State of the market

The global financial crisis (GFC) has created significant hurdles for borrowers looking to obtain finance for larger deals, which in turn has implications for their legal advisors. Deal values have dwindled and more financial institutions are required to bring in the same level of financing.

Many lawyers are now pondering on whether the economic ice age created by the GFC could spell the extinction of highly levered 'dinosaur' deals, such as CVC's purchase of PBL Media (A$4.16bn) and Telecom New Zealand's sale of Yellow Pages (NZ$2.24bn). Baker & McKenzie partner Bryan Paisley believes that the days of giant financing deals are gone for the foreseeable future. "A lot of the deals that were achievable in the past will not be seen in the present market. In the leveraged finance space the very large transactions done on PBL Media and Coates will probably not be seen for a considerable period. It's almost a question of whether lawyers will ever see buyout deals of that scale again," he says.

Kiwi lawyers are also facing greater challenges in assisting their clients to obtain finance from banks because of the reduced amount of available credit. The banks are in a stronger bargaining position than they were 12 months ago. Convincing financiers of the asset value that a client intends to acquire has become more difficult since there is uncertainty over earnings and their ability to be sustained. Simpson Grierson partner Andrew Harkness says that asset values are "under pressure" and there is now a general aversion to too much leverage. "The NZ market was at its peak back then, but I couldn't see how those deals could go ahead now. The global financial crisis has taken everybody by surprise. There are signs of recovery offshore but we are all in unchartered waters," he says.

In the leveraged or private equity (PE) buyout space, Australian lawyers are typically looking at top-end deals ranging from A$400m-A$500m. However, Paisley believes that this is "pushing it", referring to how eight banks were recently needed to provided financing for Solution 6's bid for MYOB (A$233m). "Any sizable straight buyout is now going to involve a large group of banks. Banks are going to be very careful with their capital allocation, which means that all borrowers will really need to justify why they deserve to borrow money. There's going to be a battle for capital allocations," he says.

At first glance, the recent Dexus Property entitlement offer (A$749m) seems to offer a glimmer of hope that large equity raisings may still be possible. However, Gilbert + Tobin partner John Schembri believes that lawyers should proceed with caution. "The Dexus raising was actually a sign of how bad the market is. It didn't involve debt being financed, rather debt being effectively converted to equity - ultimately a negative impact on funding as the cost of equity is much higher than debt, and it's very expensive. Currently the banks are waiting for equity sources to be exhausted before they step in to refinance an over geared asset," he warns.

Terms for repayment of funding have also reduced in New Zealand. There has been a significant increase in funding costs and this has been heightened with facilities maturing and borrowers wishing to secure on going liquidity. Australian PE sponsors have just about hit a dead-end when it comes to debt availability. Paisley recalls that prior to the crunch, six years was the usual period for full repayment - now it is just three years. This is creating significant challenges to carry out leveraged buyouts that provide a sufficient return to the sponsors, he said.

Nevertheless, there are still buyers sitting on capital who are waiting for the right opportunity to make an investment. Harkness points to some PE houses with good balance sheets who are likely to be in a better bargaining position than they were a few years ago. "Before the multiples were pushed out to the extent that only PE houses were only able to acquire. But now asset multiples are rolling back, this should make it a more attractive proposition for trade players," he says.

After global insurer American International Group's 2008 collapse, many financial institutions have been "crawling out of their foxholes", but there are still some signs of hope. Syndications for high-end corporate, such as Woolworths and Woodside, are still oversubscribed, showing that there is still life in the syndicated loans market. PE sponsors are also showing that deals can be done without banks providing leverage, such as CHAMP Private Equity's acquisition of Alleasing. Equipment financing schemes are another possible avenue, but Paisley remains sceptical about how well these will satisfy vendor expectations.

Acquisition financing is tipped to make a comeback once the M&A market rebounds. Schembri says that this has already started because the expectations of buyers and sellers are coming closer together. Other areas are booming as well, such as asset finance, because corporate clients are looking to finance their assets off their balance sheet, and lease out their own assets. The infrastructure PPP area is also busy as the state governments have a significant pipeline of projects for hospitals, prisons and schools. The debt restructuring and workout area is yet another boom area where banks and sponsors are looking to do early restructuring. "It's a real trend at the moment since highly leveraged businesses are currently under stress and exploring ways to restructure and recapitalise their transactions," Paisley says.

There is significant interest in New Zealand's retail debt capital markets as well. Harkness says retail debt capital markets have provided corporate issuers with access to longer terms and better pricing than is on offer in the wholesale market. "Corporate issuers with a strong household name that are well rated have been able to secure repayment terms up to seven years at competitive rates. Most issues have been well received and some heavily over subscribed - I believe that NZ is unique in this regard. This has allowed those corporate clients to secure a large portion of their term funding requirements from retail investors who are interest rate driven," he says.

So the outlook for lawyers will be "challenging" but not "gloomy", according to Paisley. The GFC has created an opportunity for lawyers to offer legal advice that provides a fresh look at the global economy. "We need to be open-minded and creative, and accept there will not be the same level of competition to lend, as the banks' requirements are more rigorous. Smaller deal sizes will still be achievable," he says.

Harkness agrees that lawyers are facing a challenging market with never before seen economic conditions. Although the crisis is complex there are good opportunities for clients who have a good balance sheet and are nimble in their thinking.

SYDNEY

Sydney took the brunt of the banking and finance work and generally speaking most clients were pleased with their legal advisors. They told ALB, they looked for individual lawyers rather than firms. Most of the time clients preferred well-known lawyers, although a few believed that well-known lawyers did not always equate to the best service. 

Lawyers interacting with the other side could try to stick to the transaction, according to one client. "They should not see negotiation as a chance to be opportunistic, or to take advantage of the other side, with the intention to get something out of it," the client said.

Corrs Chambers Westgarth received the highest praise in Sydney. Patrick O'Grady did the bulk of credit documentation, indemnities, securities, general commercial advice. Clients "never had a problem with him" and thought he was commercial in his legal advice, omitting the "esoteric technical legal jargon" that other lawyers tended to get bogged down with. His service was quick, effective, cost efficient and personal. One client called him the "head honcho for general banking and finance matters, with a special focus on the property sector".
Robert Ritchie, who recently moved from Clifford Chance, brought longstanding international clients with him to Corrs. He was widely regarded as an experienced lawyer who is good at combining documents on both sides of the deal table. 
Shawn Wytenburg was rated for his financing work for PPPs, with a good understanding of all commercial issues.
Trevor Danos was a top pick for a range of matters because he understood the history of his clients and, equally importantly, the structures that lenders work within. He was a sensible and commercial-minded lawyer, who did not negotiate with clients as to what they should do, rather representing them on what they wanted.
John Munton was known to many as the "old wise man of the floor", experienced in trustee-based work and general finance. Tim Barton had a derivatives and debt capital markets focus, while Andrew Galvin was a products and payments specialist.

Gilbert + Tobin impressed clients with its timeliness and variety of lawyers who were "on top of things".
John Schembri simply could not be praised any higher for his "excellent, practical and highly experienced" performance. He was not only commercially minded, but also able to avoid arguing for hours, thus ensuring speedy progress. One client said he had no hesitation in using Schembri because he "had a wealth of experience when he represented the banks... was extremely good at dealing with other side", and was very efficient at project finance and understanding all the commercial issues involved.
James Lewis was predominantly chosen for his debt restructuring and leverage finance work.
Tim Castle was "the man" for insolvency financing matters, while Robert McDonnell was the project finance specialist. Johnson Winter & Slattery (JWS) was considered highly for its nationwide work, which often required flying lawyers from several different offices to handle a particular matter.
Jim Hunwick was good at finance, structured finance, syndications, capital markets and derivatives. He was knowledgeable and professional in his dealings, managed files very effectively and at a reasonable cost.
Clients said that Shelley Hemmings was good at structured transactions and using leverage in retail financial products.

Baker & McKenzie was "fantastic" for international private placements and other capital markets work, some long-standing clients said. The firm knew the players and syndicates well enough to bring satisfactory outcomes for both parties.
Bryan Paisley was considered an "excellent" banking & finance partner, who leads an "excellent" team to be very commercial in their outlook. Tim O'Doherty was bright, knowledgeable conscientious and responsive when it came to banking, restructuring and insolvency work. One client found him particularly helpful in negotiating and drafting bank facility agreements.
Eric Boone was one of the first lawyers clients turned to for US placements and securitisation financing. George Harris was liked for his broad practice that encompassed both corporate lending and property.

Deacons was also a firm that clients thought highly of. Nino Di Bartolomeo was very profressional at matters that transpired in multiple Australasian jurisdictions. John Holmes was also praised and recognised as the "talented" head of the firm's practice - acclaimed for his own banking and insolvency work as well. Alison Deitz was the regulatory expert for financial matters, Dan Marjanovic was the project financing 'champion', while Bill Farrow was versatile in his advice for banks but was noted for his property financing skills.
Thomson Playford Cutlers' Michael George was chosen for the front-end finance work, while Adam Pope handled litigation for financial services clients.

Middletons handled a range of banking & finance matters, with Ben Burney, Rowan McDonald, Peter West and Brendan Wyhoon all highly regarded.
Henry Davis York's John Currie, Roger Dobson, Ben Emblin, caroline Harkins, Simon McSweeney and Alex Mufford were all mentioned.

Sidley Austin's Bruce Dailey was often chosen for US placement deals.

Tresscox Lawyers' Michael Bracken, Ron Heinrich, Derek Hilliard, Robert Mccormack, Philip Mitchell and Robert Tomlinson were mentioned. DLA Phillips Fox's Bill Chapman, David East and Peter Faludi were singled out for praise, while Maddocks' Geoff Charnock and Sean Rush were mentioned.

Piper Alderman's Alan Jessup and Robert Postema were mentioned, as were Arnold Bloch Leibler's Paul Rubenstein and Gadens Lawyers' Paul Armstrong.

Allens Arthur Robinson left clients impressed with its timeliness, human resources,and range of lawyers who were "on top of things".
Diccon Loxton was commended for his depth of experience. Clients said he knew document clauses "off by heart", and had already dealt with most situations that he came across. As the "head bloke", he was "top-tier" in his work for just about anything, notably syndicated bilateral facilities.
Phillip Cornwell has also been around long enough to understand all commercial issues, and how to be constructive in his advice, according to one client. Alan Maxton was very hardworking - often doing all-nighters to get a deal done. Richard Gordon was very commercial in his outlook, excellent, practical and highly experienced at having a good grasp of all issues.
Andrew Boxall was known for his syndicated banking work and Tom Highnam was a "strong" lawyer for project and corporate matters. Matthew Allchurch was known for his capitalisation and securitisation finance work. John Warde was practical and highly experienced. Robert Pick was proactive and diligent, while Ian Wallace was a hard worker. Catherine Parr was chosen for retail or consumer finance and Mark Kidston was chosen for corporate or leverage finance. Mark Wormell and Andrew Jinks were chosen for their securitisation and capital markets know-how.

Mallesons Stephen Jaques received a top recommendation for its client service that was timely, well staffed, and superior when it came to the firm's banking & finance team.
Dominic Bortoluzzi was praised for his knowledge, commercial legal advice and practical approach. His wealth of experience helped ensure that no time was wasted. Ken Astridge was called "top-tier" for banking work and was well-known outside his client base for his hard working ethic and ability to handle many deals at once.
Yuen-Yee Cho was "certainly up there" and noted for doing considerable banking and finance work at the deal table. Both David Friedlander and Shannon Finch were proactive, diligent and experienced. Ian Edmonds-Wilson was noted for his securitisation work, Nuncio D'Angelo was praised for his finance, stocks and syndication work, while Katherine Forrest was also singled out for praise. Peter Doyle, Mark Upfold, Scott Gardiner and Scott Farrell were also praised.

Freehills was "tops" for all commercial issues and the best in the market for service, time and knowledge of transactions. John Nestel was praised for his corporate and banking advice, and noted for his competence at negotiating documentation. Richard Gray, who recently retired, was considered to be "smart" and a "tough" negotiator. Both Philippa Stone and Tony Sparks were proactive, diligent and experienced at capital markets matters. John Angus was smart on complex aircraft financing matters, while Patrick St John was also praised.

Minter Ellison was called the "best in the market" for its broad range of banking, finance and property advisory services. John Mosley was mentioned for his hard work on leveraged finance, general banking and corporate finance. Tony Berriman was a specialist in financing for property, construction and retail. Keith Rovers and Paul Paxton were well-known for property financing. Stewart Robertson was chosen for his leveraged and acquisition finance experience. Daniel Marks was an expert in property and construction finance. Alex Halliday was the "lead guy" who "ran the show", and both John Elias and Ralph Ayling were mentioned for structured finance.

Clayton Utz's Sydney office was mentioned for banking facilities work and built up a good rapport with clients.
Michael Riches was very dynamic, proactive, understood issues was mentioned for leveraged finance. Jason Huinink's particular expertise was in asset finance, corporate finance, syndicated lending. Angela Flannery was the one clients turned to for structured finance and syndicated lending work. John Moutsopoulos was a funds management expert, having acted for major shopping centre clients. Stuart Byrne was mentioned for his capital markets expertise. Sonia Goumenis and Karolina Popic were praised in securitisation finance. Zein El Hassan was a superannuation expert for advice on regulations.

Blake Dawson's Sarah Dulhunty  was an experienced operator at equity and finance. Matt Stott was a "young" and "talented" partner. Paul Jenkins, David Mason and Steve Smith were all mentioned for debt work.

MELBOURNE

Bakers was a strong performer in the Victorian capital. Ashley Poke was proactive, diligent, and experienced in handling acquisition financing, equity and capital markets matters.
Clients recognised Simon De Young as an "up and coming junior partner", who has been busy developing his corporate equity and private equity skills. Stephen Watts was considered to be a "pure banking lawyer", who was good for debt or regulatory issues. Craig Andrade was proactive and diligent.

Thomson Playford Cutlers' Julie Callea-Smyth was efficient, met deadlines and kept clients up to date. Her most loyal clients also valued her mediation skills. Neil Hannan and Norman Fryde were chosen for their insolvency finance skills. Siew Ling Lian was mentioned for front-end acquisition finance work.
One client praised Deacons' Melbourne office as having the best banking & finance lawyers. Gillad Dalal was good at structured finance and did the "big-end" work, Andrew Bretherton was a specialist in property and lending finance, while Quentin Solomon did the "high-end" lending and insolvency finance work.

Corrs' John Walter, David Warren and Roy Weitzman handled the financing for large government-funded projects and bidding consortiums. Brad Husband was "great" for general banking and finance.
Cornwall Stodart's Ed Gurgiel was respected for his 28 years-plus experience in mortgages, securities and property financing. Elpis Korosidis was often turned to for structured transactions, and Gino Potenza was an insolvency and debt financing expert.

Maddocks' Ian Beattie, Michael Johns, Philip Jones, Geoff Musgrove and Craig Ng were mentioned for banking & finance. Chris Beeny, Shahriar Mofakhami and Bernie O'Sullivan were chosen for their funds management work.

Tresscox's Ian Ferres, Alfonso Grillo, Trevor Lloyd, John Petts and Nigel Watson were all praised.

Middletons had a sizeable practice consisting of talent, such as Jim Bulling, Andrew chambers, Roger Perrins, Armando Scenna and Paul Sroka. DLA Phillips Fox's Tom cantwell, Greg clayton, Stephen Sawer and Monique Stella were mentioned. As were ABL's Henry Lanzer, Philip chester, Stephen Sharp and Ben Mahoney. Piper Alderman's Michael Lhuede was praised, as was Gadens' Danny Moore.

Among national top-tier firms, Freehills was the cream of the crop in Victoria, noted for its "outstanding" banking and borrowers work.
Dan Brealey was good at breaking down complex issues and "distilling them down into a clear path forward". Andrew Booth had long-standing borrowers and banking clients, was commercial in his legal advice, and did not waste time on the small aspects.
James Crowe was chosen for his equity expertise. Sarrah Coffey was "strong" on project matters. Bill Glover was the first choice for financing.

Minters had a prominent banking & finance practice. David Eterovic was often chosen for project finance, acquisition finance and workouts. Theo Kindynis was chosen for acquisition and property finance.

Clayton Utz's Marcus Davenport was a pure banking lawyer who did a lot of corporate or project finance work. Dan Fitts was a top pick for project finance, while Graeme Gurney was a property finance expert.

Allens' Simon Lynch was good for general banking. Blakes' John Field, Bruce Whittaker and Elspeth Arnold were mentioned for debt finance.

BRISBANE

Deacons' Brisbane office advised the most extensively for business banking. David Lyons was mentioned for his work on secured financing agreements, Craig Chapman for general banking and Scott Cameron for property financing.

McCullough Robertson had its share of banking & finance expertise. Peter Stewart and Peter Kennedy were the main point of contact for general advice, while Scott Butler handled insolvency financing.

DLA Phillips Fox's Brisbane office was home to the firm's largest number of banking and finance lawyers. Rod Besley, James Daniel, Ron Eames, Eugene Fung, Martin McEniery, chris O'Shea and Jane Seawright were some of the "shining stars".
Large banks and small credit unions tended to turn to Thynne & McCartney's Paul Wong and Michael Goss for "upper scale" work.

Cooper Grace Ward was active in the banking & finance area, with Greg Thorne, David Roberts and Graeme Roberts the main points of contact.

Clayton Utz had a significant slice of the Brisbane market. Randal Dennings was a pre-eminent compliance lawyer who also advised on retail banking and lending. Alan Maguire was a major project finance specialist, acting on well-known Queensland infrastructure deals.

Minters was also a strong player in Queensland. Gillian Brown was praised for her work on documenting financial transactions for banks and corporates.

ADELAIDE

Thomson Playford Cutlers' Stephen Lyons had a solid reputation as "one of the top two or three lawyers" in South Australia, especially for front-end banking assessment work. David Gasmith was also highly regarded for his front-end banking assessment work.

JWS has acted for clients across the country. Philip Laity had particular expertise in stamp duty and was technically competent. Gordon Radford had the finance and business know-how for the wine and resources industries.

Kelly & Co was an Adelaide firm with a range of domestic and offshore capabilities. Lachlan Andrews, Paul Bear and John Brimacombe were the first lawyers clients turned to.

PERTH

Jackson McDonald was one of the firms that clients chose for finance, loan and security documentation work. Greg Wheatley, Gregory Boyle, June Bartlett,  Rachel Webber and Stephen Doyle were the main people.

Blakiston & Crabb had considerable strength in equity raisings. Michael Blakiston, Tony Burton, Marcello cardaci, claire Boyd, Mark Gerus and Julie Athanasoff were mentioned.

Cochrane Lishman was another good firm for capital raisings. Justin Harris and Tracey Renshaw were the "equity gurus". Corrs was a choice for resources finance advisory work. Megan O'Rourke and Philip Wilson did financing for heavy gas & oil projects.

Freehills had long-standing clients because its lawyers knew the players and syndicates well enough to help both two sides find satisfactory outcomes.
Gemey Visscher, David Walton and Doug Stipanicev took on major project and natural resources financing.

NEW ZEALAND

Buddle Findlay was an increasingly popular choice, especially for government clients. Peter Owles headed the team and had a broad practice, encompassing high-end transactional banking, structured finance, securitisation and leveraged finance. Jason Boyes stood out as a "real star performer" for managed funds products, debt capital markets issues, and acquisitions. Gene Turner was capable and practical at developing documentation. Scott Barker was an expert at insolvency and fraud work. Paul Farrugia was a specialist in banking and acquisition finance.

Russell McVeagh's Geoff Busch was mentioned for his broad skillset in acting on bilateral transactions, syndicated lending, debt matters and capital markets. Guy Lethbridge had a "broad" practice, including debt capital markets, acquisition finance, corporate finance, financial services, regulatory compliance, derivatives and investment products. Prue Flacks had an "extensive" finance practice, with a specialisation in capital markets, acquisition finance and structured finance.
John Powell was a "specialist" in insolvency and debt restructurings, asset, project and structured finance, and debt securities issuance. Ross Pennington had international experience and was mentioned for banking and capital markets work.

Simpson Grierson's Andrew Harkness was the first point of call for external financial related advice about debt issues, restrictions around "incidental relationships" and bond issues. Peter Eady was mentioned for bilateral transactions, syndicated lending, debt matters and capital markets. Wayne Brown was good at acquisition or leveraged finance matters.

Chapman Tripp's Michael Anderson was known to act on club deals, lending, debt capital markets and structured finance, among others. John Sproat was chosen for capital markets and syndicated facilities, while both Dermot Ross and Derek Parker were appreciated for their broad skillset.

Minter Ellison Rudd Watts' Tom Fail was mentioned for his work on syndicated lending, debt and capital markets, Michael Langdon for insolvency, property and construction finance, and Kate Lane for corporate and structured finance.
Lloyd Kavanagh was the "expert" when it came to managed funds.Mayne Wetherell was considered to be one of the "A-team", when it came to banking and finance law firms. Dave Wetherell led the pack in New Zealand for all banking and finance work.

DLA Phillips Fox's Michael Bos, Jeremy Steel and Nigel Stranaghan all mentioned. Bell Gully's Mark Freeman was good at securities and commercial law, while Murray King was the "key man".

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