Legal Business

Barclays blocks pay for all KWM Europe staff as partnership continues toward administration

Barclays blocks pay for all KWM Europe staff as partnership continues toward administration

Staff at King & Wood Mallesons‘ (KWM) European partnership will be left without salary payments following the breakdown of negotiations with Barclays.

KWM Europe and Middle East managing partner Tim Bednall sent a memo to all staff confirming the firm would no longer be able to pay any salaries.

The message from Bednall states: ‘Barclays, our bankers, indicated to me on Thursday evening that they are not willing to approve the salary payments due to you. I made a proposal to the bank on Friday to counter this, asking that essential payments including salaries by paid.

‘This proposal was rejected on Friday. I made further proposals to ensure salary payments could be made on Sunday and this, also, was rejected. A final proposal was submitted to the bank last night and, with deepest regret, this too was rejected this morning.’

Last week, Legal Business revealed the firm had halted pay for 100 staff as it prepared for administration. Those employees were notified of the decision on 3 January, their first day back after the Christmas break.

KWM filed a further notice to appoint administrators today as partners continue to make arrangements and leave the firm.

The previous notice has expired, having been valid for ten working days since 22 December when it was filed.

The new extension will give the firm’s various suitors more time to finalise deals to take on parts of the legacy business, including agreements about work in progress within already announced team moves such as those going to DLA Piper, Greenberg Traurig, Baker & McKenzie, Reed Smith and KWM’s Chinese arm.

However, the second notice may not necessarily last for another ten days, as such notices can be halted at any point by the firm or its creditors.

In London, the KWM’s Chinese arm is reportedly targeting the banking, corporate and litigation teams.

matthew.field@legalease.co.uk

For more on King & Wood Mallesons, subscribers can read ‘Branded’ for an in-depth look at the firm

Legal Business

Rise of the fintechs: Barclays divisional legal head leaves for Monzo bank

Rise of the fintechs: Barclays divisional legal head leaves for Monzo bank

Barclays’ lead legal counsel for client and customer experience Dean Nash has joined fintech startup Monzo bank as head of compliance.

Prior to joining Barclays, Nash (pictured) was an in-house lawyer at Lloyds Banking Group. Monzo, which is an app-only bank, was valued at £50m in October after a £4.8m funding round.

The start-up, which was formerly known as Mondo, aims to create a digital-only bank for mobile users that provides instant notifications of transactions and balances, a breakdown of spending across the month and a detailed feed of what money has been spent on. It gained a banking licence in August this year.

Monzo, along with Atom Bank, Tandem and Starling are new app-only banks or ‘neobanks’ which do not have any walk-in branches.

In July Barclays appointed former Gibson Dunn & Crutcher partner Mark Shelton as general counsel (GC) of Barclays’ corporate & international business following a ring-fencing restructure which saw the bank split its legal team to create two new divisions – the other being Barclays UK.

In addition, Shelton will also be the GC for Barclays Corporate and International Americas and its separately capitalised holding company, established in the US on 1 July 2016.

Earlier this year, Baker McKenzie hired the bank’s global competition head Nicola Northway, less than a year after it hired Barclays Bank’s global head of financial crime Jonathan Peddie. This was following a spate of exits for the bank last year which saw Barclays’ M&A chief Khasruz Zaman depart for Simmons & Simmons, the bank’s EMEA general counsel Erica Handling switching to funds manager BlackRock and US GC Carlos Pelayo moving to Merrill Lynch.

kathryn.mccann@legalease.co.uk

Read more in: ‘City firms poised to ride fintech wave’

Legal Business

Barclays takes more security over KWM assets with second debenture

Barclays takes more security over KWM assets with second debenture

Barclays has moved to take extra security over King & Wood Mallesons‘ assets with a second debenture, Companies House records show.

Dated 5 December, the charge details Barclays as first in line for more of KWM’s assets covered by the charge, including secured liabilities, interest and charges (land, shares, securities, intellectual property, existing accounts, equipment and goodwill among others).

The debenture puts further financial pressure on the firm’s EUME arm, which has suffered many high-profile partner exits and  is carrying more than £30m in debt.

A KWM spokeswoman said: ‘We continue to work closely alongside our financial advisers with the full support of Barclays Bank and have no further comment to make.’

Yesterday (6 January), Legal Business revealed Addleshaw Goddard has hired KWM’s former managing partner William Boss, as well as property partner Simon Tager and commercial real estate partner Michael Scott, alongside associate Luke Harvey who joins as partner.

Last week it was also reported that KWM’s head of litigation Craig Pollack is in talks to move to US firm Covington & Burling. If he leaves he will be the latest in a long line of defects from KWM’s European business, following heavyweight biller Michael Halford who has recently joined Goodwin Procter alongside funds partners Ajay Pathak, Ed Hall, Shawn D’Aguiar and Patrick Deasy.

Corporate finance partner Andrew Wingfield and former managing partner Rob Day have also recently been confirmed to have joined Proskauer Rose, the pair giving notice alongside Halford and Jonathan Pittal. Their notice caused KWM to halt its recapitalisation plans back in October.

Following the quartet’s resignations and failed merger talks with Morgan, Lewis & Bockius, the European partnership looked to its Chinese and Australian arm for a rescue deal. The deal required around 60% of the European partnership to commit to a 12 month lock-in and a contribution of around £14m in capital.

This meant around 70 of 120 partners had to agree. However, this was not successful, as only 21 partners agreed to the deal. The firm is now exploring its options, with a merger or pre-pack administration reported as two of these options. Since then, Dentons emerged as a suitor to take the entire European partnership.

georgiana.tudor@legalease.co.uk

For more on King & Wood Mallesons, subscribers can read ‘Branded’ for an in-depth look at the firm.

Legal Business

In-house: Standard Chartered takes Barclays heavyweight as new divisional GC

In-house: Standard Chartered takes Barclays heavyweight as new divisional GC

Standard Chartered has recruited a top lawyer from Barclays’ legal team, with regulatory lawyer Chris Allen set to join the investment bank as its new general counsel (GC) for clients and products.

Allen (pictured) will officially start his role on 16 January and oversee legal across the bank’s main business units including corporate and investment banking, commercial banking, private banking and wealth management.

Allen, who is currently based in London, will relocate to Singapore and report to GC David Fein, the bank’s most senior lawyer.

Currently global head of regulatory policy across the investment bank, retail bank, corporate bank, wealth management and Barclaycard, Allen joined Barclays’ investment division in 2004 as managing director for legal before his promotion for regulatory head in 2013.

Other stints in-house include serving as legal adviser to the OM London Securities and Derivatives Exchange and Clearing House from 1999 until 2001, followed by a turn in private practice as a lawyer at Baker & McKenzie. Allen began his career as a barrister at 11 Stone Buildings.

Changes within Standard Chartered’s legal division in recent years included the hire of Fein in 2013 after having served as US Attorney for the District of Connecticut. The bank’s group GC office was further reorganised amid a large scale overhaul of management by chief executive Bill Winters. Two years later, Standard made several senior appointments to its legal team, bolstering its financial crime compliance unit and recruiting ICAP’s group GC Duncan Wales as deputy legal head to help manage legal affairs.

Allen’s appointment comes as Standard Chartered faces a myriad of contentious issues, particularly in the US where it remains under supervision over lapses in controls over transactions involving Iran and other countries.

Internally the bank has been seen making broader job cuts under Winters’ leadership as part of a cost efficiency drive, with the lender expected to slash around 10% of staff in its investment banking unit.

sarah.downey@legalease.co.uk

Legal Business

Barclays introduces new thresholds for relationship accounts and tenders in latest panel review

Barclays introduces new thresholds for relationship accounts and tenders in latest panel review

Barclays has introduced a new threshold for relationship accounts and has increased the trigger point for its policy to tender work from £25,000 to £100,000 after a feedback exercise during its last panel review, it has emerged.

The relationship account system, which was introduced in 2014, works by giving firms an annual value of free legal services they must provide in return for volume of work – primarily through legal advice and secondments.

The system previously applied to Barclays’ list of preferred advisers, but is now triggered by a volume of work over £1m. According to Barclays’ head of commercial management, Stéphanie Hamon, every law firm, irrespective of their category as a panel firm, a core specialist firm or a specialist firm, must contribute when they reach that threshold.

Speaking to Legal Business, Hamon said: ‘The relationship account was actually something law firms wanted us to keep. We were pleasantly surprised by that. It is presented in a way in which you have all of the investments and relationships organised in one place and it has a value attached to it.’

In addition, Barclays has increased the trigger for its policy to tender following a feedback exercise with its law firms. In the spirit of improving relationships, the trigger amount has risen from £25,000 to £100,000. This means that every piece of work over £100,000 will still need to be bid on by the bank’s panel law firms. The bank will also be carrying out six monthly reviews of its law firms to make it easier to review the firms at the end of the two year panel term.

Hamon added: ‘There always was a policy to tender, but as part of a feedback exercise we discovered that our threshold was too low, and so we raised that threshold above a certain amount.’

Barclays finalised its global panel in June this year following months of speculation. A raft of firms including Clifford Chance, Ashurst, Eversheds, Mayer Brown, Reed Smith, Simmons & Simmons, Hogan Lovells, Pinsent Masons, DWF and Bond Dickinson won places on the bank’s reduced roster, however DLA Piper lost its spot. It is believed that the total number on the bank’s roster is around a third of the previous total of 350 – 400 firms

According to one law firm partner the key themes of the panel review were ‘delivering excellence, thought leadership, collaboration, team work and value for money.’

The bank also asked some firms to price work according to a different rates for strategic work, medium and flow, covering everything from high end mandates to process driven work.

kathryn.mccann@legalease.co.uk

Legal Business

‘It’s belt and braces stuff’: KWM silent as Barclays beefs up lending provisions following financial strain

‘It’s belt and braces stuff’: KWM silent as Barclays beefs up lending provisions following financial strain

King & Wood Mallesons (KWM) has agreed to tightened security over borrowings from its prime lender Barclays Bank following a period of financial stress for the law firm.

New documents filed on Companies House show that KWM’s European and Middle East arm, which Legal Business revealed in July had extended its loan with Barclays by £5m to £25m, has signed a debenture with the bank with strict provisions attached.

The debenture was made on 27 July by KWM in favour of Barclays ‘as security for your liabilities to us’. The firm has refused to disclose whether the debenture replaces existing borrowings or comes as new debt.

As part of the arrangement, Barclays has been given security over KWM’s revenue stream. Typically, banks will have a covenant in place with law firms that specifies a minimum number of equity partners or that profit must be equal to a multiple of its debt, but not a provision giving it security of its revenue.

The document reads that ‘by executing this debenture you charge to us with full title guarantee with the payment or discharge of all secured sums’. This includes ‘all your securities…all your goodwill and uncalled share capital for the time being…all your intellectual property…all trade debts now or in the future owing to you.’

A mechanism has been put in place whereby the bank can move between a fixed or a floating charge, which means the debenture will apply to all revenue in the region even if performance improves.

It will also remain in force until all sums have been repaid. The document reads: ‘This debenture will remain a continuing security in our favour, regardless of any settlement of account or any other matter whatever, and shall be without prejudice and in addition to every other right, remedy or security which we may have now or in the future in respect of any of the assets for the payment of any secured sums.’

A negative pledge and other restrictions have been imposed, with the firm required to gain Barclays’ ‘prior written consent’ before it can ‘sell, assign, lease, license or sub-license, or grant any interest in, your intellectual property rights’. This means Barclays will have to give sign off should the firm wish to open a new office, alter its existing leases whether to expand or contract, or sub-let space.

Barclays has also included a provision whereby it can appoint an administrator if KWM fails to meet its obligations. The document reads: ‘At any time after we have demanded payment of any of the secured sums, or any step or proceeding has been taken for the appointment of an administrator, liquidator or provisional liquidator, or with a view to seeking a moratorium or a voluntary agreement, in respect of you, or if requested by you, we may appoint…any person or persons to be a receiver and manager of all of or any of the assets or an administrator or administrators; and this debenture shall in any of the such events become immediately enforceable.’

A finance director at a major law firm told Legal Business: ‘This really restricts what KWM can do without reference to the bank. It’s belt and braces stuff. I’ve never seen this at a law firm.’

KWM has already been hit by a stream of partner exits over the last 24 months and undertook a restructuring in March which saw 24 partners being asked to leave.

The debenture was signed on the day that the majority of the legacy SJ Berwin partnership agreed to stump up £14m following a cash call. The move, which doubled each equity partners’ capital contribution, meant that those at the bottom of the firm’s 20-60 points ladder paid in around £80,000 into the business, while those at the top of the equity injected £240,000 into the firm. The firm also asked salaried partners to supply £60,000 each into the business.

KWM is still without a managing partner in the region following the resignation of William Boss at the start of the year and again failed to pay profit distributions, despite moving from a quarterly to a monthly-based system, last month after paying its tax bill.

The agreement was signed by European and Middle East senior partner Stephen Kon and regional co-head of tax Gareth Amdor. KWM said in a statement to Legal Business: ‘The debenture is part of the funding arrangements of the firm.’

tom.moore@legalease.co.uk

For more on King & Wood Mallesons, subscribers can read ‘Branded’ for an in-depth look at the firm.

Legal Business

Ringing the changes: Barclays appoints Mark Shelton as GC of corporate & international as divisions split

Ringing the changes: Barclays appoints Mark Shelton as GC of corporate & international as divisions split

Barclays has appointed ex-Gibson Dunn & Crutcher partner Mark Shelton as general counsel (GC) of Barclays’ corporate & international business following a ring-fencing restructure which saw the bank split its legal team to create two new divisions – the other being Barclays UK.

In addition, Shelton will also be the GC for Barclays Corporate and International Americas and its separately capitalised holding company, established in the US on 1 July 2106.

The appointment means that the bank’s group GC Bob Hoyt, who was appointed in May to hold the role of GC for the corporate and international business in the interim period, no longer holds this position, and Shelton will report into him. Mark Chapman was appointed as GC of Barclays UK in March.

Reporting into Shelton will be Anjali Chhania, GC of corporate banking and Rachel Huf, GC of APAC.

Shelton joined Barclays Investment Bank as its global GC and the regional GC for the Americas in March last year from US firm Gibson Dunn & Crutcher where he had served as co-chair of financial institutions.

He joined Gibson Dunn in February 2014 where he was a member of the investigations and crisis management, securities enforcement, securities litigation and white collar defence practice group for a brief one year. He joined the US firm from UBS AG where he was GC and global head of investigation for UBS’ Americas business in New York for almost eleven years.

Barclays set aside £1bn in October to meet the costs of the Bank of England’s ring-fencing rules, requiring banks to separate their retail arms from more risky investment banking divisions. The post-Lehman reforms are intended to make it easier to contain problems in the banking sector.

Barclays’ shake-up comes as its rival UK banks gear up for equivalent reforms. Lloyds Banking Group in March appointed former Berwin Leighton Paisner partner Frances McLeman to oversee its ring-fencing process.

Last month Legal Business revealed a raft of firms including Clifford Chance, Ashurst, Eversheds, Mayer Brown, Reed Smith, Simmons & Simmons, Hogan Lovells, Pinsent Masons, DWF and Bond Dickinson won places on Barclays’ reduced legal roster, however DLA Piper lost its spot following the global panel review.

kathryn.mccann@legalease.co.uk

Legal Business

KWM mulls cash call after increasing Barclays facility to £25m

KWM mulls cash call after increasing Barclays facility to £25m

King & Wood Mallesons‘ (KWM) European and Middle East business is mulling a cash call months after increasing its loan facility with Barclays from £20m to £25m, as the firm strives to recover from a torrid 18 months.

EUME partners at the 2,200-lawyer firm were informed at their monthly partners meeting in June that London-based funds veteran Michael Halford is leading a review of the firm’s capitalisation in the region. One likely option is asking partners to contribute more capital as the firm moves to put its finances on a firmer footing.

Separately, the EUME business, which KWM acquired when the Asia-Pacific giant merged with SJ Berwin in November 2013, has increased its loan facility with Barclays by £5m to £25m. While the terms of the debt are not public, partners were told at a meeting in March that the revolving credit facility, which had been set to expire in July 2016, had been extended and increased.

The review of capitalisation comes after delays last year on profit distributions. The firm has since decided to move from quarterly distributions to monthly payments. Stuart Fuller (pictured), KWM’s global managing partner, told Legal Business: ‘We should run a business where we pay partners regularly. Quarterly payments are a quaint feature of UK firms.’

The move to address finances comes amid a challenging period for KWM in Europe. The firm has been struggled following a series of high-profile partner exits in the last 12 months and carried out a partnership restructuring that saw 24 partners asked to leave in March. EUME was last year the worst performing member of KWM, which operates a Swiss verein model that keeps liability and finances separate, as global revenue fell 1% to $1.02bn (KWM posted revenue growth estimated at 8% but its results are depressed in conversion to the strong dollar). While not directly comparable given the overlap in reporting periods, KWM’s EUME business generated £181.3m in revenue during the 2015 calendar year compared to £191m in 2014/15.

Just weeks after the partner restructuring was announced, a six-partner private equity team in Paris resigned for US law firm Goodwin Procter in a severe blow for KWM. The Paris team, which included Paris managing partner Christophe Digoy and big-biller Maxence Bloch, is understood to have walked out with at least £8m in annual billings. KWM has lost a number of other partners with substantial billings in the last two years.

KWM has confirmed that it has ‘written to Goodwin Procter in connection with legal proceedings by KWM against it’, rather than the Paris partners, but refused to confirm details of any possible action.

KWM has pledged to re-build its practice in France, highlighting that its profitable Paris funds team was unaffected by the Goodwin departures. Nevertheless, KWM has some way to go to demonstrate that it has steadied its course in Europe.

tom.moore@legalease.co.uk

For more on King & Wood Mallesons, subscribers can see ‘Branded’ for an in-depth look at the firm.

Legal Business

Barclays slashes number of firms by over 60% in global review

Barclays slashes number of firms by over 60% in global review

DLA Piper misses out as bank sets out new categories

Barclays picked a raft of firms, including Clifford Chance, Ashurst, Simmons & Simmons, Hogan Lovells and Reed Smith, as the banking giant overhauled its global roster last month and slashed its number of go-to advisers by over 60%.

Legal Business

‘Questions remain’: Three former Barclays traders convicted in London Libor trial

‘Questions remain’: Three former Barclays traders convicted in London Libor trial

The Serious Fraud Office (SFO) has secured a major win today (4 July) after three former Barclays traders were found guilty by a London jury of conspiring to fraudulently manipulate global benchmark interest rates.

In a warning to junior bankers, Jay Merchant was convicted unanimously at Southwark Crown Court of manipulating the key financial rate while Jonathan Mathew and Alex Pabon were found guilty by majority verdict after a ten-week trial. The trio will be sentenced on Thursday.

However the jury was unable to reach a verdict in relation to two other defendants named Ryan Reich and Stelios Contogoulas after nearly two weeks of deliberations. The SFO will now have to decide whether to seek a re-trial.

In January a UK jury acquitted six City brokers who were alleged to have helped manipulate the Libor, just months after the high profile conviction of former banker Tom Hayes. The men – former ICAP traders Colin Goodman, Daniel Wilkinson and Darrell Read, former RP Martin brokers James Gilmour and Terry Farr; and former Tullett Prebon broker Noel Cryan – were accused of conspiring with former UBS and Citigroup trader Hayes to rig a key lending rate used between banks for rewards such as takeaway curries and drinks. The trial constituted a major defeat to the SFO which this year requested an additional £21.1m to bankroll ongoing cases through to the end of the financial year.

On the convictions, Corker Binning partner David Corker said: ‘Questions do remain though about the way in which the Libor prosecutions were brought after loud political pressure. They were about conduct widely condoned or encouraged at the time in a broken, poorly regulated system and these defendants were foot soldiers for the most part in a global financial system beyond their full understanding.’

‘The convictions strike the harshest of warnings for those operating at relatively junior levels in financial markets and in other fields of commercial life where the way in which business is routinely done may sometimes, years later, be characterised as criminal by those with 20/20 hindsight and a massive banking crisis for which politicians wanted to find someone to blame.’

The watchdog’s future has been a topic of debate since Home Secretary Theresa May has emerged as the clear frontrunner in the race to succeed David Cameron as Conservative leader following the Brexit vote. May has previously voiced her preference to abolish the SFO and roll it into the National Crime Agency.

sarah.downey@legalease.co.uk