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- Cahill Gordon & Reindel
- Cravath Swaine & Moore
- Shearman & Sterling
- Simpson Thacher & Bartlett
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- Allen & Overy
- Freshfields Bruckhaus Deringer
- Linklaters
- White & Case
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- Cleary Gottlieb Steen & Hamilton
- Clifford Chance
- Davis Polk & Wardwell
- Kirkland & Ellis
- Milbank Tweed Hadley & McCloy
- Skadden Arps Slate Meagher & Flom
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UK - capital markets - high-yield debt
Talk of the town, word on the street, flavour of the month, whatever you want to call it; high-yield debt has been a subject and an area of great interest this year in the UK and across Europe. "We're phenomenally busy given the high volume of deals, there doesn't need to be any end in sight. Everyone round here is a bit tired a bit beaten down, but it's a good problem to have," says one partner and another agrees: "Demand has been robust, everyone's been overworked, it's a rising tide."
Practitioners also note that the product is being used in a wider variety of ways, refinancing, acquisition financing – often in conjunction with a credit facility. You name the deal and you can guarantee someone's going to try to use a high-yield bond as part of the package. Refinancing though remains its key use, for a simple reason as one partner explains: "It is true that that there are a shed load of companies with a shed load of debt that are going to be coming through soon and someone's going to have to deal with it."
One of the key drivers of this wider increase has been an influx of new issuers into the market, many of whom are European corporates forced to look beyond the bank finance markets due to a lack of liquidity. "We have seen a lot of corporates coming into the market, a lot of companies coming into the market which would not have looked at this market before," says one lawyer and another agrees: "A lot of new entrants to the market, corporate and private equity shops that never really did high-yield, so a lot of probity being put on experience because there's a lot of people who don't have any relying on those that do."
Another clear reason for this trend is simply a case of confidence breeding confidence, with issuers wanting to see deals completed successfully by their peers. "Bonds were always seen as a bit of a dirty product or dangerous products or a difficult product," explains one partner. "But with more corporate issuers having come to the market, there's a greater acceptance that it is doable and life goes on after the bond deal. It's become a more accepted piece of the capital structure more as it is in the US where it never had that sort of taint."
What this trend has led some to suggest is that the market will see the development and evolution of a unique European style of product to cater to this new market. "I think you'll see something which closely resembles the US model but you'll also see a very specific European model," says one partner, "The European market seemed to be a more one size fits all model up until 2009 but then we saw a change."
This process starts with more deals being done under local law. English law deals are picking up, but in truth German law governed transactions are the ones making the most headway in the wider European market.
An interesting side issue, which emerged in April was a letter from the European Buyside Forum which raised concerns about certain elements of standard transactions. The key bugbears were the distribution of voting rights on enforcement actions and fuller disclosure of intercreditor agreements. While it certainly encouraged debate, there was a sense among practitioners that it was unlikely to lead to much change. "The fact that the letter was put out there is new, but the issues are not particularly new," says one partner. "I think it's a small group of people who I know who have always been particularly aggravated about that and now they've got a bunch of people to sign on for the letter." While there were clear doubts expressed about whether the letter would have much impact, particularly in such a strong period of workflow, most lawyers did agree with the logic of some of the demands: "I think most of the disclosure is actually pretty solid as it stands, people are fed up of not having the things [intercreditor agreements], because in the last recession it was hard to get your hands on it," explains one partner. "People were making significant bets based upon where they thought the value was breaking in the capital structure and so they're such complex convoluted documents that people wanted to be able to find, or be able to support their views on where the value break would fall."
In the legal market itself there is certainly enough work to keep everyone busy at the moment and the real question was how the group of firms, predominantly the UK magic circle, outside of the traditional US operators, would approach the new market. "I think the little club that has dominated this field since the early 2000s is going to continue to be identified as the leaders but their share will decrease as everyone slowly but surely begins to catch up," says one US partner and a compatriot agrees: "The English, this is their opportunity, they still won't get the positions in the short term but it's a rising tide, the market will get larger and they are very focussed on the market right now."