Legal Business

Finance: Slaughters, Cravath and De Brauw secure Shell DCM work as Irwin Mitchell wins Wells Fargo as new client

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Finance Cravath, Swaine & MooreIrwin MitchellSlaughter and May
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European corporates are showing greater reluctance than last year to tap into the debt capital markets but Royal Dutch Shell this week issued a triple-tranche $3.75bn bond with Slaughter and May; Cravath, Swaine & Moore and De Brauw Blackstone Westbroek at the helm.

Slaughter and May’s finance partner Matthew Tobin and tax partner William Watson led a team advising on the issue of five-year, ten-year and 30-year fixed rate notes, which were issued by Shell International Finance and guaranteed by Royal Dutch Shell, which plans to use the funds for general corporate purposes.

Cravath’s team was led by New York-based corporate partner William Rogers assisted by tax partner Michael Schler. Slaughter’s best friend De Brauw was led by London-based corporate partner Ernest Meyer Swantee and included Paul Sluerink, a Netherlands-based tax partner.

The trio regularly work together on bond issues and in August last year advised Royal Dutch Shell on a similar $2.5bn triple tranche bond under its US shelf programme, in the same month advising Unilever on a $1bn bond issue.

Elsewhere, Slaughter’s finance team has also advised Taylor Wimpey, one of the largest residential developers in the UK, on the recently announced successful refinancing of its revolving credit facility. The original facility was due to expire in November 2014 but has been refinanced with a £550m facility that expires in August 2018.

The team was led by finance partner Mark Dwyer and included tax partner Gareth Miles. Taylor Wimpey is a long term client of the firm and Dwyer has helped bring the company’s borrowing under control via a series of debt restructurings and the sale of its US business. ‘At one point the company had over a £1bn in debt. It’s most recent announcement stated a figure of £68.4m,’ Dwyer told Legal Business.

Meanwhile, it has emerged that Irwin Mitchell has won new client Wells Fargo in a multi-billion pound deal on the back of the 16-lawyer SJ Berwin real estate team that joined in 2010. The firm advised the leading US real estate lender on the England and Wales due diligence aspects of its £4bn real estate loan acquisition from Commerzbank-owned Hypothekenbank Frankfurt, in a deal that signed last month.

The Irwin Mitchell team was led by real estate partner Rob Thompson, who said: ‘This is the first time we have acted for Wells Fargo, a leading US bank and we are delighted to have advised on such a major acquisition and prestigious deal. The real estate due diligence on a portfolio of this size required immense organisation and careful management to ensure the matter proceeded smoothly.’

Allen & Overy (A&O) and Dechert advised on the overall structuring of the transaction. The A&O team was led by banking partner Arthur Dyson and corporate partner George Knighton while Dechert fielded US-based relationship partner Rick Jones and London finance partner Jeremy Trinder. Tax advice was provided by London partner Mark Stapleton.

Commerzbank was advised by Ashurst corporate partners Nick Cheshire and Rob Aird.

david.stevenson@legalease.co.uk

Legal Business

Deal Watch: Slaughters, Dentons, Taylor Wessing and Nabarro act on high profile European deals

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Corporate CMS UKSlaughter and MayTaylor Wessing
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Europe and particularly the UK has thrown up a number of high profile mandates from the nationally significant restructuring of UK Coal through to the solid £500m private equity buyout of Chesapeake by the Carlyle Group.

Nabarro has led for UK Coal on the corporate, insolvency and pension elements of a second restructuring following a devastating fire at the company’s Daw Mill in February. The company accounts for 5% of the UK’s energy needs and as a result of the restructuring over 2,000 jobs and the pensions of 7,000 members have been protected.

Nabarro insolvency and restructuring partner Glen Flannery led alongside corporate partner Ben Hendry and a cross-practice team including pensions partner Ian Greenstreet.

Flannery said: ‘UK Coal has been one of Nabarro’s longest standing clients and to secure the future of its viable mining operations is a positive achievement for everyone involved.’

Elsewhere, Telefonica UK instructed Global 100 UK firm Simmons & Simmons to lead on what is said to be one of the largest contact centre outsourcings in Europe to date and the largest deal of its kind ever entered into by Telefonica UK.

The £1.2bn, 10-year deal sees 2,700 Telefonica advisers based at four sites in Britain transferred to Capita’s management from July 1. The deal involved related real estate, employment, pensions, finance and tax issues.

Alexander Brown, an ICT partner at Simmons who led the deal, told Legal Business: ‘It was a big deal. I would think £500m is a big outsourcing deal so £1.2bn is huge, certainly the biggest Telefonica has ever done.’

Simmons is a longstanding adviser to Telefonica UK and acted on the sale of Manx Telecom in 2011 and a finance and accounting outsourcing to Genpact in 2012.

The deal was led at Telefonica by head of operations (legal and regulatory) Dean Savage, who told Legal Business: ‘[The deal] will create a workforce of 2700. It’s a massive outsourcing deal in terms of people and packs. For us, it’s going to give massive savings.

‘We’ve worked with [Simmons] in the past on M&A work including when we sold Mancks. I find them very good to work with and what I like about them is that they’re not ivory tower. They roll their sleeves up and relate to the clients. They just become part of the O2 team culturally.’

Another UK multi-million pound deal saw Dentons advise UK insurance giant Aviva and its co-investors on the sale of remaining assets at PaddingtonCentral to British Land in a deal worth £470m.

The deal included circa 500,000 square feet of offices and retail/leisure space, a 206 bedroom hotel and two development sites with consent for further 335,000 square feet of offices.

Led by Dentons real estate partner Nichola West and corporate partner Martin Kitchen, the firm’s involvement in the PaddingtonCentral project dates back to 2000, when it acted for Aviva Investors and The Equitable Life on the original acquisition of the development site and the appointment of the original developer.

Since then, the work involved representing the joint venture in negotiating the development documents as well as disposal of the investments.

West said: ‘This sale represents a successful conclusion to Dentons’ 13-year involvement in this award winning scheme. The strength and breadth of our real estate team ensured we were able to guide Aviva through every phase of the project, culminating in this significant sale.’

And while the European private equity market remains unpredictable, one of the largest recent deals has seen Latham & Watkins’ London corporate partner David Walker advise Washington-based private equity group the Carlyle Group on its reported £500m acquisition of packaging company Chesapeake from Oaktree Capital Management and Irving Place Capital. The deal is a significant result for Latham and for Walker, who joined in May from Clifford Chance, where he was global head of private equity.

Walker, who advised alongside finance partners Dominic Newcomb in London and Washington, DC-based Jeffrey Chenard, said: ‘The European PE market has remained choppy in the first half of the year but deals are still getting done. For high quality businesses, the landscape continues to be very competitive.’

Nottingham-headquartered Chesapeake – which produces packaging for Glenfiddich whiskey and Bombay Sapphire Gin – was advised by Slaughter and May led by corporate and commercial partner Jeff Twentyman and Taylor Wessing led by head of private equity Nick Hazell.

Mike Cheetham, chief executive officer of Chesapeake said Carlyle’s ‘backing will support our aspirations to build upon our strong investments over the past three years [and] allow us to respond effectively to new business opportunities as we look to further align our business with our customers’ global requirements.’

Hazell, added: ‘We were delighted to help Mike Cheetham and his team on this. They have built a great reputation in their sector and with Carlyle’s backing can further develop international opportunities. The deal also shows that there is considerable appetite within the market for high quality assets managed by a strong and effective team.’

sarah.downey@legalease.co.uk

david.stevenson@legalease.co.uk

Legal Business

Slaughter and May steps in for Siemens on €1.7bn sale of stake in NSN

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Corporate Shearman & SterlingSlaughter and May
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Shearman & Sterling has led for Nokia on its €1.7bn buyout of Siemens’ stake in Nokia Siemens Networks (NSN) in a deal that has seen Slaughter and May step in for the German engineering giant.

Announced on 1 July, Shearman fielded a multi-disciplinary team across London and New York led by City M&A partner Jeremy Kutner for longstanding client Nokia. Slaughter and May led by London corporate partner Tim Boxell advised the Siemens team led out of its German headquarters.

NSN was formed in 2006 in a €16bn joint venture between Nokia and Siemens aimed at offering innovative mobile broadband technology and services. Advising on its formation was former Shearman City-based partner Jonathan Coppin opposite Clifford Chance (CC).In April this year CC also advised NSN on the sale of its business support systems business to Redknee Solutions for €40m.

The JV was governed by English law and Kutner, who was promoted to partner in 2011, led alongside London finance partners Mei Lian and Clifford Atkins and New York M&A partners Peter Lyons, Scott Petepiece and Samuel Waxman.

The deal was turned round in a week, during which Lian and Atkins put a €1.2bn loan facility in place. Kutner said: ‘They did an amazing job of getting it done in a short space of time.

‘For us the real thing about this type of transaction is how well we work across our practice. A lot of people say that is the case but here it really was. I was closing another deal in Singapore and when I went to bed the people in New York picked it up.’

Shearman was assisted by De Brauw Blackstone Westbroek and Slaughters by Houthoff Buruma in relation to NSN in the Netherlands.

The deal is expected to close in the third quarter of 2013.

sarah.downey@legalease.co.uk

Legal Business

Slaughters leads on Punch Taverns £2.4bn debt restructuring

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Restructuring Punch TavernsSlaughter and May
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Longstanding Magic Circle client warns creditors that it could face administration

Slaughter and May is advising Punch Taverns on its £2.4bn securitised debt restructuring as the UK’s largest pub company warns creditors it could face administration.

On 10 June a powerful group of lenders rejected plans to reduce the pub group’s interest payments to £32m a year. Slaughters, led by corporate partner David Johnson is advising longstanding client Punch, which owns around 5,000 pubs across the UK.

Under the revised plans, Punch asked senior bondholders to approve a reduction in debt service payments of £600m over five years. However, a special committee set up by the Association of British Insurers to represent lenders rejected the plans last month, dismissing them as ‘vague’ and only a marginal improvement on proposals submitted in March.

Legal Business

Slaughters leads on Punch Taverns £2.4bn debt restructuring as pub group warns it could face administration

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Restructuring Slaughter and May
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Slaughter and May is advising Punch Taverns on its £2.4bn securitised debt restructuring as the UK’s largest pub company warns creditors it could face administration.

On Monday (10 June) a powerful group of lenders rejected plans to reduce the pub group’s interest payments to £32m a year. Slaughters led by corporate partner David Johnson is advising longstanding client Punch, which owns around 5000 pubs across the UK.

Under the revised plans, Punch asked senior bondholders to approve a reduction in debt service payments of £600m over five years. However, a special committee set up by the Association of British Insurers to represent lenders rejected the plans this week, dismissing them as ‘vague’ and only a marginal improvement on proposals submitted in March.

Without concessions being reached Punch faces the possibility that it will be unable to meet its debt covenants.

Slaughters has a long standing relationship with Punch, which built up high levels of debt during a series of acquisitions during the boom years, owning around 7000 pubs at its peak and earning itself a place in the FTSE 100.

The Magic Circle firm has led on Punch’s major acquisitions and disposals including a market changing £2.75bn acquisition of Allied Domecq in 1999, followed by the flotation of Punch on the London Stock Exchange in 2002, when the company was valued at between £620m and £744m.

Shortly after the turn of the century Punch gifted Slaughters with a significant corporate acquisition almost every year, including the £1.19bn acquisition of pub group Pubmaster in 2003, the purchase of Innspired Group from Alchemy in 2004 for £353m, the £233m buy-out of pub operator Avebury in 2005, and the takeover of another 869 pubs from market rival Admiral Taverns for £326m in 2006, in which TLT also had a role.

However, the company suffered at the hands of the financial crisis and in 2009 Slaughters advised the group on a rights issue worth £350m and handled the sale of 11 managed pubs to Greene King for £30.4m as the company endeavoured to reduce its debt.

francesca.fanshawe@legalease.co.uk

Legal Business

SFO to recruit 10 more barristers in defence of Tchenguiz brothers multi-million pound claim

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Litigation Slaughter and May
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The Serious Fraud Office (SFO) is to recruit an additional 10 junior barristers to join the team involved in the defence of the multi-million damages claims brought by the Tchenguiz brothers.

Last year property tycoons Robert and Vincent Tchenguiz sued the SFO for more than £200m after the agency made serious mistakes in its investigation of their role in the collapse of Icelandic bank Kaupthing, of which they were executives.

Slaughter and May is managing the disclosure exercise and a witness statement filed by Slaughter’s dispute resolution partner Jonathan Cotton as part of the pre-trial hearings last week revealed that the SFO has so far spent £118,000 up to 30 April on the disclosure review.

It also revealed that the review was progressing slower than expected, resulting in plans to bring in up to 10 more barristers to join the team of 25 already working on the process.

Outsourcing to an external provider was not an option, Cotton said, considering the detailed legal knowledge required.

A spokesman at the SFO confirmed that the review team involved in managing the process and carrying out quality control exercise has already been increased from 10 barristers in March to 25 on 22 May.

Both Tchenguiz brothers, who before the financial crisis owned around 1% of all residential property in Britain, were arrested in dawn raids on their homes in March 2011. However, the investigations were dropped and in judicial review proceedings last July, the High Court overturned the search warrants used by the SFO to seize documents and files.

The SFO’s decision to hire Slaughter and May and apply this level of resource reflects the fact that, if the Tchenguiz brothers win, this will be the biggest single largest payout in the SFO’s 25-year history.

francesca.fanshawe@legalease.co.uk

Legal Business

Old normal update – Linklaters outpaces Slaughters to hike starting associate pay by £2,500

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Salaries LinklatersSlaughter and May
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A further reminder comes this week that despite much talk of the pressure on the legal market (see Comment: Things I would have said about the future of law if I hadn’t forgotten my notes), leading City players continue to be highly profitable with Linklaters announcing on Tuesday (7 May) that it is raising its salary bands for associates.

The move sees Linklaters increase newly-qualified pay from £61,500 to £64,000. Year one post-qualification experience (PQE) associates see a more modest £500 rise to £69,500. Years two and three PQE respectively earn £78,250 and £89,000, a rise of £2,250 and £1,000. Trainees see a £500 rise, increasing in seat one to £39,500.

The rises put Linklaters just ahead of magic circle rival Slaughter and May, which last week announced modest increases to its underlying pay bands.

The review is separate to the annual increases in pay associates gain as they move up the qualification ‘ladder’. Linklaters also operates a bonus scheme for ‘exceptional’ performance. The rises at Linklaters and Slaughters underline expectations that most City firms will agree modest increases in associate pay in 2013 after three years in which market rates for associates have largely been frozen.

Salaries for City associates have fallen around 15% in real terms since 2009, when many firms effectively dropped the salary for newly-qualified lawyers from around £66,000 to £60,000 in response to the banking crisis.

While some voices have argued that junior associates are over-paid given the prolonged slump in Western economies, pressure remains on leading City firms given the higher compensation on offer at the UK arms of many US rivals.

One solution to this tension firms have hit upon is bringing in a stronger element of discretionary promotion to associate progression and pay, a shift from the traditional ‘associate lockstep’ model in which lawyers are paid strictly on years of post-qualification experience.

While that trend is set to continue, and City firms continue to modestly downsize their UK intakes in response to the sullen domestic economy, pay for those lucky enough to gain a training contract is likely to be maintained or modestly increase in the years ahead.

alex.novarese@legalease.co.uk

Legal Business

Comment: Slaughters bumps up lawyer pay but associate lockstep’s days are numbered

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Salaries Slaughter and May
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Slaughter and May today (30 April) became the first major City law firm to announce a review of its associate pay bands – triggering minor rises in the underlying rates its lawyers earn from trainee level to three years post-qualification.

Newly-qualified see salaries rise from £61,500 to £63,000; one year PQE pay rises £500 to £69,500; two year PQE from £76,500 to £78,000; three year PQE earn an extra £1,500 at £87,500. Trainee salaries are up by £1,000, increasing to £39,000 in year one and £44,000 in year two. The rises kick in from 1 May.

This is, of course, in addition to the sizeable increases as associates pass through the ranks. Commenting on the move, Slaughters’ incoming executive partner Richard Clark said: ‘Our view remains that the economic climate is still uncertain but we are cautiously optimistic for the rest of 2013.’

While these are substantial sums, they remain well below the peak offered in 2008, when magic circle firms were paying around £66,000 for newly-qualified solicitors. That figure has been substantially eroded by inflation and Freshfields Bruckhaus Deringer’s controversial (but justified) decision in 2009 to halt its associate lockstep progression, which was widely followed.

The latter move effectively reset UK associate compensation downwards by around 10%, going a long way towards making boom-era cost-bases adjust to the post-Lehman environment.

It remains likely that other peers will follow Slaughters with comparable modest rises this year but the underlying picture hasn’t changed. City firms are using inflation and the straightjacket of associate lockstep to control salaries while demand remains subdued. Indeed, many observers believe associate pay is still too high given the gloomy market.

However, such assertions probably understate the substantial shift since 2009 in that associate pay has rapidly moved from the entirely dominant lockstep to a more flexible, merit-driven version. Though the jargon differs between firms, the basic idea is the same: seniority-driven pay to three year PQE, soon after which kicks in some form of discretionary promotion or assessment that defines salaries and career tracks. While the mid-tier pioneered it, Freshfields’ recent introduction of a four-stage ‘milestone’ framework was hugely significant. Even the famously conservative Slaughters is currently bringing in some grading beyond the four year PQE point.

This is a considerable and rapid shift by the standards of City law. Despite the oft-repeated claim that most partnerships have ditched lockstep, the majority of top 50 UK firms deploy only moderate variations on the seniority-based equity ladder. And that is after a 20-year evolution of dishing out the profits. In comparison, associate pay is being redrawn far more quickly.

Largely, that’s a good thing. Associate lockstep is slow-moving, inflexible, prone to transmitting excessive wage inflation and tends to deliver pay rises at the wrong point in the economic cycle.

This decisive break with the old model is very different to the US. Major US advisers have kept compensation heavily structured post-qualification despite the downturn, so far with problematic results. As yet there is no sign of that consensus breaking down in the world’s largest legal market, despite increasingly bad-tempered – and rather ill-directed – grumbling from clients about ‘paying for training’.

You don’t have to be a legal futurologist to believe that this relative flexibility will stand UK firms in good stead in the years ahead as they strive to reinvent and renew their businesses for a more disruptive and demanding age. Still, with US rivals making ground in the City, and continuing to offer a lot more for junior talent, phasing out lockstep remains a tricky balance to strike. Just not tricky enough to stop it happening. That means comp’ for junior lawyers will be pushed down and a select band of mid-level associates in hot practices areas will be earning more in the years to come.

alex.novarese@legalease.co.uk

Legal Business

Banks could face backlash on legal panel reviews

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Adviser reviews Mayer BrownSimmons & SimmonsSlaughter and May
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With the latest round of bank panel reviews in full swing, early indications show signs of a backlash from law firms as banks place increasing demands on panel candidates at the same time as driving down costs.

In October, The Royal Bank of Scotland (RBS) announced the results of its long-running panel review. By reducing its number of sub-panels from 13 to five, it has significantly lowered the number of law firms on the panel from around 100 previously to between 55 and 60 now. Meanwhile, former panel firms Slaughter and May, Olswang and Mayer Brown didn’t pitch to join the panel this time around.

Legal Business

Australia tempts yet another major international player

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Australia LinklatersSlaughter and May
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Linklaters has joined the ranks of its Magic Circle peers by moving into the Australian market via an alliance with Allens Arthur Robinson (AAR).

The alliance, which went through on 1 May, was planned over a year ago, according to a source close to the firm. AAR, which had operated an exclusive relationship with Slaughter and May, is viewed by many as one of the best in the region.