IFLR 1000
The Guide to the World's Leading Financial Law Firms

"We've never been so busy," says one debt capital markets lawyer. The volatility that has pervaded the market has subsided and firms report a reliably stable deal-flow. "We have seen the deals and business is coming back in all areas across the board," says another partner.

Debt markets and firms' practices continued to benefit from the absence of affordable bank lending and the increased attractiveness of bonds. "One trend has been for corporates to fund themselves directly via the capital markets [and] I'm not talking about seasoned issuers; we had a series of debt Eurobonds and we had high-yield bonds from first-time issuers," notes one partner. Despite the banking market re-emerging, lawyers feel this will continue to be a reliable source of work. "The debt Eurobond issuer topic will be ongoing. There is a real tendency to dis-intermediate, cut out the middle-man, the bank, and refinance in the capital markets and take no risk," says one partner.

July 2010 saw the first high-yield bond issued under German law since the changes to the country's bond legislation in 2009, which allowed for amendments to be made to the covenants after bonds had been issued. Previously sold under US law, German high-yield bonds are being utilised to finance acquisitions and to refinance, particularly when issuers need to service a large amount of debt. "One of the features last year was where a corporate had massive debt, especially on the leveraged side, that was financed by a combination of loans and bonds and that was typically high-yield." Some lawyers are quick to point out that as yet no true German high-yield market exists but there is an expectation across the continent that it could develop into more than just a niche market in Europe.

The slight recovery of the equity markets and buoyant debt markets has reduced the popularity of convertibles bonds. "The convertible market is very subdued. The increase in straight equity and debt work has seen a reduction in this type of asset class," explains a lawyer. Hybrids have, however, become a popular choice among banks as they support core Tier I capital requirements under CRD II. Ensuring financial institutions are in line with European capital requirements has created a good deal of work for firms: "We are advising our bank clients and some owners of credit institutions on how to go about their capital base, their own funds base," says one lawyer. CRD IV was announced in July 2011 and will be begin implementation into law in January 2013. "It's not long for banks to prepare," says one lawyer, "We expect a flurry deals."

"There is no stopping in the development of the legal framework and everybody has to prepare for, and adapt to, the legal changes and requirements plus the market forces."

The market fully supports Hengeler Mueller's ranking: "They are the most established firm and they still have the biggest percentage of the [debt] programme work and also a lot of corporate bonds and some really excellent lawyers," says one competitor. Clients praise the lawyers in the firm's debt practice for being diligent and corporate-minded: "They left no problem unsolved. They provided very deep understanding of the business, to the extent that no-one can reasonably expect from a lawyer," says one.

The firm advised pharmaceutical company Phoenix Pharmahandel on issuing a €500 million high-yield bond as part of a refinancing process. Alongside the Continental high-yield bond issued in July 2010, Phoenix's was one of the first to be issued under German law.

Another highlight for the team came in September 2010 when it advised RWE, Germany's second-biggest utility company, on its issuance of €1.75 billion in hybrid bonds, the largest ever issue of its kind by a European industrial corporation and the biggest offering of the equity-like securities in Europe since 2006.

A further deal involved advising Commerzbank and UniCredit Bank on issuing a €300 million bond to Symrise as part of the company's restructuring.

The firm has been also been active for the German Federal Ministry of Finance on setting up a €440 billion European Financial Stability Facility (EFSF) in addition to an intergovernmental financial stability programme of Eurogroup and issuance programme for the EFSF.

"They are very thorough, very knowledgeable and up to speed with new decisions and they always deliver on time," says one client of Linklaters' exceptional debt capital markets practice. "There were one or two situations that required lateral thinking and they dealt with that well," another client adds. Competitors widely agree that the firm is one of the leaders in the field.

Practice head Peter Waltz's varied capabilities were demonstrated by the diverse range of transactions he has advised on in the past 12 months, from convertibles to Eurobond issuances to hybrids and high-yields.

Waltz advised on two Eurobonds for banking syndicates: a €200 million Eurobond of 5% notes due in 2016 for a syndicate led by Unicredit, Deutsche Bank and Morgan Stanley; and a €150 million issuance of 6.375% notes due in 2016 guaranteed by Nordex Energy for UniCredit, Commerzbank, Bayerische Landesbank, HSH Nordbank and ING Belgium. The deals closed in March and April 2011, respectively.

Waltz also teamed up with partner Dirk Eisel to advise the bookrunners on pharmaceutical company Celesio's €350 million 2.5% bond issuance due in 2018.

On the hybrid side, Waltz acted for Citibank, Commerzbank and Deutsche Bank on a €2 billion 5.75% subordinated bond issuance by Allianz Finance II, structured to be treated as regulatory capital and counted as Tier 2 capital.

A notable high-yield bond issue saw the practice head working with the London office to advise Goldman Sachs and Morgan Stanley on the German legal aspects of the €375 million 11% senior secured notes issue due in 2014 and the €75 million floating rate senior secured notes due in 2014 issued by Auto-Teile-Unger Handels (ATU).

Led by head of practice Sebastian Maerker, Clifford Chance has continued to advise German and international clients on substantial bonds issues.

In a deal that closed in July 2011, the firm was mandated by Deutsche Bank to advice the deal manager and tender agent on Aareal Bank's repurchase of a €800 million worth of bonds due in March 2012 and guaranteed by the German Financial Markets Stabilisation Fund (SoFFin).

An interesting piece of cross-border work saw Maerker advise on the first bond issued in Chinese Yuan Renminbi (Rmb) by a German company in May 2011. The firm acted for a banking consortium consisting of Bank of China, HSBC and Standard Chartered Bank on issuing a bond denominated in Rmb1.5 billion (approximately €160 million) by Volkswagen International Finance, secured by Volkswagen Aktiengesellschaft.

George Hackett was active for Volkswagen and its subsidiary Volkswagen International Finance on the issuance of $2.7 billion of bonds by Volkswagen International Finance. The bonds, directed primarily to US institutional investors pursuant to Rule 144A and guaranteed by Volkswagen, were issued in four tranches: $700 million 1.875% senior notes due in 2014; $650 million 2.875% senior notes due in 2016; $500 million floating rate senior notes due in 2012; and, $850 million floating rate senior notes due in 2014.

In a comprehensive refinancing for Heidelberger Druckmaschinen, the German printing press manufacturer, partner Markus Pfüller advised the company on issuing a high-yield bond of €304 million in April 2011.

Freshfields Bruckhaus Deringer's debt market practice was mandated on some challenging transactions and the firm is well respected by peers: "Freshfields is very strong, [particularly] in the area of regulatory capital. When we speak insurance hybrid capital or when we talk about bank hybrid capital, in that area they are very strong."

In June 2010, Christoph Gleske advised Citigroup and RBS as joint global coordinators of Continental's bond, the country's first secured high-yield bond for €750 million. In late 2010 he then acted for Continental on two further bonds of this kind valued at €1 billion and €1.25 billion. The first deal was awarded Debt and Equity-linked Deal of the Year at the IFLR European Awards 2011.

Freshfields expanded its high-yield offering with the appointment in London of securities partners Gil Strauss and Simone Bono, in August 2010 and March 2011 from Simpson Thatcher & Bartlett to work in the conjunction with the firm's German practice.

Another complex transaction saw Gleske lead a team advising a consortium consisting of Credit Suisse, Citi, Goldman Sachs and UBS on the structuring and implementation of Commerzbank's €626 million capital increase via a hybrid-for-equity exchange in January 2011, intended to raise the bank's core Tier 1 capital and included purchasing hybrid instruments from the bank.

The firm was also involved in the first Solvency II-compliant subordinated bond by a German insurer in which Gleske and Munich-based Wessel Heukamp advised Commerzbank and Goldman Sachs on the issue of €1 billion subordinated fixed to floating rate bonds by insurer Munich Re.

Allen & Overy's debt practice closed some interesting mandates in the last 12 months.

The firm continued to advise Barclays Bank on a programme for the issuance of German-law covered N Bonds utilising a structure developed by the firm that allows foreign entities to issue covered bonds under German law.

Practice head Okko Behrends and Jens Nollmann led a team to advise Deutsche Bank as arranger of a German law governed €325 million covered bond to be issued by Abbey National Treasury Services.

Germany's largest bank also mandated Behrends on its second Pfandbrief issue of €1 billion as part of its ongoing debt issuance programme.

Behrends and Martin Scharnke devised the first German-Swiss platform for the issuance of structured debt products with Credit Suisse. The platform comprises ten base prospectuses and is compliant with Swiss, German and European regulatory requirements.

Heraeus, the precious metals and technology group, also required the firm's assistance on its €250 million corporate bond. The bond was issued by Heraeus Finance and guaranteed by Heraeus Holding and Deutsche Bank while HSBC acted as joint lead managers.

Cleary Gottlieb Steen & Hamilton is better known for its equity work but the firm has been active for underwriters on two notable bond issues for Volkswagen. In a deal which closed in August 2010, the firm represented a syndicate comprising Bank of America Securities, Citigroup Global Markets and JP Morgan Securities as underwriters in the Rule 144A/Regulation S offering of $1.75 billion notes issued by Volkswagen International Finance and guaranteed by Volkswagen Aktiengesellschaft.

Again for the underwriters, the firm advised on $1 billion 1.625% guaranteed notes due in 2013 and $750 million 4% guaranteed notes due in 2020, issued by the same car manufacturer.

There are queries about the capabilities of Gleiss Lutz's debt practice and competitors question whether it has a particular focus in this area.

Helge Kortz heads the department with Stephan Aubel. The former advised Morgan Stanley Senior Funding on the issuance of €500 million senior notes by NXP while latter has been active for RCM Beteiligungs on the issue of 90,000 convertible bonds for the nominal amount of €9 million.

One of the firm's key regular clients, Celesio, has continued to keep the firm busy, mandating the team on the issuance of a €500 million Eurobond with a final maturity in 2017 and a convertible bond with a total issue value of €350 million.

Shearman & Sterling is noted for being very active on the high-yield market and its offering in this capacity is well respected by the market. The change in the German bond act, which allows for high-yield assets to be sold under German law, has benefited the firm in the last 12 months.

Managing Partner of Capital Markets Europe and Asia Stephan Hutter and Katja Kaulamo were involved in the first high-yield bond guaranteed and secured under the new 2009 German Bond Act (Schuldverschreibungsgesetz). The pair advised a syndicate led by Citigroup and RBS in connection with offering of €750 million in high-yield bonds by Conti-Gummi Finance in July 2010.

A more substantial and recent high yield issue saw the firm advise the initial purchasers , led by Credit Suisse, Deutsche Bank and JP Morgan, in connection with offering of €1.2 billion Euro denominated high-yield bonds by Kabel BW Erste Beteiligungs and Kabel Baden-Württemberg in March 2011.

The debt capital markets practice at White & Case gets a mixed response from the market, with some commentators saying they are present and capable while others query the complexity of the mandates they secure: "I only see them doing stand-up work not the bespoke work," says a competitor.

The practice is headed by Jochen Artzinger-Bolten, who led on all the firm's notable mandates. In September 2010 he closed two deals, advising the issuer, healthcare company Asklepios Kliniken, on its €150 million 4% seven year debut bond issue and, the lead managers, Crédit Agricole, Deutsche Bank and UniCredit Bank, on a €500 million debut bond issue of Rheinmetall, a manufacturer of defence and automotive components.

A notable piece of programme work saw the firm advise Morgan Stanley as arranger on the annual update of Landesbank Baden-Württemberg's €50 million EMTN programme.

The firm has also been advising UBS on the update of its Structured Note Programme, which allows for the issuance of virtually all types of structured notes with additional features such as a Swiss law option, Swiss settlement and Scandinavian clearing systems.

Hogan Lovells debt capital markets practice gets some good client feedback. "Completely fulfilled our expectation... They have the expertise that we are looking for," is one's reference for practice head Sven Brandt and his team. Another commends Frankfurt and New York partner Sina Hekmat, saying: "He is a very well founded player. He is very hands on and knows exactly what is going on in the market."

In the past 12 months Brandt has led teams advising two of Germany's bad banks. In October, the firm acted for Erste Abwicklungsanstalt, Germany's first Bad Bank established to take on the loan books of WestLB, on the establishment of its €20 billion debt programme and in May 2011 it advised FMS Wertmanagement, Hypo Real Estate's bad bank, on the establishment of its €50 billion programme.