2011, but it conducted a long-running legal battle to keep control of Stansted, which was ultimately lost after a Supreme Court ruling in 2012, leading to Stansted’s sale to Manchester Airports Group for £1.5bn.

jaishree.kalia@legalease.co.uk

Legal Business

‘At the forefront of changes in our market’: A&O targets 100 more recruits in Belfast

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Three years on from the launch of its Belfast legal and support services centre, Allen & Overy (A&O) has exceeded headcount targets and has unveiled plans to recruit a further 100 new staff over the next five years.

Launched in late 2011, the Northern Ireland office exceeded its 2014 headcount target of 300 employees earlier this year, currently housing 380 staff, including around 320 non-lawyers and 60 lawyers, making it the firm’s third largest office worldwide.

Over the next five years, the firm aims to hire a further 70 legal staff and 30 support staff in a bid to optimise revenues.

A spokesperson for the firm told Legal Business that the number of matters going through its Legal Services Centre (LSC) in Belfast doubled in the financial year ending April 2014, whilst revenues tripled, although the firm declined to provide figures to support this.

Earlier this year, the firm confirmed the project was contributing significantly to its bottom line thanks to greater efficiency savings. At the beginning of 2013, the firm moved a number of support roles out of Europe and the US into Belfast, which also led to a fall in staff costs.

A&O global managing partner Wim Dejonghe (pictured) said: ‘The new roles reflect the success of our Belfast operation, with the office continuing to grow ahead of expectations. That success is largely down to the quality of the people that A&O has been able to recruit in Northern Ireland. As the global economy continues to improve, we see opportunities to continue to grow the wider business and Belfast plays a crucial role in facilitating that growth.’

Jane Townsend, partner and head of the LSC, added: ‘The way in which we deliver our service to clients continues to change rapidly. The LSC in Belfast has given us a real and tangible competitive advantage and we have won significant mandates as a result. This additional resource will ensure we can meet this growing demand and that we remain at the forefront of changes in our market.’

The legal services centre in Belfast is headed by partner Jane Townsend, and predominantly carries out large volume work such as banking and regulatory litigation, corporate and due diligence, with its main competition being second tier firms.

In our leadership insight feature, published this week, senior partner David Morley told Legal Business that the success of the legal and support services centre in Belfast has given management the political capital to try other successful innovations, such as contract lawyer business Peerpoint, which launched last year.

jaishree.kalia@legalease.co.uk

Legal Business

Into Africa: A&O launches Johannesburg office with Bowman Gilfillan team

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Having been speculated over for some time, Magic Circle firm Allen & Overy (A&O) has, today (8 August), announced its entrance into South Africa with the launch of an office in Johannesburg, and hired a seven-strong banking and finance team from local firm Bowman Gilfillan.

The office will be led by former Bowman Gilfillan banking head Lionel Shawe, and A&O partner Michael Duncan, who will be relocating to Johannesburg.

Set to open on 20 October, the firm anticipates the office will house around 40 lawyers in 2015. For the launch, Shawe and Duncan will be joined by a group of banking and finance lawyers from Bowman Gilfillan, including Khurshid Fazel, Lisa Botha, Sibusiso Zungu, Lindani Mthembu, and Alistair Collins. The firm added that finance lawyer Anthony Colegrave will join the team later in the year.

In early September the firm was reported to be getting closer to launching a South Africa base following the hire of Shawe from Bowman Gilfillan. The launch makes A&O the first Magic Circle firm to officially set up shop in the South African market without an association with a local firm, although Linklaters was the first of the group to enter the region in 2012 when it formed an alliance with local firm Webber Wentzel.

Explaining the move, A&O global managing partner Wim Dejonghe said: ‘Johannesburg has become a key hub for local and international banks, development institutions, institutional investors and funds looking at investment and finance opportunities in Sub-Saharan Africa. Building on the success of our launch in Casablanca, Johannesburg is a continuation of our carefully targeted investment in Africa and emerging markets more generally. It offers a fantastic opportunity to take our Africa platform to the next level’.

Tim Scales, head of Allen & Overy’s Africa group, said: ‘This opens an exciting new chapter for A&O’s Africa Group.  Lionel, the foremost banking and finance lawyer in South Africa and Mike, one of the leading lights in A&O’s global banking practice, are a powerful combination and we are very excited by the depth, quality and energy of the wider team. This will give us a unique platform to pursue opportunities in the banking, finance, projects, energy, infrastructure and mining sectors both in South Africa and elsewhere in Sub-Saharan Africa’.

Scales added the firm was seeing increasing interest in Africa from clients across its network, which was a key driver for the launch.

He added: ‘With the opening of our office in Johannesburg, we will now be able to offer clients a seamless service across sectors, combining a global presence and specialisation with a premium local team. This also provides our team in South Africa with access to an unrivalled international platform and the opportunity to advise companies that are world leaders on some of the most significant transactions in the region’.

sarah.downey@legalease.co.uk

Legal Business

Three years after Northern Rock, A&O and Freshfields lead on Virgin Money IPO

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Magic circle duo Allen & Overy (A&O) and Freshfields Bruckhaus Deringer have won roles to advise Virgin Money on its forthcoming London initial public offering (IPO).

Sir Richard Branson’s retail banking arm has announced it will raise £150m from its London Stock Exchange listing to facilitate the company’s development, boost capital and support growth plans including recruitment and staff retention.

A&O is advising Virgin Money, led by corporate partners Andrew Ballheimer and David Broadley, while Freshfields is advising the underwriters, led by corporate partners Mark Austin and Julian Makin.

Bank of America Merrill Lynch and Goldman Sachs are joint sponsors, joint global co-ordinators and joint bookrunners, while Barclays Bank and Citigroup Global Markets are joint bookrunners, and Keefe, Bruyette & Woods is the joint lead manager.

Virgin Money, which acquired a part of lender Northern Rock from the Government in 2011, will sell a portion of its existing holding of ordinary shares, and an offer of new ordinary shares to be issued by the company. The offer is expected to result in a free float of at least 25%.

The bank will also return £50m of the proceeds to HM Treasury as part of its payment agreement for its acquisition of the ‘healthy’ part of Northern Rock in 2012. A&O’s Ballheimer also advised Virgin Money on that deal, while Freshfields advised Northern Rock.

Virgin Media said ‘the net proceeds of the offer will also be used for general corporate purposes as well as to satisfy the payment due to HM Treasury in respect of the contingent consideration payable as part of the company’s acquisition of Northern Rock in January 2012’.

Virgin Money is the latest of a string of British banks, or ‘challenger banks’, to announce their intention to list after Aldermore, OneSavings and TSB also opted to float earlier this year. These listings come as these British banks seek to acquire a larger chunk of the retail banking market from UK’s major financial lenders.

jaishree.kalia@legalease.co.uk

Legal Business

Dealwatch: Phones 4u, with £105m profit and ‘cash in the bank’, enters administration with CC, A&O and CMS acting

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Allen & Overy (A&O), Clifford Chance and CMS Cameron McKenna have all landed key roles advising on the administration of high street retailer Phones4u.

With PwC acting as administrator, the company went into administration on Sunday [14 September] after the withdrawal of EE, O2 and Vodafone products from its stores, placing 5,596 jobs and more than 700 outlets at risk.

Owned by pan-European private equity house BC Partners, a statement from the company said on Sunday: ‘Following the decisions of Vodafone and EE, Phones 4u has no option but to seek the appointment of administrators from PwC’.

The statement continued:’Phones 4u is a profitable, well-managed business with 550 standalone stores, employing 5,596 people. The company has a turnover of over £1bn, EBITDA of £105m for 2013 and significant cash in the bank.’

A&O restructuring and corporate insolvency partner Ian Field is leading a team advising Phones4u alongside the firm’s managing partner of the global restructuring and insolvency group Mark Sterling.

Clifford Chance is understood to be advising the lenders of the company’s rolling credit facility on the administration with a team led by finance partner Charles Cochrane.

CMS Cameron McKenna is also advising on the mandate, and is acting for the security trustee, ING Bank, with corporate recovery and restructuring partner Martin Brown advising.

Shortly before the administration, Moody’s downgraded its outlook over the company’s ability to repay its debts following Vodafone’s decision to not renew its network agreement with Phones 4u, which represented more than 20% of the latter’s revenues and gross profit.

Sarah.downey@legalease.co.uk