Contributed by Davis Polk & Wardwell LLP
The US retail cash-flow loan market has long been divided into two worlds: facilities for investment-grade borrowers and those for the non-investment-grade, or the leveraged loan market. While the exact line of demarcation can be blurry – some regard a loan with a LIBOR spread of 125 basis points or more as leveraged regardless of the borrower’s rating, and cross-over credits can share characteristics of both – the differences away from the middle are clear.
Loan facilities for highly-rated companies pay relatively low fees and margins, often remain undrawn (revolving credit backstops for commercial paper borrowings or working capital, for example) and are provided predominantly by commercial banks that have or aspire to larger overall relationships with the borrower. Although the terms of investment-grade loan agreements evolve with changes in the marketplace, the evolution has generally been conservative, incremental and in response to changes in law or more general practice.
In contrast, leveraged loan borrowers pay larger fees and higher interest rates and typically have large portions of their exposure in fully-funded term loan facilities. These term facilities attract a broad range of institutional lender focused on investment yield rather than a larger relationship with the borrower. The increasing importance of these yield-driven lenders has made the leveraged loan market more closely resemble the market for high-yield bonds, and many have noted the increasing overlap of buyers and convergence of terms in what has traditionally been two separate markets. On the borrower side, negotiation has been influenced heavily by financial sponsors, frequent players in the loan markets who continually seek maximum operational and financial flexibility for their portfolio companies. Partly as a result of the dynamic between these sets of participants and their objectives, market practice in covenants and other terms of leveraged loan agreements can shift comparatively quickly. In particular, in strong markets financial sponsors and leveraged borrowers will monitor recent precedent to determine what terms are obtainable and ask their bank arrangers to obtain them.
At the time of this writing – early May 2013 – the US leveraged loan market has been moving from strength to strength. The years from the depths of the financial crisis through early 2012 had been marked by numerous short, steep cycles and sudden reversals of sentiment in response to broad macroeconomic concerns. These twists and turns have not completely disappeared. But, as discussed below, demand for new loans over the past year has outstripped supply, and the current market has been marked by significant refinancings and repricings of existing debt with increasingly narrow spreads and flexible terms. The remainder of this Overview focuses principally on certain features of the leveraged loan market, its recent evolution and its current state.
Continuing Uncertainty, Impatience for Yield
In May 2013, banks and non-bank lenders alike continue to confront challenges and reasons for uncertainty. These include, to state just a few, the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which may include new taxes or other means of Federal revenue enhancement; the new capital and liquidity requirements of the Basel III accords; concerns about US growth and the sustainability of public debt levels; and continued anxiety about the financial health of Europe and the future of the Eurozone. Yet with US Treasuries and other “safe haven” bonds yielding historically low rates and central bankers continuing to provide systemic liquidity at similarly low cost, an increasingly large share of investor money has been invested in higher yielding investments, including leveraged loans. The effort to balance risk and reward is, of course, neither new nor unique to the loan market. But the gyrations that marked the first few years after the heart of the financial crisis have been more muted in recent months, with the supply of new money moving into this market continuing to grow. The resulting narrowing of yields on investments that are traditionally viewed as speculative has, in turn, caused some to suggest that the leveraged loan and partnered high-yield bond market are oversold even to the point of creating a bubble. If the continued flow of money is the measure, many haven’t been deterred.
What’s Driving Activity?
While there has been some buyout activity, including large announced or pending LBOs (Heinz, Dell and BMC Software, e.g.), predictions of a significantly higher volume of mergers and acquisitions fueled by cheap financing and supported by a stable stock market have not been borne out. Low borrowing costs and apparent increased confidence in the market generally have, however, led to a significant number of dividend recapitalizations. Still, M&A transactions overall have not been the main driver of the market.
Instead, activity in the market has been driven largely by refinancing and repricing of existing debt. Much of this has been refinancing of loans and bonds issued in the buyout boom years of 2005 – 2007 and opportunistic repricing of loan facilities initially priced in the higher interest rate environments of the last few years. The enormous volume of financings in 2006 and 2007 in particular had created a “refinancing wall” or “maturity tsunami” for 2012 through 2014 that some predicted would produce a flood of defaults as it approached. The commensurately large volume of refinancings, particularly in the last quarter of 2012 and so far in 2013, represents a continuing erosion of that wall. Most of the increased demand has come not from commercial banks, but from institutional lenders such as CLOs, hedge funds and loan mutual fund (sometimes known as “Prime funds”), including recently popular structures like exchange-traded closed-end funds. Assets-under-management at loan mutual funds hit record levels in the first quarter of 2013. CLO formation during the second half of 2012 and through the first quarter of 2013 has continued at levels not seen since the beginning of the financial crisis.
Recent Trends in Documentation Terms
Recent activity has produced some striking trends in loan documentation terms, most notably in covenants but also in some other terms that provide borrower flexibility. In underwritten financings, some of the more aggressive asks have been hedged by arrangers’ use of “market flex” – effectively allowing the financing’s arrangers to propose a feature at or beyond the edge of generally accepted practice while preserving a more conservative committed fallback if the first doesn’t clear the market.
Covenants and other structural terms of recent financings, especially for institutional tranches – the “Term Loan Bs” – have become more forgiving. One feature that had historically distinguished the loan market from the bond market has been financial maintenance covenants, requiring the borrower to maintain, for example, a maximum ratio of debt-to-EBITDA or a minimum ratio of EBITDA-to-interest expense. In 2006 and then increasingly in 2007, a large volume of institutional term loans were made without any financial maintenance covenants, what the market referred to as “covenant-lite” loans. Very few covenant-lite loans were originated in 2008 through 2010. Some predicted then that they were a phenomenon of market excess that was unlikely to be repeated. But covenant-lite loans returned to the market in 2011 and 2012. First tentatively – with “market flex” insurance allowing the arrangers to add one or two financial covenants – then with increasing confidence. In the first quarter of 2013, the percentage of new issuance that was issued covenant-lite exceeded that of 2007. Although it is still rare to see a non-investment-grade revolver without a financial covenant, a covenant-lite term loan is often combined with a revolving credit facility (including an asset-based revolving credit facility) that contains a “springing” financial covenant that only applies upon exceeding a specified utilization or availability threshold.
At the same time, negative covenants – direct limitations on debt, liens, investments, restricted payments and the like – have become more borrower-friendly, though the specifics vary from transaction to transaction and are often company or industry-specific. These may include liberalized ratios and bigger baskets governing new debt incurrences, more generous provisions for sharing collateral, acquisitions permitted with few limits (often subject to a maximum pro forma leverage ratio) and enhanced ability to invest in or borrow at non-guarantor subsidiaries. In some covenant-lite loans, the overall covenant package has gone so far as to mirror what might be found in a high-yield bond issued by that company.
Certain hallmarks of today’s market, such as covenant-lite loans, originated in the buyout boom before the financial crisis and have only recently reappeared with like frequency. Other features began to appear in leveraged loan documents largely in response to practical issues confronted by borrowers during the financial crisis. Some of these latter features appear to be less a phenomenon of a bull market than a generally accepted change in perception of a borrower’s acceptable financing flexibility.
One such change is the borrower’s ability to extend maturities or even refinance entire loan tranches with willing lenders. During the financial crisis, a borrower with a boom-era facility that includes a maturing revolver might wish to extend the maturity of that revolver with lenders who are willing while maintaining the existing commitment of those who are not. The mechanics that allowed these “amend-to-extend” transactions to occur on an ad hoc basis under those older documents have now been expressly incorporated into more recent documents.
Similarly, “refinancing facility” features that allow a complete or partial refinancing of one tranche of loans without the consent of any lenders other than the ones providing the new financing have become commonplace. Finally, incremental facilities, allowing increases in existing loan tranches or the addition of new tranches to facilitate acquisitions or provide for other needs, have become more generous and flexible – often subject only to a pro forma leverage ratio – making it less likely that a borrower will need the consent of a non-increasing lender to increase the amount of secured financing under its senior credit facility. Along with the increased ease of refinancing and incremental loan facilities has come a greater expectation of pricing protection. This can take the form of “call protection” (a premium paid upon a repayment or pricing-driven refinancing – a “soft call” – in the first year or years after closing) or “most favored nations” clauses to ensure that incremental loans are not made with a significantly higher yield. This sort of pricing-for-flexibility tradeoff has long been part of the high-yield market.
Loan Repurchases and Prepayments
Another set of features that seem likely to survive the normal ebb and flow of the supply/demand balance is the ability to repurchase or optionally prepay loans on a non-pro rata basis from willing sellers and without the consent of other lenders.
It had long been a distinguishing feature of the syndicated loan market that loans were prepayable at the option of the borrower, often at par though sometimes with a prescribed premium. One of the quid pro quos of that freedom was that the prepayment – or “repurchase” – would be required to be allocated pro rata among the lenders of the affected facility. With the pricing dislocation caused by the credit crisis, many borrowers whose fundamentals were unchanged but whose loans were now trading significantly below par sought ways to repurchase and retire some of those loans from willing lenders at or near that market price. The resulting “reverse Dutch auction” model that evolved, sometimes despite some unfriendly documents, has become a common option prewired into recent leveraged loan documents.
One of the features of an auction that reassured lenders of equal opportunity was the fact that all lenders had the right to bid to have their loans repurchased. Recently, many documents have gone beyond this model to allow the borrower to effect one-off “open-market” purchases of loans without the need of an auction or any assurance that the repurchase is at or near a trading price. The effect is to allow non-pro rata voluntary prepayments to selected lenders. An institutional investor who is used to the dynamic of the bond market might find this unremarkable – open-market repurchases have long been permissible in that market. But this change can surprise a lender who has viewed parity and sharing of payments to be an article of religion for the syndicated loan market.
Going Forward During 2013
Lender sentiment in today’s loan market – especially the institutional leveraged loan market – can change swiftly and with dramatic results. It has reversed direction before and will do so again. Just so, the dynamic of today’s increasingly demand-driven market will not continue uninterrupted. But while this dynamic continues to drive pricing and practice, we can expect more pressure on traditional structural lender protections such as covenants and margins, even while certain features long a part of the high-yield bond market – premiums on early optional prepayments and “most favored nation” pricing protections, permission for open-market purchases – become increasingly familiar to leveraged lenders.
Due to the number of tables in this section, the editorial
is in alphabetical order
by firm name.
Banking & Finance - Nationwide
THE FIRM This practice has made a name for itself representing a variety of lenders in the leveraged finance market. Key clients include, on the bank side, HSBC and Bank of America and non-bank lenders such as GE Capital and Ares Capital. It recently represented the latter as the agent, arranger and lender in $385 million of senior secured unitranche credit facilities.
Sources say: "They are my go-to when I need responsive, solid advice. I really trust them on the deals we do."
KEY INDIVIDUALS Senior figure at the firm, Edwin Smith is respected by peers who note "if you have a Uniform Commercial Code (UCC) there is nobody better." He is particularly recognized for his experience in distressed investment work and also demonstrates strength in leveraged loans and bankruptcy work.
Banking and leveraged finance group cochair Frederick Eisenbiegler enjoys a fine reputation in the market. He has played a prominent role in many of the firm's highlight matters of late, including acting as the lead attorney on the aforementioned Ares Capital transaction.
THE FIRM Cahill is well known for its strong affiliation with financial institutions at the forefront of the lending market. The team possesses a deep bench and stellar expertise across the leveraged finance arena and is recognized as a strong player in transactional deals. It is particularly accomplished at representing institutions in their roles as lead arranger and its impressive highlight list this year includes a $7.2 billion debt financing with JPMorgan and Bank of America Merrill Lynch and a $1.2 billion term loan facility with UBS.
Sources say: "They have a very deep leveraged finance bench and consistently perform to a high quality."
KEY INDIVIDUALS James Clark continues to garner significant respect from market observers. He is actively involved in representing lenders in capital market transactions and maintains a significant relationship with regular client Bank of America, for whom he advised on several significant transactions this year.
Firm chairman William Hartnett plays a vital role at the firm managing key relationships with institutions such as Deutsche Bank. Alongside this he maintains an active practice providing exceptional representation in a range of lending transactions. This year he has advised a range of top-tier clients including Morgan Stanley, Citigroup, Deutsche Bank and Credit Suisse.
Jonathan Schaffzin has an extremely broad transactional practice, with skills applicable to a range of transactions including private equity work, M&A and out-of-court debt restructurings.
Daniel Zubkoff is held in high regard by interviewees. He enjoys a particularly strong relationship with JP Morgan who seek his skills in a significant number of lending transactions. Highlight work for the institution this year includes advising it, along with other lead arrangers, in a $2.5 billion credit facility for Telesat.
Adam Dworkin offers experience in acquisitions, recapitalizations, restructurings and refinancings. This year he was part of the lead team who represented Bank of America Merrill Lynch and other institutions in a $3 billion debt financing.
Away from the traditional bank loan work, William Miller's practice focuses primarily on high yield debt and equity securities. He is regularly involved in acquisition financings and has the abilities and experience to represent either side of the transaction.
Corey Wright is acknowledged as a growing presence in the market and is regarded by one highly impressed source as "one of the hardest working people there is, really smart and great to work with. Does it all on every deal - the full package."
Ann Makich has experience in a range of leveraged finance transactions. She has been part of the lead team in numerous significant transactions for the firm including advising JPMorgan, Citigroup and Credit Suisse, amongst others, as joint bookrunning managers and co-managers in an acquisition financing by Everest.
THE FIRM This firm is a popular choice with private equity clients and corporate borrowers. Acquisition financings continue to be a major focus of the practice. Highlights in this area include advising Bausch & Lomb in a refinancing and up-sizing of its credit facilities, the proceeds of which were earmarked for several key acquisitions, and representing the National Copper Corporation of Chile in connection with a $1.867 billion financing for the acquisition of equity shares in Anglo American Sur. It has also been busy lately dealing with several complex restructuring matters.
Client Service "They are dedicated to us: they offer consistency and have a great work ethic. They are always available." "Their turnaround time is so rapid, it is amazing. They have a great bedside manner."
KEY INDIVIDUALS Laurent Alpert is singled out by sources as "patient and methodical" and for "knowing all the provisions that are industry-relevant." His wealth of experience in loan transactions is particularly valued by clients.
Margaret Peponis is described as a "very talented individual who always impresses with her creativity and her intelligence." She recently advised Biomet in connection with the amendment and restatement of its existing credit facility.
THE FIRM This practice is recommended for its strong abilities in equipment finance and leasing. It is particularly adept at handling complex matters in the aviation finance space on behalf of a wide variety of clients including lenders, airlines and lessors. It continues to be recognized for its presence in some of the most sophisticated deals in the market. Highlights over the past year include advising Credit Agricole Securities in connection with an asset backed security (ABS) transaction, involving a $390 million issuance of senior notes secured by 79 aircraft engines.
Sources say: "I get real and immediate answers that provide me with the information to understand the risk and enable me to make an informed decision."
KEY INDIVIDUALS John Howitt is "an expert: he is always extremely good and has the ability to boil things down to bite sized pieces," report sources. His wealth of experience in the aircraft finance space ensures that he is highly sought out as counsel in market leading deals. This year he represented The Milestone Aviation Group in a number of transactions including a financing for 32 helicopters.
Commentators describe Zarrar Sehgal is "an excellent lawyer who is dedicated, very knowledgeable and has a great legal mind." Sehgal focuses on asset finance transactions and, in the past year, he has handled a substantial number of deals for lenders active in the aviation space, including BNP Paribas, Credit Agricole and HSBC.
The "tireless and remarkable" Geoffrey White continues to enjoy a fine reputation in the market. Over the past year he advised LATAM Airlines Group in several issues of bonds totaling $1 billion to finance and refinance a number of aircrafts.
THE FIRM Cravath's banking and finance group is affiliated with several of the strongest global financial services firms including JPMorgan, Credit Suisse and Goldman Sachs. As such, the firm is predominantly known for its outstanding lender side representation, offering clients much-lauded expertise across the gamut of lending transactions. The firm also has capabilities on the borrower side, servicing private equity firms and corporate clients in a multitude of financings. In a recent highlight, it acted for Credit Suisse and Citigroup in a $14 billion bridge credit facility related to the merger of Express Scripts and Medco Health Solutions.
Sources say: "Their work stands out on every deal. They always excel - it is truly remarkable that they have the capability to perform to that standard. They offer sound business advice and excellent work quality."
KEY INDIVIDUALS Michael Goldman earns much praise from sources, with one commenting: "Not only does he offer sound legal advice, but he has a great ability to frame business questions as well." Of late he has done considerable work with Credit Suisse on several highlight deals including the aforementioned bridge credit facility.
James Cooper is well respected by market observers. He often works with JPMorgan and recently advised the firm in connection with two credit facilities totaling $8 billion provided to social networking company Facebook.
Financial institution practice chair Robbins Kiessling remains a prominent figure within the firm. His wealth of experience in lending transactions ensures continued work with clients such as JPMorgan, Citigroup and Bank of America.
James Vardell has a strong reputation with interviewees. His practice focuses on syndicated bank financings and he regularly represents both corporate borrowers and traditional lenders. He is also well versed in project finance, restructurings and equipment finance.
Presiding partner at the firm, Allen Parker has a wealth of experience in the field, specifically in syndicated loan transactions, acquisition finance and leveraged recapitalizations. Recent highlights include the representation of Rock Tenn Company and Rock Tenn Company of Canada as borrowers in connection with $3.7 billion of credit facilities.
Described as "a great adviser," Jed Zobitz is adept at handling syndicated loan transactions, and has particular strengths in acquisition financings, leveraged recapitalizations and M&A.
Tatiana Lapushchik is a popular choice with several high-profile financial institutions. She recently advised JPMorgan in connection with $7 billion of credit facilities provided to Pfizer.
THE FIRM Davis Polk is renowned as a leading, high-quality banking and finance group. This practice is equally accomplished at representing corporate borrowers and institutional lenders and shows impressive breadth, offering expertise across an extensive catalogue of financial transactions. Alongside this it is proficient in handling workouts and a range of bankruptcy services highlighting strong experience in all the relevant stages of a financial transaction. Unsurprisingly the firm's client roster boasts a succession of high-profile names including Morgan Stanley, Goldman Sachs, Ford Motor and PepsiCo. Highlight work includes representing Facebook in a $5 billion revolving credit facility and $3 billion bridge term loan to fund certain obligations relating to the company's IPO.
Commercial Awareness "They are my first pick for a challenging situation. They have a wealth of experience to draw on and they balance thoroughness and carefulness with commercial creativity." "They are very commercial and understand the market with depth that others do not."
Client Service "They really stand out in complex, time-consuming work - they are phenomenal on those really complex deals that involve a lot of hand holding." "They work with us to do the best they can for us and our client. They are very responsive and we get great service from them."
KEY INDIVIDUALS Bradley Smith is a well-respected authority in the banking world. His wealth of experience in this sector is highly valued by interviewees who say: "He has seen it all - if you have a unique challenge and need someone who has been there and done that he is the guy." His work of late has focused on acquisition finance and a range of secured credit transactions.
The "very experienced and creative" James Florack earns praise from clients who say: "I appreciate the value that he adds not just with legal advice but from a business standpoint as well." He has been particularly active in recent times working on a number of highlight transactions including advising Bank of America, Deutsche Bank and Morgan Stanley as joint lead arrangers in a $1.23 billion financing to Providence Equity Partners for its acquisition of Blackboard.
Jason Kyrwood's reputation as a significant player in the market continues to grow. He is applauded by interviewees who say: "He puts so much work into having a comprehensive understanding of the wider market - it is the overall perspective that is so valuable." His key clients include Citibank and Bank of America.
Lawrence Wieman is acknowledged for his work as borrowers counsel and recently advised Ford Motor on its $9 billion revolving credit facility. He is also well versed in workouts and debt restructurings.
Sartaj Gill is described as an "extremely calm and very smart attorney - he is never fazed and always makes his point calmly and effectively." He is experienced in acquisition finance and other leveraged finance transactions as well as having strong abilities in restructuring work. He regularly works with clients such as Credit Suisse and Bank of America, as well as a number of corporate borrowers.
THE FIRM This firm is highly regarded for its proficient representation of private equity clients in the leveraged finance market. It has a healthy following, regularly attracting work from some of the most active financial sponsors in the market, including The Carlyle Group, Clayton Dubilier & Rice and Providence Equity Partners. This year the firm also represented regular client Reynolds Group Holdings in its $3.25 billion notes offering, which was one of the largest single-tranche issues in the high-yield market in recent years. The firm is also active in the aviation finance space where it is recognized for its enduring relationships with multiple airlines, whom it represents across a full range of transactions.
Client Service "They are responsive, very user-friendly and customer-focused." "Their work standard is exceptionally high - they have a great deal of resources and are very client sensitive. We need good legal advice but also have to focus on how clients interact with us and they are top notch at that - they are very sensitive and cognizant of what our clients think."
KEY INDIVIDUALS Seasoned practitioner William Beekman is noted for being "detail-oriented, creative and well versed in market transactions."
Paul Brusiloff "has excellent client focus and is great at bringing a process together," report impressed interviewees. He focuses on complex debt and equity financings, as well as refinancings, recapitalizations and restructurings.
David Brittenham garners significant praise from interviewees: "He is extremely knowledgeable and brings practical experience - it's very valuable to have such a strong advocate." He recently represented The Carlyle Group in the financings aspects of the $3.3 billion acquisition of Getty Images.
John Curry is an admirable presence in aviation finance. Sources say: "He is a high-quality, intelligent and analytical lawyer." He continues to work with American Airlines, and is advising it on the financing aspects of an aviation order where committed finance amounted to $13 billion.
New addition to the rankings Jeffrey Ross is highly valued by clients in the private equity sphere and is described as "commercial, practical, extraordinarily responsive, smart and creative."
THE FIRM This practice demonstrates abilities across the full spectrum of financial transactions. It is proficient at handling matters for a wide range of clients, providing the practice with a well-rounded view of the overall market. Recent highlights include advising Permira in relation to a $625 million senior secured credit facility related to its $1.5 billion acquisition of Genesys. The firm is also active in fund financings, bankruptcy and restructuring transactions, and real estate development work.
Commercial Awareness "They do a great job to get the best terms the market will stand. They have worked on comparable transactions and help us to understand where we can push. They know what is out there and what we can get."
KEY INDIVIDUALS Sources are quick to single out William Reindel's "encyclopedic knowledge of deal documentation," and also praise his great judgment and calm and thorough approach to matters. He has stellar expertise in the leverage finance space and is particularly noted for his strength in representing borrowers and sponsors in their financial activities.
Clients are quick to describe Emil Buchman's knowledge as "second to none," while peers single him out as a "pleasure to work with." He recently advised Bank of America Merrill Lynch in a $550 million credit facility matter, and has done several deals on behalf of AEA Investors and its portfolio companies.
THE FIRM Traditionally known for its strength on the borrower side, Gibson Dunn continues to attract work from private equity firms, financial sponsors and corporate borrowers. Of late the firm has been involved in a number of acquisition financings, on both sides of the transaction, including advising Del Monte Foods in its $3.45 billion acquisition by an investor group.
Sources say: "They are creative and thoughtful on approaching problems."
KEY INDIVIDUALS Sources are quick to praise Janet Vance, saying: "She has that rare component where she cares about our company and wants us to do well." Recently she has worked on a number of financial transactions including advising Williams Partners in a $2.8 billion revolving bank facility.
The "hard-working and very creative" Joerg Esdorn is focused on leveraged finance transactions where he represents both borrowers and lenders. Lately he has advised UBS Bank in several secured credit facility increase matters.
THE FIRM Holland & Knight is a highly esteemed practice in the equipment finance and leasing market. The group is a leading authority in the aviation finance space, where it is particularly experienced in representing airlines and lessors in complex transactions. Among its recent highlights is its counsel to GE Capital Aviation Services in connection with the public issuance of $1.7 billion bonds secured by 137 aircraft on lease to US airlines. The practice also has stellar expertise in the shipping finance arena, drawing on strong capabilities across the field of maritime law. Other strengths include railcar and equipment leasing and finance work.
Sources say: "They offer industry knowledge, attention to detail and close communication with their clients."
KEY INDIVIDUALS Nancy Hengen is a notable figure in the shipping finance space. She recently advised Nordea Bank Finland, as agent and lender, on modification to a $1.4 billion credit facility made to shipping company, Excel Maritime Carriers.
San Francisco-based William Piels is described as "very collaborative, thoughtful, thorough and responsive." He is widely respected as one of the best aviation finance lawyers in the market and is regularly seen representing airlines, lender and lessors in complex transactions.
John Pritchard is viewed as someone who "knows the industry and deal matter so well." Sources say "he is great at negotiating deals, very reasonable and highly knowledgeable."
"Smart, analytical lawyer" Fred Bass recently advised GE Capital Rail Services in the acquisition of railcars and the sale of several portfolios of leased locomotives and railcars. He is also experienced in aviation finance transactions.
THE FIRM Kirkland's banking and finance group is an acknowledged presence in the market as counsel to an array of private equity firms, with whom the practice enjoys strong standing. The group's standout deals this year display an array of strengths in areas such as acquisition finance, complex restructuring and refinancing matters. Key work includes its representation of Kerzner International Holdings in a $4 billion out-of-court restructuring.
Commercial Awareness "They are bright guys who know the market well. They represent a lot of sponsors, from big to small, so they know this work inside and out. The breadth of deals they do is incredible - they have seen it all."
KEY INDIVIDUALS Jay Ptashek has a strong presence in the market and elicits particular praise for his "very commercial" approach to matters. He is noted for his strength in sponsor side representation and also has significant expertise in the leverage finance space.
Chicago-based Linda Myers is singled out as possessing "the relevant experience and a great demeanor in negotiations." She recently completed a $1.135 billion refinancing for theme park company Six Flags Entertainment.
THE FIRM This distinguished practice is a solid presence in the leveraged and acquisition finance space. It handles transactions for both lenders and sponsors, showing impressive depth and breadth across the market. Within the swath of transactional capabilities the firm offers, it possesses particular expertise in cross-border transactions and large scale acquisition deals, both of which contribute significantly to recent highlights. This year the firm represented Barclays in a bridge, term loan and revolving credit facility matter connected to the $38 billion acquisition of El Paso Corporation by Kinder Morgan.
Sources say: "In leveraged finance work, across the spectrum, they offer a very broad international coverage. They are strong in the US and are on the ground everywhere here. Offering every product and covering all areas from the one firm."
KEY INDIVIDUALS Sources say John Mendez is "always available, very focused and involved in the process, with a great knowledge of precedent." He has wide-ranging experience in representing financial institutions in all manner of lending transactions.
Seasoned practitioner David Crumbaugh's Chicago-based practice focuses on secured finance. He specializes in representing financial institutions and commercial lenders in a range of transactions including leveraged buyouts, refinancings and cross-border deals.
Michèle Penzer is appreciated for being "responsible and commercial in decisions." She was the lead attorney on the aforementioned Barclays transaction and has also worked with the institution in a complex financing throughout various stages of an acquisition transaction.
"Deservedly recognized" Daniel Seale is adept at handling transactions in the leveraged finance space. He recently represented Watson Pharmaceuticals in a $1.8 billion financing related to the acquisition of The Actavis Group.
Christopher Plaut is valued in his role as lender's counsel. He is experienced in acquisition financings, asset-based deals and exit financings. This year he worked with Barclays on a $1.1 billion financing in the telecommunications industry.
THE FIRM Linklaters's New York based team continues to provide representation across the spectrum of leveraged transactions. With the ability to draw on a comprehensive international network, it is particularly strong at representing clients in transactions that involve a cross-border element. This is evinced by the recent representation of Siam Commercial Bank in its role as agent for a syndicate in connection with a $450 million term loan facility. Other international clients include Australia and New Zealand Banking Group Limited and Banco Bilbao Vizcaya Argentaria (BBVA).
Client Service "When we seek their counsel we know it will be responsive and timely." "We have demanding clients and deadlines and they are just so responsive no matter what."
KEY INDIVIDUALS Co-head of the banking practice Jeff Norton has a wealth of experience in financial transactions. Recent highlights include representing health insurance company WellPoint in a $3 billion unsecured 364-day bridge term loan credit facility transaction.
Michael Bassett is a "very knowledgeable guy - he always responds, never panics or misses a beat," reports one impressed source. He is adept at handling cross-border transactions - particularly those with a Latin American element.
Danelle Le Cren draws much praise form the market with sources saying: "Very impressive - her skill set is excellent, as is her attention to detail. She gets it right the first time and is extremely practical in her advice."
THE FIRM This firm is a heavy hitter in the equipment finance space and is regularly seen on some of the market's most prominent and sophisticated deals. The firm has commendable skills in both aviation and railcar finance - specifically in acquisition, leveraged and asset-based finance. It is regularly seen representing large investment banks that are active in this field. A major highlight of late was the representation of Sumitomo Mitsui Banking in its acquisition of RBS Aviation, which created the world's fourth-largest commercial jet aircraft leasing and finance company. Alongside this the firm's leveraged finance group continues to provide solid representation across the spectrum of financial transactions to a handful of leading financial institutions including Goldman Sachs, Credit Suisse and Barclays. In addition, the practice is an increasing presence as borrowers' counsel, and recently represented MGM Resorts International in a major $5.25 billion refinancing for MGM Grand.
Sources say: "It has extensive knowledge of all aspects of the aviation finance practice area, from complex securitizations to individual asset tradings. It has a deep bench of partners and associates and provides round the clock service."
KEY INDIVIDUALS Marc Hanrahan exhibits first-class knowledge in senior lending transactions and is particularly adept when acting as lenders counsel. Unsurprisingly he continues to work with some of the industry's leading global financial service firms. He has recently represented Credit Suisse in connection with several recapitalization matters.
Drew Fine earns high praise from interviewees: "He is a dean of the industry - he has extensive knowledge of all aspects of the practice area, from complex securitizations to individual asset trading." Recent highlights include representing International Lease Finance Corporation in connection with its $1.5 billion term loan.
Helfried Schwarz is seen as an asset to clients who say: "He is really valuable to us. He is knowledgeable, easy to work with and business-minded." He focuses on aircraft and other structured equipment financings.
Head of the transportation and space group Elihu Robertson is adept at handling all aspects of aviation finance for clients from all areas including lessors, underwriters and airlines. This year he was one of the lead attorneys in the aforementioned Sumitomo Mitsui Banking Corporation matter. Other clients this year have included Citi and Continental Airlines.
Jonathan Green is a leading figure in the firm's project finance group and is well respected by practitioners active in this field. He is also experienced at handling acquisition and leveraged finance transactions.
THE FIRM Fulbright's equipment finance group is globally active in an array of transactions on behalf of lessors, lenders, manufacturers and airlines. The team maintains a fine reputation in the aviation space and has recently worked on a complex financing funded by a commercial paper facility on behalf of Jackson Square Aviation. Other highlight deals this year include the representation of Apollo Aviation in multiple transactions related to the purchase, lease and disassembly of aircraft and the subsequent sale of parts.
KEY INDIVIDUALS Equipment finance practice head James Tussing is noted as having "a tremendous depth of experience." His expertise in equipment finance, particularly his wealth of knowledge in the aviation space, has been busy in the USA, Europe, Asia and Latin America. Tussing was ably assisted on the aforementioned Jackson Square Aviation and Apollo Aviation matters by associate Kelli Sallemi, who is regarded as a rising star in equipment finance field.
THE FIRM Paul Hastings's banking and finance team focuses on the representation of major banks that are active in the leveraged finance market. Recently the firm has handled a number of cash-flow and asset-based loans on behalf of clients including JP Morgan Chase, UBS and Wells Fargo. It also demonstrates notable skills in high-yield bond work such as the representation of RBC Capital Markets, amongst others, as initial purchasers on the high-yield bond offering made in connection with the financing for a $1.6 billion acquisition of 99 Cents Only Stores, by Ares Management.
Commercial Awareness "They are really involved in the market and have good intelligence on what is market standard and what is not." "They have a broad reach and their market experience is amazing."
KEY INDIVIDUALS Michael Michetti earns praise for his "creative and commercial acumen." He is highly valued by leading financial institutions and continues to represent them in a broad range of leveraged finance transactions.
LA-based John Hilson is noted as being a "very knowledgeable guy." He is a highly respected presence on the West Coast, where his wealth of experience, particularly in asset-based finance work, continues to attract a significant amount of work.
Michael Baker is an increasing presence in the leverage finance market. Lately he has played a key role in a number of the firm's highlight deals, including the aforementioned RBC Capital transaction.
THE FIRM Paul Weiss dedicates a significant part of its practice to representing private equity firms and corporate clients in all manner of leverage finance transactions. The firm is particularly recognized for its close links with private equity firm Apollo Global Management and its portfolio companies. This year it has represented the group as part of a consortium in the financing related to the $7 billion acquisition of El Paso Corporation. With close links to the firm's impressive bankruptcy team, the practice is also adroit at handling exit finance and refinance matters.
Sources say: "They have great depth and very talented lawyers. They are creative, have strong attention to detail, are good problem solvers, and are able to look at things from a wide angle and fill in the gaps."
KEY INDIVIDUALS Sources say Eric Goodison "has a deep and broad understanding of the current financial market and deal terms." He recently advised Oak Hill Capital Partners III in a $575 million financing related to a $1 billion acquisition.
Gregory Ezring is particularly noted for his representation of private equity firms. "He really truly understands financings - not just the law but the financial implications. The nuance in high-yield deals is that each company has unique peculiarities and he can take them and make a bespoke agreement," asserts one satisfied client.
THE FIRM This accomplished team offers services across the spectrum of aviation finance. It maintains a strong reputation for its strength in Ex-Im Bank and other forms of export credit agency (ECA) financing and regularly works on such transactions in the aviation space. The team is well-equipped in handling complex leasing transactions and bankruptcy matters. This year the firm worked with several airlines in their Ex-Im Bank transactions, including a $1.5 billion financing for Ethiopian Airlines and a $1.21 billion financing for Atlas Air.
KEY INDIVIDUALS William Bowers is recognized for his knowledge in the structured finance space. This year he represented Willis Lease Finance Corporation in an ABS transaction, involving a $390 million issuance of senior notes.
The seasoned Michael Schumaecker has worked extensively with airlines in the full range of financial transactions and is a well-known presence in the lending space, representing institutions who are active in aircraft financings.
Payson Coleman is an experienced figure in the aviation finance arena, where he represents clients from all areas of the market across a broad swath of transactions.
THE FIRM This banking and finance practice is sought out by some of the leading private equity firms for its substantial talent in leveraged buyouts. Key clients include TPG Capital, who it represented in a $1.695 billion financing to acquire Par Pharmaceuticals Companies, and Bain Capital, who it advised as part of a consortium in the $1.3 billion financing to acquire SkillSoft.
Sources say: "They keep us updated on necessary issues and always translate legal language into business terms, which is useful. They are a very proactive firm."
KEY INDIVIDUALS Jay Kim is "efficient, direct and always thinks five steps ahead of the deal," sources note. He excels at handling leveraged transactions for private equity firms and counts TPG Capital and The Blackstone Group among his regular clients.
Thomas Draper "understands business issues, how to document them and how to get a deal done. He has great insight and that is incredibly valuable," a satisfied client reports.
THE FIRM This broad practice offers capabilities in both lender and borrower side representation in all manner of leveraged finance transactions. The firm's comprehensive international platform allows it to bring a strong network of resources to the table in order to efficiently handle global matters and cross-border deals. The team has been busy on a number of key matters including the representation of Morgan Stanley Senior Funding and other lenders as joint lead arrangers in a $14.5 billion aggregate financing for a prominent pharmaceutical research business.
Sources say: "We are always pleased with their work. They have good market knowledge and are always available to assist with questions or a tough deadline."
KEY INDIVIDUALS Maura O'Sullivan receives much praise from clients, who say: "She knows her markets and documents cold. She is commercial and flexible, when appropriate." She recently represented Morgan Stanley in a number of high-value matters including the $14.5 billion financing referenced above.
Steven Sherman is skilled in handling acquisition and project finance as well as bankruptcy work. He handles work for both corporate clients and major money lenders such as Citigroup Global Markets.
THE FIRM With a stellar presence in Illinois and strong banking and finance teams in New York, California and Texas, Sidley Austin has an impressive nationwide footprint. This practice is well equipped to advise clients from all areas of the market in the full gamut of financial transactions. Recently the group has been particularly busy assisting financial institutions, such as JPMorgan, Wells Fargo, US Bank, Bank of America and Barclays, in a multitude of transactions.
Sources say: "They offer consistent quality. They do not let a deal become adversarial and take a cooperative and consultative approach to prevent issues."
KEY INDIVIDUALS Chicago-based James Clark "is integral to us in managing our relationship and brings valuable skills to the table," asserts one impressed client. He recently advised US Bank as administrative agent in a $450 million acquisition loan finance.
Senior counsel Rory Kelleher remains an experienced authority for the firm in the equipment finance and leasing space, specifically within the field of aviation finance.
Angela Fontana recently joined the team from Weil, Gotshal & Manges LLP. Fontana is hailed as "a very dynamic sponsor lawyer and a real force to be reckoned with." While at her prior firm she represented General Growth Properties in a $1 billion revolving credit facility for GGP Limited Partnership and related entities.
THE FIRM This practice maintains its reputation as a preeminent force in the market, and is much in demand for its strengths in syndicated and leverage finance. It has a particularly strong reputation as borrowers' counsel and counts many of private equity's vanguard among its loyal client base. Highlights this year include the representation of Eaton Corporation in a $6.8 billion financing related to the acquisition of Cooper Industries, and the representation of KKR in financing for the $7.2 billion purchase of Samson Investment Company. The practice is also well-equipped in lender-side representation and recently advised a consortium of top-tier lenders, including JPMorgan, Credit Suisse, Goldman Sachs and UBS, in connection with a $2.2 billion financing related to the acquisition of Pharmaceutical Product Development.
Sources say: "Simpson Thacher are a leader for level of service, quality, depth and knowledge - they are absolutely exceptional."
KEY INDIVIDUALS The very well-regarded James Cross is experienced in working with financial institutions, as well as representing corporate borrowers in their finance activities. Recent work includes advising First Data Corporation on a refinancing of outstanding debt.
James Knight is described as "a great lawyer who really makes deals run smoothly." He continues to work with regular client JPMorgan, having this year advised it on a healthcare acquisition finance and a $6.25 billion revolving credit facility for Comcast.
Banking and credit practice head Patrick Ryan is praised by clients, who emphasize that "in high-grade acquisition finance his knowledge of precedent in the legal market is unbelievable." He is particularly valued by financial institutions and acted for JPMorgan, Credit Suisse, Goldman Sachs and UBS on the $2.2 billion financing mentioned above.
Marissa Wesely has a wealth of experience in leveraged finance and recapitalizations, and frequently represents private equity companies and corporate borrowers. A highlight this year was the representation of Peabody Energy in a financing related to the acquisition of Macarthur Coal.
Alden Millard's reputation with his peers continues to grow: "He is outstanding - excellent for high-yield work," sources say. He is accomplished at handling a wide range of financings, with the ability to offer strong representation on either side of a deal.
Peers acknowledge Brian Steinhardt for his transactional skills. This year he has been particularly active with private equity and corporate clients, acting as the lead attorney in several noteworthy deals, including those for KKR and Eaton Corporation detailed above.
THE FIRM With the ability to draw on the firm's impressive M&A platform, this banking and finance team consistently attracts work from corporate clients, representing them in all types of financial transactions. Highlights include advising Coty in its $10.7 billion bid for Avon Products and the associated underwritten bank and bridge loans. While the practice is accustomed to working with borrowers, it also continues to develop significant links on the lender side. Key work this year in this area has included representing Barclays in a highly complex $1.45 billion debtor-in-possessor (DIP) financing.
Sources say: "They are a go-to for corporate finance work. They are very knowledgeable."
KEY INDIVIDUALS Sal Guerrera has a strong presence in the market and is described by interviewees as "one of the most detail-oriented guys around - a fine lawyer." He specializes in representing financial institutions in both US and international financings. This year he has handled a number of complex transactions on behalf of regular client Credit Suisse.
The "very practical" Sarah Ward is singled out by sources for her expertise in leverage finance work. In a recent highlight, she was the lead attorney on the Barclays DIP financing noted as being an extremely intricate transaction.
The "very knowledgeable" Robert Copen has worked on a substantial number of acquisition financings for Valeant Pharmaceuticals, and advised on a $7 billion revolving credit facility for Pfizer.
The "terrific" David Reamer is based in Los Angeles and elicits particular praise for his commercial approach and reliability as an advocate.
THE FIRM With leading talent in the firm's M&A practice and strong expertise in its bankruptcy and capital markets groups, Sullivan's banking and finance practice has the ability to provide clients with experienced, full-service representation in a vast range of transactions. The practice's expertise is demonstrated in its recent work, which includes advising United Rentals in its merger agreement to acquire RSC Holdings valued at $4.2 billion, and the continued representation of TCW/Crescent Mezzanine as lender in a number of transactions.
Sources say: "They are straightforward and do not miss a thing."
KEY INDIVIDUALS Erik Lindauer is viewed as a valuable asset to the firm for his experience in bank finance work. He is well versed in a broad range of transactions and is noted for his experience in corporate restructurings and bankruptcy matters. Recent work includes advising Eastman Kodak Company in its $650 million debtor-in-possession facility as part of the company's global restructuring.
THE FIRM Vedder Price retains its admirable reputation in the global aviation finance space, where the firm skillfully handles the full gamut of services including leasings, financings, securitizations, workouts and restructurings. The firm is experienced at representing clients from all sides including lessors, lenders, investors, airlines and manufacturers. It is also highly adept at handling matters in a range of other areas including railcar, maritime and equipment finance. Key deals this year have included acting as bankruptcy counsel to a significant number of creditors in connection with the American Airlines bankruptcy proceedings.
Sources say: "They are proactive, reactive, available and have a very commercial view, which is highly useful for negotiations."
KEY INDIVIDUALS Global transportation finance team chair Dean Gerber is in high demand for his top-drawer abilities, particularly in commercial aviation matters. "His knowledge is incredible and he is easy to work with," asserts one impressed client.
Ronald Scheinberg has an array of experience in aviation, railcar and equipment financing. Clients enthuse: "He is very helpful to us - his greatest value is his ability to highlight weaknesses that we could strengthen. He really sees it all."
Edward Gross is highly valued for his skills in the equipment finance space. Sources say: "He is just outstanding, he is very knowledgeable and he has great interpersonal skills."
Joshua Gentner is a well-known name in the market and specializes in aviation and railcar finance. This year he has represented Amtrak in a Railroad Rehabilitation & Improvement Financing (RRIF) loan from the US government used to finance improvement on the northeast corridor of the US.
THE FIRM This practice demonstrates impressive breadth and depth in both lender and borrower side representation across the gamut of financial transactions. Key strengths include advising private equity clients in acquisition finance as well as representing financial institutions in their lending activities in the leveraged finance space. This practice is also boosted by the firm's impressive international footprint which attracts highly coveted, cross-border deals. An example of this included acting for a client as part of the consortium which purchased EMI Group's music publishing operations, for $2.2 billion.
Sources say: "They are very hard working, technically strong, detail-oriented and thorough."
KEY INDIVIDUALS Global practice head Daniel Dokos elicits praise for his ability to "get things done: he cuts through the case with very practical advice." He is well versed in financial transactions and has notable expertise in cross-border deals. He acted as the lead attorney in New York in the aforementioned EMI deal.
Douglas Urquhart is "responsive, co-operative and helpful in achieving our objectives," a satisfied client reports. Recent highlights include the representation of TE Connectivity in a 364-day bridge take-out facility for $700 million concerning the acquisition of The Deutsch Group.
The "excellent" and "very detail-oriented" Morgan Bale is a new addition to the rankings following a raft of market praise and impressive work highlights. Standout moments of late include advising Goldman Sachs as lead arranger in a $3.5 billion senior unsecured bridge facility to Walgreens, in connection with the company's investment in Swiss-based group Alliance Boots.
Peers are quick to praise Andrew Yoon: "He's a very thorough lawyer - he always gets it right." The representation of private equity firms, particularly in acquisition finance matters, is a key strength.
THE FIRM This banking and finance team boasts considerable breadth and depth, offering substantial expertise in a wide range of financial transactions. Predominantly known as a lender side firm, this practice continues to attract work from leading financial institutions including Deutsche Bank, BNP Paribas and Credit Suisse. The group is also recognized for its global strength, and regularly draws on the resources and expertise of the firm's worldwide network, to assist clients in sophisticated cross-border deals. A recent example of such work is the representation of Deutsche Bank in its role as administrative agent and joint lead arranger in a $2.1 billion senior secured credit facility to Colfax Corporation. The firm's breadth is also reflected by its expertise in the equipment finance arena where it is frequently seen representing clients, such as lenders, lessors and airlines, active in the aviation and shipping market.
Client Service "Their senior partners are available throughout the life of the deal. They have a very deep bench and the ability to call on non-US offices, so are very efficient in cross-border deals." "They know how we operate and have a great relationship with us."
KEY INDIVIDUALS Speaking of Michael Smith's experience in the aviation finance space, sources say: "He is extremely intelligent and meets important criteria for us by being very commercial. We want someone who helps get the deal done and he is excellent at that."
Global practice head Eric Berg continues to do a significant amount of work with regular client Deutsche Bank and was the lead attorney on the aforementioned credit facility deal. Other highlights include advising Morgan Stanley Senior Funding in connection with a $425 million senior secured term loan.
Richard Smith is recognized for his work in equipment finance and leasing. He earns praise for his ability to "manage large multibillion-dollar projects involving a huge team. He can bring the work in on time and with the highest quality."
David Bilkis's expertise in leveraged and acquisition finance continues to attract work from leading financial institutions. Of late he has advised clients such as Deutsche Bank, Citibank and Jefferies Finance in a range of transactions.
David Koschik is adept at handling leverage finance matters and routinely represents a number of high-profile lenders. Highlights include representing Merrill Lynch as joint lead arranger and joint bookrunner in an amendment and extension of a $3.5 billion senior secured term loan and credit facility.
Eric Leicht is noted as being "unflappable, steady and determined." His recent highlights include an array of deals with Deutsche Bank, including a $1.4 billion senior secured term loan facility and revolving credit facility, and a $970 million term loan tranche under an existing credit facility.
Alan Rockwell is qualified in both the USA and UK and proves to be a valuable resource in deals with an international element.
David Joyce is highly experienced across the board in the financing space, while gaining particular praise for his expertise in shipping matters. He recently represented The Kansas City Southern Railway Company on a number of matters, including obtaining a $54 million loan facility via the Railroad Rehabilitation and Improvement Program in order to provide for the purchase of 30 locomotives.
Ji Hoon Hong recently joined the team from Shearman & Sterling. Hong is recognized for his presence in the aviation finance sphere. He has experience in structured finance and capital market transactions. In the last year he has represented several financial institutions in their lending activities to a number of international airlines.
Grant Buerstetta of Blank Rome LLP demonstrates expertise in structured asset-backed securities work. A key strength is his experience of collateralized debt obligations.
Of late Steven Cohen of Cadwalader, Wickersham & Taft LLP has been active in representing prominent market lenders in a number of financings, including advising BNP Paribas in a sophisticated $1 billion credit facility to a global commodities trading company. At the same firm, Houston-based Michael Niebruegge handles all manner of financial matters. He is a leading figure in the energy industry and is highly experienced at representing clients who are active in that space.
"Very, very experienced practitioner" John Hoyns of Hughes Hubbard & Reed LLP is well respected in the aviation finance arena. He is particularly commended for his expertise in Enhanced Equipment Trust Certificate (EETC) matters and for his stellar work with Continental Airlines.
The "calm and unflappable" Brett Barragate heads Jones Day's banking and finance practice and divides his time between New York and Ohio. He recently acted for PolyOne on its $486 million acquisition of ColorMatrix Group.
Timothy Lynes of Katten Muchin Rosenman LLP is an experienced practitioner in aviation finance and is particularly knowledgeable in dealings with manufacturers and new aircraft orders. He is also singled out for his expertise in the restructuring of complex agreements in and out of bankruptcy.
Chicago-based Robert Baptista of Mayer Brown LLP represents both borrowers and lenders in a range of transactions. He is particularly adept at handling syndicated financings and recently represented Bank of America in a $1.45 billion syndicated credit facility matter.
Morgan, Lewis & Bockius LLP's Marshall Stoddard elicits particular praise for his negotiation skills and is also praised for his "great balance and eloquent, even demeanor." His practice is divided between Los Angeles and New York. Key clients include Bank of America and Wells Fargo.