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It has been another turbulent 12 months for Ireland's banks. With the property bubble long burst and the government ploughing reserves into its debt-ridden institutions, which were teetering on the brink of default, a bail out to rescue the Republic looked increasingly likely as 2010 drew to a close....

It has been another turbulent 12 months for Ireland's banks. With the property bubble long burst and the government ploughing reserves into its debt-ridden institutions, which were teetering on the brink of default, a bail out to rescue the Republic looked increasingly likely as 2010 drew to a close. Swallowing its pride, the former government requested assistance from the EU and IMF to the tune of €90 billion in November 2010. A good proportion of this money has already been funnelled in to the banks in return for additional shares and now the country's banking system has an altogether different complexion.

The banks can now be divided into two distinct categories; the ones supported by the state, which have handed over loan portfolios to Nama (National Asset Management Agency), and the independents. Allied Irish (AIB), Bank of Ireland, Anglo Irish, EBS, Irish Nationwide and Irish Life and Permanent, all fall into the first group, while on the non-Nama side is National Irish Bank, RBS (Ulster Bank) and the other international lenders.

Going forward, the Minister of Finance plans to consolidate and has said only two stripped-down, conventional banks will remain, AIB and Bank of Ireland.

With foreign investment vital to the country's economic recovery, the state is conscious that it must assure the world that every endeavour has been made to redress the glitches in the old system. "The particular issue that was identified was that hands-on regulation and auditing of the financial services industry in general was poor and in particular there was a skills gap, where the regulators didn't have the capability to fully analyse. As a result of that there's a huge exercise by the Central Bank in up-skilling as well as increasing their hands-on supervisory roll," explains one lawyer.

All the financial services regulatory work has now been transferred from the financial regulator, which was previously a separate entity to the Central Bank, to an internal department. "You are now going to see the Central Bank of Ireland looking after all aspects of financial services regulatory work as well as the prudential capital side of the equation." explains one lawyer.

A mass of new regulations and numerous restructurings has filled a void in conventional banking and finance activity for several lawyers. One partner says: "In broad terms, an awful lot of what we've been doing from an advisory perspective is advising on restructuring, or regulatory, or protective work for corporates and others.

The country is by no means through the worst of the crisis but with the action being taken through Nama and a new government elected in March 2011, lawyers are upbeat. "I would suggest that at least the cycle has moved on a little - even if that's going on to enforcement or restructuring or whatever at least it's just not frozen indefinitely," says one lawyer.

Nama is certainly still one the biggest clients in town. Primarily employing firms to complete the due diligence on the loans that it took on from banks to become a consolidated lender, Nama has since moved to making decisions on how to progress with the loans. Developers have submitted business plans and on the basis of whether the agency considers them feasible or not it decides how to progress. "We're in the phase where Nama has the business plans and has decided either to enforce the loans or restructure the organisation's facilities. So we're seeing quite a bit of activity out of that," explains one lawyer. A further bounty of instructions for lawyers and opportunities for investors is assured once the sale of assets from within the loan portfolios begins.

On the pure lending side, firms have not been overwhelmed with opportunities but banks have healthier balance sheets, courtesy of the state and have opened their doors again at its behest. As it owns controlling stakes in a significant proportion of the country's banks it is utilising them to stimulate the economy. Small and medium size enterprise (SME) lending has been one such growth area spurred by the government. "The Irish government at the moment is very much focussed on growing our way out of this recession and they believe that they only way to do that is by creating employment in these smaller companies. They have put pressure on the Irish banks and they are the majority shareholder if not a 100% shareholder in most of them, to lend to these businesses," says one lawyer.

A niche industry, based in the country to avail of its favourable tax laws, is aviation finance, which has proven itself almost recession-proof. "Some banks still have international capital. There are areas that are a risk - aviation isn't one. It's one of the few areas seen as attractive to lend to," says one partner. Financial institutions are willing to bankroll Irish aircraft lease companies, which are doing a roaring trade with rapidly expanding Asian companies that need to account for large populations which are travelling more.

Irish banks may indeed have a new problem on the horizon as non-domestic banks look to capitalise on the difficulties and gain purchase on the Irish market by undercutting their local counterparts. One lawyer says: "While the Irish banks are still open for business, more and more lending at that high level with those blue chip corporates is from foreign banks who are offering very competitive pricing," says one partner and another agrees: "We're increasingly seeing foreign banks taking over in the role as the primary bankers of some significant Irish companies. So people like HSBC are increasing their presence in the market and Ulster Bank are doing the same," says one banking lawyer.

The Irish capital markets offer two contrasting stories: the debt side is prospering while equity flounders. There is one notable exception; where troubled banks used secondary markets to bolster reserves and amend balance sheets....

The Irish capital markets offer two contrasting stories: the debt side is prospering while equity flounders. There is one notable exception; where troubled banks used secondary markets to bolster reserves and amend balance sheets. "From an Irish perspective we are still suffering on the equity capital markets. There has been very limited activity, unless you consider what has gone on around our banks as equity capital markets work," explains one partner. Although, the activity doesn't speak to the true state of the beleaguered market, as banks have predominantly raised capital through increases with the state's assistance rather than privately, there's been an abundance of this type of work.

Rescuing the country's struggling banks had dire consequences for the government and it was forced to ask for a €90 billion bailout from the EU and the IMF in November 2010. Conditions of the rescue package included additional banking stress tests, as a result banks have raised funds through capital increases. "The stress tests highlighted the level of capitalisation which was required by the banks and that was probably the trigger for the recapitalisations," says one partner. One of the most successful of these was Bank of Ireland's triumphant €3.4 billion rights issue in 2010 and €5.2 billion capital raising in 2011 which enabled it to remain free from possible state control.

Post bailout, the government implemented the Credit Institution (Stabilisation) Act (CISA) to enable the restructuring of the retail banking system, where needed and gain to greater control over the institutions. Enacted in December 2010, the legislation confers powers to the Minister of Finance to restructure the assets and liabilities of banks. "Within a week of its enactment, AIB [Allied Irish Bank] was directed by the high court to use the legislation to put in over €3 billion in equity from the government," recalls one partner, adding: "In respect of pretty much anything the banks are doing it's almost as if there's going to be a parallel process."

Under the duress of court orders, several financial institutions also undertook multi-billion asset transfers. "There's been a lot of orders in respect of potential subordinated liability orders and in respect of disposal orders where there have been transfers of deposits from some of the old banks to the new banks," says one partner. This activity is certain to continue with the Irish Central Bank estimating in March 2011 that four banks will need an additional €24 billion in capital and reserves over next three years.

Companies too small to access the debt markets have utilised the UK based Aim and Ireland's equivalent to raise capital. "In terms of fundraisings, we have seen some, particularly mining on the junior markets but very little outside food and agriculture," says one lawyer. Oil and gas companies listed in Ireland also represent another exception: "Clearly debt is going to be difficult for them, the markets that they're operating in are good, either oil and gas, wider exploration or commodities. Whatever it might be, either new listings, unusual financings or straight forward placing of existing companies, we're seeing quite a bit of that," says one lawyer.

International work has also proved to be more active with practitioners noting a return of structured products and securitisation. "The international side of things has seen a pickup in activity over the last 12 months. Most of the activity is structured products," says one partner. "The deals we're seeing are probably not as complicated as the deals we used to see, the rinky-dink CDOs are not being done anymore, but we are seeing repackaged bespoke debt products being sold to investors usually being large corporates or insurance companies. Another thing we've seen is a continuing stream of life settlement securitisations, which are sold to specialised investors," says another capital markets lawyer.

Trade receivables are also making a comeback as companies seek finance. "What we are definitely seeing is Irish corporates who are raising finance by traditional trade receivable financing arrangements or securitisations, which is seen as a good way of replacing old fashioned bank or bond financing," remarks one lawyer.

Historically always smaller, lawyers note an increase in mandates on the domestic front too. "In terms of Irish companies issuing real bonds, not in terms of structured products, there has been some activity. The high-yield end of things has seen a bit. There's interest in it [the bond market] but current market conditions are challenging for Irish corporates," one lawyer explains. A scarcity of viable bank finance has, however, led issuers towards the international markets by issuing bonds through subsidiaries.

Investment funds lawyers in Ireland could be forgiven for forgetting they are in a recession. Lauded as the potential saviour of the Irish economy by the government, past and present, the funds industry has been resilient and is thriving in spite of domestic economic turmoil....

Investment funds lawyers in Ireland could be forgiven for forgetting they are in a recession. Lauded as the potential saviour of the Irish economy by the government, past and present, the funds industry has been resilient and is thriving in spite of domestic economic turmoil. Any concerns that the jurisdiction would remain such a popular one for fund promoters have proven unfounded. "The reality is that people who put these funds together know that what the investors are investing in is what the fund owns itself," says one lawyer. "The fund isn't investing in Irish assets. They are set up here for tax or regulatory reasons and the underlying exposure is not to Irish assets."

In Ireland, as the economy has declined, the number of assets under management domestically has grown exponentially. The statistics corroborate that it's been an immensely successful year. Figures published by the Irish Funds Industry Association and the Central Bank in December 2010 revealed the value of Irish domiciled investment reached an all high time of €964 billion, increasing by nearly a third on the €748 billion recorded at the same time the previous year.

The level of inquiries to the Central Bank to launch new funds has surpassed even lawyers expectations: "More than 70 new managers, promoters and finance houses are looking to establish funds in Ireland in over the last 12 months," says one.

The proclivity towards EU regulated funds in preference of riskier offshore alternatives is one explanation for the augmented numbers. "The enormous increase in volume of both new funds and assets under management in respect of Irish domiciled funds reflects this growing trend where people are moving away from tax havens or offshore jurisdictions in terms of Cayman, BVI [British Virgin Islands], Guernsey and the Isle of Man and moving to an EU regulated jurisdiction in terms of setting up their platform," says one partner.

The EU's Alternative Investment Funds Management Directive (AIFMD), which is designed to regulate the hedge fund and private equity community, also spurred investors to replicate their offshore products in Ireland.

Some of the headline features concern determining who is responsible for the hedge fund and in this respect lawyers feel it favours their jurisdiction. "At the moment it looks like the commission are leaning towards the entity or group of individuals who have the corporate governance role in respect of the alternative investment fund as opposed to the person who makes the investment decisions. We think there's a real opportunity for Ireland because that fits in with the model Ireland has developed," says one lawyer.

Outside of transactional work investment funds lawyers have been zealously preparing for the implementation of Ucits IV (undertakings for collective investment in transferable securities). In effect as of July 1 2011, the new directive evolves the Ucits product introducing a number of new procedures.

While Ucits III was a product directive that enhanced the asset classes that these funds could gain exposure to and led to an increased number of managers and promoters availing of it, Ucits IV is about gaining greater efficiencies in the European fund market.

The Qualifying Investor Funds (QIFS), the other popular onshore product, designed for the more established investor with a bigger risk appetite has also seen some enhancements. "There's been a reduction in the minimum subscription; it used to be a quarter of a million euros now it's one hundred thousand, and there used to be qualifying network criteria which has also been done away with and is easier to deal with criteria has been introduced so it's a product that has a future potential market as well," says one partner.

The Irish market welcomed a new entrant in January 2010 when offshore firm Walkers opened an office in Dublin. As Maples and Calder will attest, the Irish market is not the easiest place to break in to with rivals looking unfavourably on new competitors. The firm has already antagonised Ireland's largest firm, plundering Matheson Ormsby Prentice for three of its partners.

A lawyer from Walkers admitted that the firm had been encouraged by Maples success and hoped they could mirror could it. Competitors are however quick to point out that Maples have a substantial wallet, which they have used to invest in new talent. Walkers have also committed themselves financially and the market will wait to see how the practice develops.

Post-bailout, M&A activity in Ireland has been dominated by the Irish banks, which were directed to dispose of non-core assets as part of the conditions of the country's EU and IMF loan. "As part of the terms of the EU IMF bailout Irish banks were told they had to strip down their group structures back to effectively being high street banks," explains one lawyer....

Post-bailout, M&A activity in Ireland has been dominated by the Irish banks, which were directed to dispose of non-core assets as part of the conditions of the country's EU and IMF loan. "As part of the terms of the EU IMF bailout Irish banks were told they had to strip down their group structures back to effectively being high street banks," explains one lawyer.

A succession of multibillion deals has ensued and occupied several of the country's law firms for the first half of 2011. Some of the standout deals include: Irish Life & Permanent's acquisition of Irish Nationwide Building Society's €3.6 billion loan deposits in March 2011; Allied Irish's (AIB) €9 billion acquisition of the deposit book of Anglo Irish Bank in February 2011; and Bank of Ireland on it's disposal programme, which has seen it sell Bank of Ireland Asset Management (BIAM) for €57 million and its custody and administration business, Bank of Ireland Securities Services (BoISS), for €60 million in January and June 2011, respectively.

With banks in difficulty there has been a dearth in finance for leveraging acquisitions: "M&A activity is down unequivocally. Certainly the lack of acquisition finance in the domestic market is impacting on the ability of people to do deals," says one. Another partner concurs highlighting that this has encumbered any private equity activity: "There is a continued absence of private equity in Ireland. The majority of buyers were trade or strategic from international buyers with strong balance sheets."

Large multinationals with liquidity and no need for bank debt have, however, been taking advantage of low valuations. "Most of the transactions we've seen have been internationally driven and we would of seen more trade to trade than we would have for a number of years. On the basis, presumably: that there's more value in the market; leverage isn't available; and, trade buyers see more opportunity," explains one lawyer. Ireland's export driven sector is one area that has remained resilient in the crisis and is prospering. Invariably, this has attracted in the interest of foreign conglomerates with activity in these type of industries spread across a range of sectors: "Energy, natural resources, technology, pharma are buoyant," says one M&A lawyer.

Going forward there remains plethora of potential sales to be derived from the troubled banks, many of which are holding out for improved valuations: "We would expect to see in to the future a continued disposal programme with the banks. There are some assets that they want to sell but they'd rather not sell right now. An example is New Ireland for Bank of Ireland where there's some valuable assets but it's a bit of a distressed market so they would rather sell in more orderly fashion," says one lawyer.

A future driver of the Irish M&A market is widely expected to be the semi state sector. Lawyers anticipate that like Greece and the other troubled economies, Ireland will be asked to dispose of semi state assets. As one corporate practise head observes: "We're keeping a close eye on the semi state sector whereby there is a lot of impetus to realise some value out of state owned assets. Not a lot has happened this year but over the next year or so we expect to see a lot of activity in consolidating. That goes from everything from the energy sector, to forestry and peat."

"Frankly, the last 12 months here it's been grim," says one project finance lawyer. According to infrastructure journal nine project finance deals closed in Ireland in 2010: "It's a very low figure for an island of this size and it's a very, very tough market at the moment," explains the lawyer....

"Frankly, the last 12 months here it's been grim," says one project finance lawyer. According to infrastructure journal nine project finance deals closed in Ireland in 2010: "It's a very low figure for an island of this size and it's a very, very tough market at the moment," explains the lawyer. Divided in to two broad categories, infrastructure and energy; both have been besieged by challenges thrown up by the crisis, albeit distinct ones.

There is a significant pipeline of substantial PPP projects but the challenge has been securing private sector debt for these plans, which are underwritten by a sovereign guarantee. "There's just a concern about the worthiness of the Irish state at the moment. PPP projects have been suffering because to the extent they are backed by the state the sovereign risk element has meant that non-Irish banks are reluctant to take Irish risk," says one lawyer.

The long awaited rail projects have also fallen foul of banks reluctance to become entangled in the country's problems. One of the most prominent deals to suffer is the Metro project in Dublin. "On the big rail projects they all look to be dead at the moment. A €3 billion Metro project in Ireland is unfortunately desperately needed infrastructure but it's just a level of debt Ireland can't handle right now," says one lawyer.

Smaller PPP projects, deemed essential, in the education and healthcare sector have had more luck, with one lawyer speculating that the government may have, "Asked them to pull on the national jersey." In this vein, The new cystic fibrosis unit at St Vincents Hospital and the second schools project, comprising of five new buildings on four sites, achieved financial close in June and November 2010, respectively.

Activity on the energy side has been driven by the push towards renewables and the picture is a little more positive. "I suppose the wind deals in particular, there is a greater appetite for them than the pure PPP deals. People are seeing the support mechanisms for wind and utility revenue pool that sits behind that are somewhat removed from the sovereign so people are more comfortable."

A further impediment for project finance lawyers concerns REFIT 2. The state Renewable Energy Feed-in-Tariff is being amended and state approval is pending. There is anxiousness surrounding it amid speculation it is to be cut. "From an Irish specific perspective there's some regulatory uncertainty in relation to renewable support schemes beyond 2025, which given that you need those to fund projects over at least 15 years, is causing a little uncertainty at the moment," says one lawyer.

Clients are all too aware of the shortage of mandates available for law firms and with practises vying for client's business, another thing that is depreciating is fees. As the head of one project finance practice observes: "The market is very price competitive at the moment. In a very crude way, the amount we're making for transactions wasn't what it was a few years ago. When you've got the same number of firms bidding for half the number of deals, you're never going to get as much as you used to."

The repercussions of the property crash still continue to fuel the restructuring and insolvency market in Ireland. "The last 12 months has been dominated by the property sector and the clear up after that between the advent of the loans having now actually moved in to Nama (National Asset Management Agency) and Nama actually now starting to deal with those loans," says one insolvency partner....

The repercussions of the property crash still continue to fuel the restructuring and insolvency market in Ireland. "The last 12 months has been dominated by the property sector and the clear up after that between the advent of the loans having now actually moved in to Nama (National Asset Management Agency) and Nama actually now starting to deal with those loans," says one insolvency partner.

Having assumed the loan portfolios of Ireland's struggling financial institutions, Nama is currently the largest holder of distressed equity in the world. The state agency is in the process of deciding on how to proceed with the loans; through enforcement or consensual restructurings, having evaluated debtor's portfolios and prospects for the future. "We're seeing quite a lot of restructuring work, but we're seeing more enforcement where restructuring is not possible for one reason or another. Nama of course is a major force in driving both of those aspects and has really swung in to action and work is frankly pouring in from them," remarks one lawyer.

Industries connected with real estate have also been affected by the ripples of the crisis with even those businesses that don't have a primary interest in the real estate market being been brought down because of some level of speculative investment within this area. "The other sectors really suffering are: the hospitality sectors, that's anything under hotel and licensed premises; the retail sector is also feeling the strain," explains one lawyer.

Outside of these sectors, the current economic cycle has seen some marquee names such as the Quinn Group and Eircom undertake significant restructurings and shown that no one is immune from the inherent economic difficulties the country is facing.

Lawyers have seen a reduction in the number of examinerships applied for and several speculated companies have been deterred after a number of cases were unsuccessful: "Examinerships, which were very prevalent 12 months ago, have probably eased a bit because most of them failed under Irish law. There has been very few," says one lawyer.

An Irish construction company, McInerney Homes, failed in its bid to be utilise this process. There are exceptions, Xtravision, the Ireland's largest film rental chain, went in to examinership and domestic airline, AirElan, both came through the process successfully.

In regard to Xtravision case, an important point was clarified by Supreme Court, which ruled that companies in examinership can apply to repudiate leases on existing outlets to cut back costs. Lawyers feel this will increase the chances of retailers coming through the process in future and that it will be availed off frequently: "I think retail chains are going to use that to scale back operations and cut of liabilities maybe when they've closed doors or to close those doors with a view to restructuring themselves," says one.

A further development on the legislative side has seen ongoing discussions concerning the reform of Ireland's archaic bankruptcy code: "There are proposed changes to our bankruptcy regime. Currently there isn't an automatic discharge it lasts for a minimum period of 12 years. There's restrictions on the bankrupt operator applying for credit. There's a lot of talk about that needing to be reformed with a view to making that easier for individuals," explains one lawyer.

Insolvency lawyers foresee another busy 12 months with the level of distressed debt within the Irish market still extremely high. "Until a number of the banks decide to act on the basis of the provisions; either by way of restructuring and there might be a lot of debt for equity deals coming in the next 24 months; or, there may yet be a lot of receivership appointments, but there's a lot of debt that still needs to wash through," says the head of a leading insolvency practise.